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    Bernie Stephan Nestle

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    alucardei
    Nestlé has transformed its business in China through partnerships and joint ventures. In 2011, Nestlé entered partnerships with Yinlu and Hsu Fu Chi (HFC) to gain scale and relevance in China's large and fragmented food and beverage market. Yinlu is a leader in ready-to-eat congees and peanut milk, with a large sales force and production capacity. HFC is the leading confectionery company in China with 900 products and unique pick-and-mix retail model. The partnerships have helped Nestlé reach the top 5 largest food and beverage players in China. Managing the joint ventures requires understanding Chinese culture and business practices. Nestlé provides expertise while respecting the partners' identities

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    Bernie Stephan Nestle

    Uploaded by

    alucardei
    77 views18 pages
    Nestlé has transformed its business in China through partnerships and joint ventures. In 2011, Nestlé entered partnerships with Yinlu and Hsu Fu Chi (HFC) to gain scale and relevance in China's large and fragmented food and beverage market. Yinlu is a leader in ready-to-eat congees and peanut milk, with a large sales force and production capacity. HFC is the leading confectionery company in China with 900 products and unique pick-and-mix retail model. The partnerships have helped Nestlé reach the top 5 largest food and beverage players in China. Managing the joint ventures requires understanding Chinese culture and business practices. Nestlé provides expertise while respecting the partners' identities

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    Bernie Stephan Nestle

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    Nestlé has transformed its business in China through partnerships and joint ventures. In 2011, Nestlé entered partnerships with Yinlu and Hsu Fu Chi (HFC) to gain scale and relevance in China's large and fragmented food and beverage market. Yinlu is a leader in ready-to-eat congees and peanut milk, with a large sales force and production capacity. HFC is the leading confectionery company in China with 900 products and unique pick-and-mix retail model. The partnerships have helped Nestlé reach the top 5 largest food and beverage players in China. Managing the joint ventures requires understanding Chinese culture and business practices. Nestlé provides expertise while respecting the partners' identities

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    77 views18 pages

    Bernie Stephan Nestle

    Uploaded by

    alucardei
    Nestlé has transformed its business in China through partnerships and joint ventures. In 2011, Nestlé entered partnerships with Yinlu and Hsu Fu Chi (HFC) to gain scale and relevance in China's large and fragmented food and beverage market. Yinlu is a leader in ready-to-eat congees and peanut milk, with a large sales force and production capacity. HFC is the leading confectionery company in China with 900 products and unique pick-and-mix retail model. The partnerships have helped Nestlé reach the top 5 largest food and beverage players in China. Managing the joint ventures requires understanding Chinese culture and business practices. Nestlé provides expertise while respecting the partners' identities

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    © All Rights Reserved
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    of 18

    Nestl in China

    Localization as a growth driver

    24th October 2014

    Nestl at a glance

    CHF 92.2 billion in sales in 2013


    339,000 employees in over 150 countries
    468 factories in 86 countries
    Over 2,000 brands
    1 billion Nestl products sold every day

    Nestl is the worlds largest food and beverages company


    but is still only 1.7% of the market
    The USD > 10bn Food & Beverage Companies in 2013
    A graphical sales comparison between Nestl and its main global competitors

    100

    Food & Beverage Sales (in bn USD)

    90
    80
    70
    60
    50
    40
    30
    20
    10
    0

    The 20 largest food companies account for less than 9% of the world market
    3

    Nestl China history: a long presence but lacking scale &


    depending mainly on western products

    Nestl sales office


    opened in Shanghai

    1908
    1874
    Started trading activities in
    HK. First trademark (Eagle
    sweetened condensed milk)

    Shuangcheng factory
    (Heilongjiang Province)

    1990

    80% partnership with


    Totole (Shanghai)

    1999
    1996

    Establishment of Nestl China HQ in Beijing

    70% partnership with


    Dashan (Water)

    2010
    2002
    80% partnership with
    Haoji (Sichuan Province)

    The Chinese F&B market in 2011: highly fragmented &


    dominated by local players
    Key F&B Players - Turnover & Growth 2008-2011
    Turnover
    (2011 Est, CHF bio)
    WAHAHA
    (all beverages)

    7
    TINGYI
    (noodles, bever.)

    MENGNIU

    YILI (dairy, I-C)

    (dairy, I-C)

    CHINA FOODS

    (oil, bever., wine)

    WANT WANT
    (snacks, bever.)

