Nestle Kenya, a unit of the world's biggest food group plans to add three new factories over the next two years in the Africa region, sourcing input materials locally, its head said on April 07.
Nestle Kenya, part of Swiss based Nestle Group, makes baby food Cerevita and beverages Nescafe and Milo locally. It plans to invest about $150 million to upgrade plants in Kenya and Zimbabwe, as well as build green field operations in the region, newly appointed managing director Hakan Misri said.
Emerging markets, of which some of Nestle's Africa market are part of, are a major source of revenue for the Nestle group, contributing about 36 percent or 39 billion Swiss francs ($42.56 billion) of total annual sales last year.
Nestle expects this portion to rise to 45 percent by 2020, as part of a plan by the company to double its turnover in the Africa region every three years, Misri said.
"We want to depend less on imports and source more materials locally," Misri told Reuters in an interview.
Misri said imported milk powder attracts 60 percent import duty, a cost that is passed on to its consumers.
Sourcing milk, its main ingredient, locally would not only slash operational costs but ease logistical problems associated with transporting a perishable raw material.
Nestle Kenya mainly buys milk from New Zealand despite an ample supply of fresh milk in Kenya, a farm-based economy that is east Africa's biggest.
Misri said the milk produced and processed in Kenya does not yet meet Nestle's standards, but the company had partnered with local dairy farmers in a pilot project that started two years ago to improve the quality of milk.
This would also help Kenya find new avenues to sell milk, which has in the past gone to waste due to poor storage facilities and trade routes.
"We are not yet there, but we are likely to source part of the milk this year and mix with imports," Misri said. Misri's other priority is to improve sales in the low income market through smaller and affordable packaging. In the past two years, the company has benefited using this strategy, which has helped its Kenyan sales to increase by 24 percent.
"The millions of people (low earners) giving us 10 shillings are very meaningful to us instead of the very few people spending a 100 shillings ($1.18) on our products," he said.
Angola, one of the 20 countries that make up the group's equatorial Africa region has the largest sales for the company, with the company capturing about 50 percent market share in the products it sells. Sales for milk are especially brisk, Misri said.
The country, which has emerged from a long-running civil war and is a major oil producer in the continent, is one of those that will see a new factory built by 2013, Misri said.
Also in line for a new factory is Mozambique, re-building after a long civil war and whose economy is growing at a healthy rate. Misri said the first phase of a new factory in the Democratic Republic of Congo will be open in three months.
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