Bloomberg

(Bloomberg) -- After a period of disappointing growth, Nestle SA is experiencing a turnaround in China as the multinational food company focuses on e-commerce and product innovation.

Sales have posted “steep numbers” for products -- recently relaunched in China -- like Nescafe coffee and Shark wafers, Reinhold Jakobi, managing director of the food and beverage business in greater China, said in an interview on Sunday.

The company’s e-commerce business in China, expanding at triple-digit rates, and is on average more profitable than brick-and-mortar retail, he said.

Nestle’s growth had been slowing in the past few years as the company didn’t react quickly enough to trends like e-commerce and healthier eating, which led shoppers to shun some packaged-food offerings. Its Yinlu brand, which makes peanut milk and a rice porridge called congee, has declined as consumers shift to more premium products.

Nestle has learned that "we have to make sure that the needs of the consumers today are faster addressed in this market, faster than any other market. So we have been catching up in the last two years," Jakobi said.

New Products

The company set up a standalone e-commerce unit in China a few years ago that is independent of its traditional business. It has rolled out new strategies like Sunday’s unveiling of 67 products on Alibaba Group Holding Ltd.’s Tmall.com portal that it has never offered in China and which aren’t available in shops, including Nido milk powder and Damak chocolates.

The online experimentation is part of an e-commerce fair commemorating the company’s 150th anniversary that features deep discounts in over 150 products on Tmall.com. It will run for an initial period of six months.

"This idea and its execution speaks to the flexibility, speed and agility of our team," said Wan Ling Martello, head of Nestle’s Asian and African businesses on Sunday. "If you look at many start-ups, they might be moving very fast but don’t have the stability. We have a stable, consistent core but when we can pull off (e-commerce) events like this, that’s where the magic happens."

This new nimbleness was made possible by a global company-wide restructuring a few years ago that gave the various units of the world’s biggest food company’s more flexibility. The business now operates like "a fleet of agile ships that go to the mother ship for certain services but are allowed to sail as they do best," said Jakobi. 

The company’s business in China is growing at a "very positive" rate now, he said.

"When you look at the penetration of our products into Chinese households, it’s still very small. There is still a long way to go."

--With assistance from Robert Fenner To contact Bloomberg News staff for this story: Rachel Chang in Shanghai at wchang98@bloomberg.net. To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Steve Geimann, James Kraus

©2016 Bloomberg L.P.

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