On October 13, Nestlé’s Board of Directors approved a motion to create new regions, effective January 1, 2022.
Nestle announces the formation of Greater China Region
The new structure will consist of five regions as follows.
North America, which includes the United States (the Group’s largest market), and Canada. This region has annual sales of CHF 24.7 billion.
The Latin America region (LATAM) includes Brazil and Mexico, which are among the Group’s leading markets in terms of sales. The Latin American part also consists of the Caribbean, which generated annual sales of CHF 9.2 billion.
The Europe region (EUR) will continue to develop in line with its established category-driven operating model. The model has already achieved extensive market share gains in the area. This includes annual sales of CHF 17.7 billion.
The Asia, Oceania and Africa (AOA) region will now include the Middle East and North Africa (MENA) region, with annual sales of CHF 17.5 billion in AOA.
Greater China (GC) is one of the fastest-growing food and beverage markets globally and offers Nestlé significant growth potential. The region has annual sales of CHF 5.7 billion.
Nestlé said the company will report sales and growth figures under the new regional structure for the first time on April 21, 2022. The new design underlines the company’s determination to succeed in all regions of the world, including the two largest markets of North America and Greater China.
With the new regional structure, we will significantly strengthen our focus on critical regions to drive sustainable and profitable growth in all the areas where we operate,” said Nestlé CEO Mark Snyder. With this move, we will be closer to consumers, open new business opportunities and enable us to be more nimble in a rapidly changing consumer environment.”
The recent announcement also disclosed that Zhang Xiqiang, currently Chief Executive Officer of Nestlé’s food and spices business unit, Mrs. Le Group and Head of Greater China Food Business, will join the Group’s Executive Board as Executive Vice President and Chief Executive Officer of Greater China Region.
Zhang Xiqiang started his career at Wyeth China in 2000, where he held various positions related to the finance department. When Nestlé acquired Wyeth in 2012, Zhang Xiqiang moved to Nestlé and served as Head of Dry Goods Sales for Nestlé China from 2015-2016.
The current head of Greater China, Rothschild, has decided to leave the company and hand over the region’s responsibility on December 31, 2021.
Mr. Paul Boquet, Chairman of Nestlé, added: “I fully support Mark and the team’s initiative to take Nestlé’s regional structure to a new level. This is an important and timely change and will strengthen the effective implementation of our company’s local attributes and Group strategy.”
Background of Nestle
Nestlé is a multinational food and beverage business headquartered in Vevey, Vaud, Switzerland. It is the world’s largest food company by revenues, having acquired the interests of Gerber in 2007. Founded and headquartered in Vevey, Switzerland, Nestle developed through mergers and partnerships its international presence around the globe with more than 333 factories, 147 institutes and around 2,000 offices in 86 countries. It is the fourth-largest food company globally by revenue (after Pepsico, Mars, Incorporated and Danone). Its products include baby food, medical food, bottled water, carbonated soft drink, coffee and tea beverage, prepared meals, ice cream (about 80% of Nestlé’s 2012 sales), frozen food, beverage and pet foods.
The company dates back to 1866 when two separate Swiss enterprises were founded that would later form the core of Nestlé. The two competing firms, however, aggressively expanded their operations across Europe and the United States in the following decades.
Nestle merged with a predecessor of the Swiss company in 1905.
The founder retired in 1925, and the company was led by his son Willy (William) for more than 20 years before it was acquired by American food company General Foods in 1947.
Nestlé has resisted selling its US beverage business, which includes Arrowhead Mountain Spring Water and Poland Spring water (bottled water business plan). It announced in 2017 it is to sell its US candy business to Italy’s Ferrero for $2.8 billion, which includes brands such as Baby Ruth, Butterfinger, and Sno-Caps.
Challenge of Nestlé
1. Reduce the amount of food packaging and ensure it is recyclable and recycled
Nestlé seeks to reduce the amount of its packaging across all product categories. It ensures that food packaging is recyclable, reusable or compostable. The company supports initiatives to make recycling more widely available, improve sorting processes and encourage consumers to recycle their own waste efficiently. As part of Nestlé’s commitment to sustainable sourcing, our factories sustainably obtain raw materials. Packaging is an integral part of the process, and we use recycled material wherever possible.
Nestlé works with partners to collect used beverage packaging from consumers and recycle it into valuable products or inputs for its manufacturing processes. In 2016, one billion beverage containers were collected directly from our customers to be recycled in the beverage recycling bin systems in the United States.
Nestlé also recycles cardboard, paper and plastic from other sources to be used as beverage packaging. This includes recycled Nestlé Pure Life bottles made from 50% rPET or post-consumer recycled plastic introduced into our US system. These bottles are currently available in California and Florida and will soon be available in other states.
Currently, beverage bottles account for around 20% of our total packaging weight. By 2025 we plan to reduce this percentage by 5%. This target has been incorporated into Nestlé’s 2020 goals for energy and climate change.
Nestlé aims to use recycled materials where possible, such as in beverage bottles made from 50% rPET or post-consumer recycled plastic, and ongoing work to create more recycling opportunities in the US beverage recycling bin system.