    3
    WANGLAOJI
    (herbal drinks)

    COCA-COLA
    (CSD, juices, teas)

    (CSD, juices, teas)

    HAITIAN

    UNI-PRESIDENT

    (soya sauces)

    (noodles, bever.)
    ( peanut milk,
    congee)

    BRIGHT

    (dairy)

    HSU FU CHI

    (IMF, water)

    STRONG
    ( jellies, milk tea)

    (candies, cookies)

    0
    10%
    Note:

    15%

    CAGR 08-11
    20%

    Unilever F&B only (CHF1.4 billion with HPC). Coca Cola and Pepsi figures include bottlers. Nestl NNS for NiM Mainland China

    25%
    Source: Nestl GCR Analysis
    5

    Crossroads ahead

    THE KNOWN
    Focus on global brands in niche categories

    THE UNKNOWN
    Grow by entering local & large categories

    Key considerations for M&A in China


    No clean deal high risk

    Take time to build relationships

    Lack of transparent accounting processes and


    reliable market data

    Understand the target/partner (background,


    culture, objectives)

    Often some challenges on management and


    large # of employees

    Establish trust on both sides by understanding


    the underlying aspiration

    Understand that some things will take longer


    than in Western culture

    Increasing regulation

    Good window of opportunity

    Large foreign buyouts likely to face increasing


    regulatory hurdles and delays

    IPO plans delayed, currently low valuation (but


    still high valuation expectation)

    Central government approval if notion of


    national economy and security

    Market getting tougher (lower growth,


    increasing competition)

    Some cash flow issues

    YINLU is an ideal platform to become a major player


    in healthy dairy-based beverages & nutritious congees
    Chinese relevant products
    Leader in ready-toeat congee and
    ready-to-drink
    peanut milk

    April 2011: 60/40 partnership


    with founding families
    Headquartered in Xiamen

    Traditional trade
    & Deep penetration

    High operational efficiency


    & Aseptic experience
    8000 sales
    people
    1.1 mio
    outlets covered

    4 large-scale
    standardized factories
    ~4 mio tons of capacity
    61 production lines with
    expertise in aseptic PET

    HSU FU CHI is the leader in sweet confectionery in China


    with a very unique sales model
    Leading position with ~900 products

    Hsu Fu Chi
    July 2011: 60/40 partnership
    with founding families

    Candies, chocolates,
    cakes, wafers, jellies
    cookies, snacks,
    sachima

    Headquartered in Dongguan

    Invented and developed the


    Pick&Mix format in China
    3500 displays
    in Hyper and
    Supermarkets

    3 production bases in
    Guangdong (South), Henan (Center), Chengdu (West)
    529 kt of capacity
    55 workshops
    165 production lines
    120 high speed
    packing lines
    80% imported equipment
    9

    Nestl reaching the Top 5 largest F&B players


    Key F&B Players - Turnover & Growth 2009-2012
    Turnover
    (2012 CHF bio)
    10
    9.36

    WAHAHA
    8.57

    (all beverages)

    TINGYI
    (noodles, bever.)

    7
    6.18

    YILI (dairy, I-C)


    With 3 JVs (YL, HFC, WN1)

    5.31

    5.064

    MENGNIU
    (dairy, I-C)

    4
    WANT WANT

    3.63

    CHINA FOODS

    COCA-COLA

    2.94

    (oil, bever., wine)

    (CSD, juices, teas)

    2.691764706

    JIADUOBAO
    (herbal drinks)

    2.03

    (snacks, bever.)

    3.12
    2.909

    (noodles, bever.)

