Nestle Juan Aranols qtcht AS the world begins to look past the coronavirus pandemic, Malaysia’s largest listed food product manufacturer has set its sights on capturing a bigger share of consumer demand as it returns to normalcy in 2021. In an exclusive interview with StarBizWeek, Nestle (Malaysia) Bhd chief executive officer Juan Aranols says the company has “plenty of new exciting” developments on the cards next year. The company will be rolling out a number of new offerings, but one of the most important innovations would be Nestle Malaysia’s plant-based food products that could hit the market in just a few weeks. Interestingly, Malaysia will be one of the two bases in Asia for the manufacturing of the plant-based products, with the other being in Tianjin, China.Ubiquitous presence: Nestle has a long list of products from over 2,000 brands in across 191 countries, and one billion Nestle products are sold every day. “The factory in China has started operations a few weeks back, and there is another factory here in Shah Alam in our current factory complex, where we will basically be supplying for Malaysia and the rest of the Asian markets other than China, ” says Aranols. The Shah Alam-based factory’s development works are about to be completed by the end of the year. Meanwhile, the products will be rolled out commercially by early January 2021. For a start, Nestle Malaysia’s target markets would be the out-of-home or hotels, restaurants and cafés (Horeca) customers and the fast food restaurants. Aranols says that such restaurants are targeted because there is a demand for plant-based burgers as an alternative to the traditional meat burgers.Less meat: A dish prepared with the products of Nestle’s new plant-based Harvest Gourmet brand is seen at the line’s launch event in Beijing. — Reuters “This will be our initial entry into the segment and then we are looking at expanding our range of products into retail stores, but that will happen a little bit later in the year but before June 2021, ” he adds. Nestle Malaysia will offer a wide range of plant-based food under the Harvest Gourmet brand. Its parent company, the Switzerland-based Nestle S A (Nestle Group), has been rolling out the Harvest Gourmet brand in many other countries. Aranols notes that in terms of brand proposition, it is already well-defined globally. In China, the Harvest Gourmet brand made its debut just last week on Dec 9. The range includes burgers, sausages, nuggets and mince, as well as plant-based alternatives to favourites such as kung pao chicken, braised meatballs, pork belly, and spicy wok. Nestle Group’s global ambitions for plant-based food manufacturing is timely and makes commercial sense, as the global demand for such a diet has been growing at a robust pace, with more consumers transitioning to meals with less or no meat. According to independent research firm Meticulous Research, the global plant-based food market is expected to grow at a compounded annual growth rate of 11.9% from 2020 to 2027 and is anticipated to reach a market size of US$74.2bil by 2027. While plant-based meals are in trend, Aranols says it is also a healthier alternative because the product comes with a very low cholesterol level, and much lower fat content. “Fundamentally, there will be growing demand for these products, and it will be a structural demand, ” he says. Nestle Group’s global sales performance for plant-based food solutions makes evident the growing demand for such a diet. In its half-year results for 2020, the Swiss food giant revealed that the worldwide sales of its plant-based and vegetarian ranges have grown strongly by 40%. As for Nestle Malaysia, Aranols acknowledges that revenue contribution from plant-based foods will be small in 2021, as it is a new market segment for the company domestically.“This (plant-based food) is one of the strategic choices that Nestle has made which we’ll go fast and start developing. What I cannot tell you is how big and how fast this is going to be. “But I can say that we are well positioned where our halal manufacturing facilities will also enable opportunities for export to many parts of the world, ” he says. Capturing growth To capture further growth in 2021, Nestle Malaysia is looking at boosting its export markets, enhancing online sales, expanding production and continuing to rejuvenate its existing product range by bringing extensions into its different brands such as Milo, Maggi and Nescafe. “On new products, some of them will be released in the next few weeks where you will start seeing some of them hitting the market just before Chinese New Year, ” Aranols says. Commenting on the company’s exports, Aranols points out that the performance took a hit in the second quarter (Q2) of 2020 as a result of the movement restrictions implemented globally. “But we recovered quite strongly in Q3, and we also are quite positive on the Q4 numbers. “We see that going into Q1 and Q2 of 2021, we have a solid portfolio for the export market and we will continue building our presence in the 50 countries we export our products to. “We are also exploring some new opportunities in North America, where there is growing demand for halal products, ” Aranols says. Currently, some of Nestle Malaysia’s main export destinations are in the Asian region as well as Oceania and the Middle East. Aranols says the company also exports some of its products such as the Maggi instant noodles to several countries in Europe. “The demand for chocolate malt drink Milo is also building consistently over time and it continues to be an important source of exports for our company, ” he says. In September 2019, Nestle Malaysia unveiled the world’s largest Milo factory in Chembong, Negri Sembilan following the expansion of its existing production facility. According to Aranols, with