Nestle next to eye emerging-market growth

Posted by Josette Dunn on 22nd February 2010

Nestle on Friday (19 February) became the latest of the largest food manufacturers to set out its stall for further expansion in the world’s emerging markets.

The company, the world’s largest food maker, emphasised its plans for Latin America, Asia and Africa after publishing a set of full-year results that the group claimed showed it had outperformed the market in 2009.

CEO Paul Bulcke said emerging markets in those regions accounted for 35% of Nestle’s annual turnover. The business, he said, was aiming for 45% of revenues to come from those markets by 2020.

“We are increasing our investment in the emerging markets. We have seen the emerging markets more than double, and in some cases, more than triple, so we have to increase our capacity there,” Bulcke said.

In the last week, fellow food giants Unilever, Danone and PepsiCo have all set out their ambitions for the world’s developing economies, particularly for China and Russia.

Frits van Dijk, Nestle’s lead director for its operations in Asia, Oceania, Africa and the Middle East, said the company’s investment would not just centre on China and he emphasised the group’s plans for Africa.

“This is not only about China; this is a broad-based expansion plan. We are accelerating capital investment rather dramatically,” van Dijk said. “In Africa, in 2010, we plan to put up several new factories – a small, modular-type approach – in order to be closer to where consumption takes place.”

Van Dijk said Nestle had identified that it could reach 1bn new consumers between now and 2020 through its expansion in emerging markets. Improving its distribution in rural areas was central to meeting that target, he said.

“This goes hand-in-hand with another objective to significantly broaden and deepen our distribution in Asia, the Middle East and Africa. We need to have a distribution network that allows us to penetrate deeper.”

Bulcke said the recession had had a less severe impact on developing markets and Nestle’s belief in the growth to come in those regions was behind its “responsible optimism” that its 2010 sales would grow faster than in 2009.

“The recession that we saw in certain parts of the world has been fended off – but we do not foresee a sharp return to growth in those parts of the world. The fire is out but we still have to put our houses in order,” Bulcke said.

“But there is no such thing as a global crisis. If you go to the developing world, there is a different spirit. There are two worlds out there and we are working globally.”

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