    BRIGHT Without 3 JVs (YL,


    (dairy)

    3.15

    UNI-PRESIDENT

    HFC, WN)

    1.47(IMF, water)
    1.268

    0.848

    HSU FU CHI

    0.93

    ( peanut milk,
    congee)

    (candies, cookies)

    0.868

    0%
    Note:

    5%

    10%

    15%

    20%

    25%

    Unilever F&B only (CHF1.4 billion with HPC). Coca Cola and Pepsi figures include bottlers. Nestl NNS for NiM Mainland China

    30%

    35%

    CAGR 09-12

    Source: Nestl GCR Analysis


    10

    Nestles drivers for JVs with Yinlu & HFC


    Why did we enter the JVs with Yinlu & HFC?
    Transform Nestle in China - Achieve scale & relevance
    New categories
    Different business model
    Chinese insights
    Growth opportunities

    What is their strength?


    Entrepreneurship
    Speed & flexibility
    Category knowledge
    Proven success in China
    Realization about the limits of their own model & succession

    11

    Deciding factors for Yinlu & HFC to choose


    Nestle as a partner?
    Why did THEY choose Nestle as a partner?
    Nestl's respectful approach
    Non imperialistic way to manage separate markets & businesses
    Totole JV track record
    Nestl's promise to keep their identity
    Ensure long term success for their brands

    What does Nestle bring to them?


    Know How, R&D and Quality
    People
    Planning

    12

    The JVs have transformed Nestl in China


    resulting in a unique business model
    JVs & Wyeth Nutrition account for
    >70% of NNS

    Beijing Head office and 4 Head offices


    as well as Different business models

    Portfolio diversity - Adapting to local


    preferences

    Seasonality & complexity driven by the


    Chinese calendar and events

    RTM
    # of POS
    Yinlu
    >1,400,000
    Nestle F&B
    314,000
    TTL
    200,000
    HFC
    120,000
    Wyeth
    31,000

    Example: HFC
    13

    Two post-acquisition models


    Standalone business

    Full integration

    Current management continues to drive


    the business

    Small to mid-sized business in existing or


    adjacent categories

    Owner retaining equity to be incentivized


    to continue to create value

    Strong synergies in terms of


    manufacturing and/or S&D

    Nestle providing full support in terms of


    R&D, finance & marketing

    When does it apply?

    Mid to large-size businesses in new


    categories where there is limited/no
    synergies with our existing businesses

    Mindful to maintain low-cost structure

    14

    Defining a hybrid model for Nestle GCR


    One Country two systems

    Organization Alignment

    Compliance

    Governance

    Build on the JV business models and


    respect differences

    Define service provided by


    Corporate Functions to entire NIM

    Identity Culture Values

    Find the right balance

    15

    Managing the JVs: its less about the WHAT, much more
    about the HOW to do
    Western
    Professional Manager

    Chinese
    Entrepreneurial Manager

    Implications

    Education

    University

    High-School / College

    Be modest & humble

    Languages

    Multiple + some Chinese

    Chinese + local dialect

    Learn basic Chinese

    Emails / PPT

    1-to-1 / Phone

    Get personal

    Decision

    Collegial

    Top Down

    Give guidance

    Risk

    Manager

    Taker

    Be pragmatic

    MOR

    Monthly
    Complete Review

    Irregular
    Focus on key issues / actions

    Prioritize key issues & action


    plans

    Must / Fixed

    Waste / Flexible

    Be flexible & adaptable

    OG / OP1 / WD

    Growth / MS / Cash-Flow / ND

    Grab Market Potential

    Inclusive
    Professional distance

    Hierarchical
    Blurry private/profess. line

    Get personal

    Last priority

    Central

    Get political

    Whisky, Cognac & Cigar

    Repetitive shots

    Try if you can

    5 weeks

    5 days

    Be productive on-duty

    Communication

    Planning
    KPI
    Employee
    Management
    Role of Government
    Drinking Culture
    Holidays

    16

    A hybrid business model enables us to get the best out of


    both global and local expertise

    Global

    Glocal

    Local

    A Glocal Company
    Global Best Practice

    Local Insights

    Corporate Management

    Entrepreneurship

    Specialist

    Generalist

    17

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