Swiss food and beverage giant Nestle SA is expanding its reach in China by acquiring a controlling stake in Yinlu Foods Group for an undisclosed amount.
The Vevey, Switzerland-based company said Monday it is taking a 60-percent stake in the well-known Chinese brand that already is a co-manufacturer for Nescafe instant coffee in China. Yinlu, whose ready-to-drink peanut milk and canned rice porridge are popular with Chinese consumers, had sales of around 750 million Swiss francs ($840 million) in 2010, Nestle said.
The deal lets Nestle, the world’s largest food and drinks company, expand its instant food products in a fast-growing market. It said the transaction is subject to regulatory approval in China. Other details, including the price of the deal, are not being disclosed.
Nestle CEO Paul Bulcke said the deal is a reflection of Nestle's "long-term investment in China and our commitment to further developing local brands."
Nestle has operated in China for 20 years and said it is retaining Yinlu's chairman to lead the family-owned company in the new partnership. The chairman, Chen Qingyuan, said Nestle's acquisition would help his company achieve its "long-standing aspiration to be a relevant and favorite brand for consumers" through collaboration particularly in central and western China.
Nestle reported sales of 2.8 billion francs ($3.13 billion) last year in China, where it already has 23 factories and 14,000 employees churning out coffee, bottled water, milk powder, confectionery and other products.
Last week, Nestle reported first-quarter sales of 20.26 billion Swiss francs ($22.64 billion), a more than 9 percent drop from comparable sales a year ago, blaming declining sales on the strong franc. But it said organic sales growth was still strong at 6.4 percent, while real internal growth was 4.9 percent.