Nestle expects challenging 2016

> Food firm adopts cautious approach for short term

PETALING JAYA: Nestle (Malaysia) Bhd expects the challenging economic conditions to continue in 2016, and, as such, has adopted a cautious approach for the short term.

Its managing director, Alois Hofbauer ( pix), said going forward consumer sentiment will continue to be impacted post-Goods and Services Tax (GST) implementation and market conditions will remain tough.

“In 2016, commodity prices are expected to increase, and prices of raw materials are foreseen to be impacted by the weakening currency,” he said.

Taking this into account, Hofbauer said, the company will need to be flexible and responsive to change. “It will not be an easy year ahead but we are well poised to weather these challenges.”

He said Nestle Malaysia is focused on internal improvements to maintain prudent cost management and improve efficiency and productivity.

Hofbauer said the Nestle Continuous Excellence (NCE) programme is the global Nestlé approach to identify and realise efficiency increases within and beyond operations on a sustainable basis.

“The savings that we achieved from NCE have been reinvested into strengthening our brand portfolio to fuel growth and maintaining price stability,” he said.

“Consumer tastes and trends change in tandem with their lifestyles, hence it is crucial to evolve with our own consumers, and provide more relevant innovative product solutions in order to grow the business.

“In line with this, new product innovations and launches will continue to be an important pillar in driving the business forward,” Hofbauer added.

Nestle Malaysia, he said, remains very positive on the middle- to long-term prospects for the Malaysian market, given the strong fundamentals of the country.

Malaysia is among the top five markets for Nestle in Asia, and ranks among the top 20 Nestle markets globally. Malaysia is a key Asian market with a still growing young population in the Nestlé world, which will subsequently see the consumer base expanding in the long term.

Over the long term, Hofbauer said, opportunities are ripe in Malaysia for Nestle.

“We are committed towards maintaining our

balanced business strategy of prudent cost management coupled with proactive investments for the future.”

Hofbauer said Nestle performed admirably this year and was resilient in weathering tough headwinds such as the GST implementation coupled with the rising cost of living.

Nestle Malaysia grew by 6% in 2015, according to Nielsen,

outperforming its competition and the food and beverage market.

Hofbauer said product innovations have been the key in driving business forward this year.

As of the third quarter this year, its product innovations contributed close to 10% of total sales in Malaysia, which is a notable increase compared with 2014.

“Whilst many manufacturing companies were scaling back on spending this year, we seized on the opportunity for growth.

“We expanded our manufacturing capabilities by opening our eighth factory in Sri Muda for the production of readyto-drink products, and invested in a high-capacity noodle line for Maggi in Batu Tiga.”

Hofbauer said Nestle Malaysia investments in the new factory and noodle line amounted to more than RM370 million, bringing its total investment in manufacturing and distribution to RM1.5 billion over the past seven years.

The addition of the Sri Muda factory makes the Nestle Shah Alam factory complex one of the biggest manufacturing sites in Malaysia and is set to boost its ready-to-drink capacity by 60%.