Global giant Nestlé milks post-war optimism

Commits Rs. 2 b investment in 2011 and Rs. 8 billion in next six years

Nestlé Lanka Plc said yesterday that the post-war bullish investment environment prevalent over the past 18 months boosted the company’s growth by 12.2% and announced that the company would be investing Rs. 10 billion over the next five to six years, with Rs. 2 billion to be invested this year.

Market Head of Nestlé South Asia and Chairman Nestlé Lanka Helio Waszyk asserted that the company was “very, very happy” to see a turnaround from one digit growth to two digit growth to 12.2% during the past 18 months.

“May 2009 was the turning point for Sri Lanka. I was blessed to be in Sri Lanka to see the real positive impact on the lives of the people here,” he told Daily FT in an interview.

He said that the post-war bullish environment and strategies adopted by the company during the past 18 months had given clear results, due to which the board met during the weekend and gave formal authorisation for more investment in the company.

Accordingly, Nestlé said that the investments would be channelled under the new master plan for massive expansion and development in the future.

“Over the past 18 months we saw our sales increase by 10.4% and profits growth by 30%. The main reason for us to perform well was the renovation and innovation we carried during the past months,” Nestlé noted.

Commenting on the company’s future plans, the Nestlé Lanka Chairman said that the company saw a lot of opportunity in Sri Lanka and that the decision to invest more was made after taking Sri Lanka’s new outlook into consideration.

“In 2010 we invested Rs. 1.1 billion in dairy development and for capacity expansion in our state-of-the-art Kurunegala factory. This is approximately 5% of our sales and significantly higher compared to earlier years. Almost one third of the new investment will relate to dairy development and dairy-based products. Other investments will be in the beverage and culinary areas and expanding our manufacturing capacity. I am happy to inform you that our facility in Kurunegala produces 90% of all Nestlé products sold locally,” he added.

Touching on the company’s plans of becoming self-sufficient in fresh milk, Waszyk said the company welcomed the Government’s policy of making the country self-sufficient in fresh milk production.

“We had already drawn up plans for the company in this regard and we want to continue with our strategy to become self-sufficient in milk. We are working towards achieving this in line with the Government’s goal. We see great potential in developing the industry,” he added.

Commenting on the increased number of companies engaged in the fresh milk industry, the Nestlé Chairman welcomed more and more companies entering the sector, as long as they display professionalism in their operations.

Commenting on Nestlé Lanka’s initiatives in dairy development, Waszyk said that the company had continually invested in its fresh milk collection network and collected 45 million kg of fresh milk in the 2010, showcasing 20% growth over 2009 and 29% growth over 2008.

During the past two years, the company has commissioned 37 chilling centres and over 400 milk collection points.

“We have invested Rs. 200 million to expand our fresh milk collection network over the past two years and today we are the country’s largest private sector collector of fresh milk, with the highest number of milk chilling centres in the country.”

Nestlé Lanka pioneered the collection of fresh milk in the north and east areas in 2009 and has contributed significantly to the development of the industry. Plans are in the pipeline to increase its milk collection and cross the 50 million mark this year, by collecting milk from over 20,000 farmers daily.