2. Reduce CO2 emissions in manufacturing and supply chain
Nestlé is becoming increasingly aware of the need to reduce its impact on the environment, particularly climate change. 62% of Nestlé’s agricultural raw materials come from drought-affected areas, which are expected to worsen due to climate change.
To help combat this situation, Nestlé is increasing the amount of recycled and renewable materials used in its factories and reducing the number of greenhouse gases produced.
Nestlé announced a 20% reduction in CO2 emissions from company-owned and operated factories, as well as its supply chain.
Since 2010, Nestlé has invested more than $700 million in water efficiency projects to reduce water usage and improve wastewater treatment. This includes water distribution in Nestlé’s coffee, cocoa and candy activities in countries where water is a natural constraint.
Nestlé has set a long-term goal of reducing direct greenhouse gas emissions from its factories and distribution centers by 80% in 2020, compared to 2006 levels. To achieve this goal, Nestlé’s Climate Change program aims to:
As well as the objectives mentioned above, Nestlé is looking to reduce direct and indirect water usage by an additional 20% between 2010 and 2025.
It is also looking to reduce the greenhouse gas emissions from suppliers and those from its own electricity use at factories. In addition, Nestlé has the ambition to increase the amount of renewable energy it uses in factories, another way of reducing CO2 emissions.
In 2007, Nestlé set out 10 goals to help improve its business, focusing on nutrition, bottled water, rural development and ethical trading.
Nestlé’s biggest priority is the improvement of infant nutrition for babies in developing countries.
It works with UNICEF to develop nutrition strategies for mothers and children in these regions.
3. Produce more sustainable food products
Nestlé has become the target of environmental and consumer groups for its use of palm oil, which is blamed for deforestation and pushing orangutans towards extinction. However, Nestlé believes that it can produce more sustainable food products by positively impacting society and the environment – providing healthy nutrition, reducing environmental footprint, and supporting communities.
Nestlé has been producing healthy and nutritional products for more than 150 years. At present, it makes 1 in 8 of all the food products bought around the world by people every day. Nestlé aims to improve access to safe water and adequate sanitation together with farmer training and nutrition education programmes worldwide. This should lead to improved quality of life and reduce malnutrition.
Nestlé is now focusing on making more sustainable food products. Its aim is to positively impact society and the environment in terms of producing healthy nutrition, reducing environmental footprint, and supporting communities. They have set an ambitious goal to reach by 2020. Nestlé has also become the target of environmental and consumer groups for its use of palm oil. Palm oil is blamed for deforestation and pushing orangutans towards extinction. However, Nestlé believes that it can produce more sustainable food products by positively impacting society and the environment – providing healthy nutrition, reducing environmental footprint, and supporting communities.
4. Neutral environmental impact
Nestlé makes sure their products have a neutral environmental impact by reducing the amount of water they use, recycling packaging materials and being environmentally aware when looking for new places to build factories. Nestlé is working on a project to reduce the amount of water they use in beverage making by up to 40% across its factories worldwide. The company has also created a beverage factory that recycles 100% of its wastewater, sends zero waste to landfills and uses 100% renewable energy.
Nestlé is part of the World Economic Forum’s campaign called ‘The New Plastics Economy,’ aiming to reduce plastic waste by making recycling more accessible and more widely available. Nestlé says that beverage bottles will be made of 25% recycled plastic by 2020. They hope to create a recyclable beverage bottle that is 100% recyclable in the bottled water business plan.
Nestlé has been very active in looking for new places to build their factories, especially when looking for new production sites for beverage making. They have been looking for a better way to get water during the water business plan and have recently found a new method that can cut down on costs, use less water and make beverage production more environmentally friendly.
Nestlé says beverage production is responsible for 1% of the world’s total greenhouse gas emissions. They say this is equal to aviation and is comparable to the emissions of New York City. Nestlé tries to reduce carbon dioxide emissions by looking for new, more energy-efficient production sites powered by renewable energy sources such as solar and wind power.
Nestlé has been an industry leader in research and development, especially in beverage making. They have recently developed a beverage that uses 30% less sugar. They are also trying to create a beverage that can change colour if it has gone wrong, which would help reduce food waste.
Nestlé is constantly developing new beverage products. This year, they created an orange-flavoured beverage containing vitamin C and no artificial colours or flavours. They say the beverage is aimed at children and parents who want to give their children a beverage without added sugar.
Nestlé strives to be as environmentally conscious as possible. They try to use packaging materials that can be recycled or reused, such as the aluminum beverage cans first introduced in 2016. They have also been trying to find ways to send less waste from beverage factories to landfill, such as reducing the amount of beverage packaging they produce.
Nestlé’s decision to create new regions is a way for the company to address changing consumer preferences. At an institutional level, it also reflects how difficult it can be to adapt when faced with unique challenges in their industry. What this change means for Nestlé will be interesting to see, and how they fare against competitors like Coca-Cola, PepsiCo, or Red Bull, who have previously made similar changes. If you’d like help navigating these waters yourself, please contact us today!
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