KUALA LUMPUR: Malaysia will continue to be an important base for Nestle SA as it continues to seek expansion here in spite of its already dominant position in the local food and beverage (F&B) industry.

The F&B sector is set to accelerate its growth with a new corporate address after completing its move to the Surian Tower, a 26-storey office building in Mutiara Damansara on Oct 26. It is the anchor tenant at the building with over 300,000 sq ft of rental space.

“The main reason for the move was because the old corporate building in Petaling Jaya could no longer cope with our needs and expanding staff of more than 700,” Nestle (Malaysia) Bhd director of corporate affairs and wellness Tengku Marina Badlishah told The Edge Financial Daily in an interview at an international crisis management conference here recently. Nestle has a total of 5,000 employess in the country.

She said Malaysia, as the halal centre for Nestle’s global operations, was strategically important to the group as an export hub, particularly to the Middle East and other Muslim countries. Exports contributed about 23% to Nestle Malaysia’ total sales of RM3.9 billion for the financial year ended Dec 31, 2008 (FY08).

Tengku Marina said the Nestle group invested about RM6 billion annually in research and development worldwide. It has 28 research and development centres in 13 countries; with Beijing and Shanghai as the base for product development dedicated to Asian tastes. 

“More than 90% of our products sold here are manufactured locally, and certain products such as Milo has reached 93% household penetration in Malaysia,” she said.

The company recently invested RM110 million to increase the capacity of its Nescafe plant in Shah Alam. However, it remains cautious going forward, as some commodity prices such as cocoa, skim milk powder and sugar are showing an upward trend.

Tengku Marina also said consumer perception of the overall well-being of the economy influenced their spending behaviour. “During the more challenging economic period, consumers tend to tighten their spending and this has had an impact on F&B patterns of consumption and purchases, for example, consumers are eating in more.”

For the first nine months of this year, Nestle Malaysia posted a revenue of RM2.8 billion, a decline of 3.8% from RM2.9 billion a year earlier. The lower sales were due to price reductions of 7%-12% for Milo and other dairy products since February 2009.

Net profit, however, inched up to RM265.57 million from RM263.6 million previously, as softer commodity prices and an efficiency drive resulted in cost savings.

On crisis management, Tengku Marina said the most recent health scare with regard to melamine contamination served as a valuable lesson for the group in managing customers’ expectations.

“During the height of the scare, our call centre received over 22,000 calls in two weeks with queries on the safety of our products. It is like a natural audit on our standard and product safety compliance,” she added.   

Tengku Marina said the episode had reinforced the group’s belief to be always prepared and in maintaining a high standard of quality as the best line of defence.

Nestle’s presence in Malaysia dates back to 1912, and the Malaysian unit became a listed company in 1989.

Nestle has 456 factories in 84 countries, including six in Malaysia and employs some 280,000 people worldwide.


This article appeared in The Edge Financial Daily, November 9, 2009.