the expansion of the Milo factory, it has gained around 70% of net capacity for exports. “The investment that is currently ongoing in plant-based meals in Shah Alam will also, to a large extent, be dedicated to exports. Meanwhile, our investment in our Batu Tiga factory for Maggi is also boosting our capacity to export noodles to every part of the world, ” he says. It is noteworthy that the year 2020 saw Nestle Malaysia’s largest capital investment over the past six years. “For 2021, maybe it is still a bit early to disclose the numbers, but we will also see a very significant capital commitment in Malaysia. “To just give you an essence, in the last five years, we have invested north of RM1bil in the country. “When it comes to projects, every year, we have always brought new investment to keep our capacity and our technology up to the best and to the state-of-the-art level that we can obtain, ” he says. Aranols further adds that the company continues to look at viable merger and acquisition (M&A) opportunities as part of its ongoing process. “At this point, our focus remains to continue growing our brands in our industrial footprint with our know-how. “We see organically generated growth out of our current businesses that will continue to drive most of our business, ” he says. Aranols was also asked to comment on whether Nestle Malaysia would consider working closely with delivery service provider Grab following the launch of GrabSupermarket, Grab’s first delivery-only supermarket. “We will look into this with attention and interest...this is part of our job to continue exploring wherever our shoppers and customers go, we want to be a part of it. “That is also one of the key success drivers to make sure that our generating demand strategy follows the changes in the consumer and the retail landscape, ” he says. For perspective, Grab announced earlier this month that GrabSupermarket currently delivers over 2,500 products, including household goods, beauty and health essentials and freshly-sourced produce direct from its warehouse and farms. Meanwhile, Foodpanda launched its Pandamart on Dec 10, following a pilot project since July 2020. The on-demand delivery service features over 3,500 daily essentials such as groceries, fresh produce, household essentials, beauty products and over-the-counter medication.Post-Covid-19 business environment With movement restrictions and a drop in the overall consumption in the country, Nestle Malaysia was surely not immune to the Covid-19 pandemic despite being a household name. Its sales in the first nine months of financial year 2020 declined by 3.5% year-on-year (y-o-y), with the biggest impact seen in the second quarter where sales dropped by nearly 9% y-o-y and 15% quarter-on-quarter. However, Nestle Malaysia witnessed a shift from the “on-the-go” and “out-of-home” consumption as people reduced travelling and patronising restaurants, but at the same time, saw a significant increase in “in-home” consumption. “Our Nestle Professional business and our Ready-to-Drink cans that are mostly consumed on-the-go have struggled a little bit, especially in Q2, but as we have mentioned in our nine-month result announcement, they have recovered well in Q3. “Now, due to the conditional movement control order, our businesses have been impacted again. “However, from what we see, our in-home consumption continues to be very strong, and we also continue to encourage that by looking at how we can inspire consumers who stay at home to try products in different ways, ” Aranols points out. Online sales play an important role in boosting Nestle Malaysia’s in-home consumption demand, especially since the coronavirus outbreak. Aranols describes the online sales as one of the company’s growth channels, particularly in the last five to six years. “About a year ago, the growth was around 3% of our sales. Probably this year, it will be somewhere from 4% to 5%, which gives you an indication that it is not very big yet, but is developing very fast. “On its own, it is really a business that is close to roughly RM300mil and growing, so clearly it is acquiring a certain relevance, ” he says. With two more weeks left before 2021 sets in, Aranols says he is relatively moderately positive on the outlook for the industry and Nestle Malaysia. While he opines that Asia as a market will rebound much faster than the other parts of the world, Aranols says business dynamics will largely depend on the deployment of vaccines. “Probably, we will have more visibility in the second part of the year because in the first part, we will still be depending on when the vaccines will arrive. “That said, considering there are a lot of efforts being deployed by the country to reactivate the economy, I am quite confident that all of this will help in having a strong recovery in 2021, ” he says. On its part, Nestle Malaysia announced in April 2020 that it is committing to spend RM15mil on Covid-19 relief efforts to support over 200,000 Malaysians, especially lower-income communities and small enterprises. One such effort is the Bangkit Bersama programme, which aims to support local coffee shops and small restaurants impacted by Covid-19. “The Bangkit Bersama programme, what it has tried to do is alleviate the financial situation of these small coffee shops and restaurants by supporting facilitated purchase of products. “We have also worked to give them new capabilities, for instance, we have given them some digital tools to help them build their delivery services as part of their business, which is the latest survival tool that coffee shops have. “That programme is ongoing. It is also helping to build a stronger bond between Nestlé Professional and many of these outlets, and that programme will continue, ” says Aranols.
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