Nestlé is reportedly considering divesting from Yinlu Foods

I was surprised to read this news today. I know Nestlé as one of the earliest multinational food companies to invest in China at the beginning of the Economic Reforms. The company has since then steadily increased its presence in China, both regionally and in terms of product scope.

Yinlu's canned instant congee

Nestlé had acquired the 60% stake in Yinlu from candy maker Hsu Fu Chi in Apr 2011. It acquired 20% more in 2017 and the remaining 20% in 2018.

Yinlu's peanut drink

Yinlu is a producer of canned congee, saqima (a traditional Chinese type of pastry) and a peanut-milk beverage. Nestlé’s ready-to-drink coffee fitted nicely in this product range.

Nestlé's ready-to-drink coffee

Two of these main products of Yinlu, canned congee and peanut protein drinks, are regarded as growth markets in the China at the moment.

Canned food sales received a big boost during the months that the entire Chinese nation was home-bound due to the corona epidemic. It will therefore be hard for Nestlé to pin its decision on problems caused by the epidemic.

Protein drinks were already gaining popularity for some time, as an alternative to dairy drinks more suitable to the Chinese palate. The total turnover for protein drinks exceeded RMB 100 billion in 2015, and is expected to reach RMB 258.3 billion in 2020.

So, it puzzles me why Nestlé is not able to cash in on that. The English language site that brought this news on March 13 states that Nestlé is not found willing to give information. However, according to Chinese sources, Nestlé has already put Yinlu on the market in October 2019. Four major domestic companies are mentioned as potential buyers.

Local analysts name considerable conflicts about the long-term strategy within Yinlu’s top management as the major cause for the company’s bad performance.