Swiss food giant Nestlé S.A Tuesday said it will spend $270 million building a new coffee factory in Vietnam and increase its sourcing of coffee from local farmers.
The factory, to be located in Dong Nai province, southeast Vietnam, will produce products under the Nescafe brand for both local consumption and export when it becomes fully operational in 2013.
The investment supports Nestlé’s 350 million-franc Nescafe Plan, launched in August 2010, which aims to support sustainable coffee farming, production and consumption.
In addition, the factory, which will create 200 jobs, will also showcase the latest process technology and focus on energy and water savings, Nestlé said.
“Today’s investment is fully aligned with the global Nescafe Plan, launched just a year ago, which brings our commitment to support responsible coffee farming, production and consumption together,” said Nestlé Chief Executive Paul Bulcke.
Over the next five years in Vietnam, Nestlé aims to increase the amount of Nescafe coffee bought directly from farmers and their associations to 30,000 tons of coffee from around 16,000 farmers every year.
Working with local farmers can also help Nestlé reduce the impact of soaring raw-material costs. New York coffee prices have surged 38% in the last 12 months.
Nestlé said it is working together with the Vietnamese Ministry of Agriculture and Rural Development to improve coffee productivity through better farming practices as well as to distribute high-yield, disease-resistant plantlets.
Eventually, Nestlé aims to engage with 20,000 Vietnamese coffee farmer households within five years.
At present, it operates four factories in Vietnam employing more than 1,500 people nationwide.
The latest investment is part of Nestlé’s plan to increase capital expenditure in Asia and Africa by around 40% this year, director Frits van Dijk said.
“Traditionally in Zone Asia, Oceania, Africa, we have been spending 800 million to 900 million francs, but this year it has significantly expanded to 1.4 billion francs,” Mr. van Dijk, executive vice president for Nestlé’s AOA zone, said in June.
“If you grow at double digit rates year on year, you have to invest in new production lines, new factories, and that’s exactly what’s happening. “
Nestlé’s AOA Zone has been the fastest-growing of the Swiss food company’s three global regions, with sales up 11.8% to 3.8 billion francs in the first three months of 2011.
Nestlé will report its first-half earnings on Wednesday.
