Nestle Sees 20% China Growth in This Year as Wages Rise

Nestle (NESN) SA, the world’s largest food company, said China sales will probably grow about 20 percent this year because of rising wages and the government’s policy to boost local consumption.

The slowing growth of Asia’s biggest economy hasn’t affected the local operations of the Vevey, Switzerland-based company, which has seen expansion in most of its businesses, including dairy products and coffee, Greater China Chairman Roland Decorvet said in an interview today. Nestle’s China sales increased by more than 20 percent last year and will grow by a double-digit percentage in 2013, he said.

“There are a lot of initiatives done by the government to promote the local economy, domestic economy and local consumption,” said Decorvet, who was attending the World Economic Forum in Tianjin. “Wage inflation means more purchasing power.”

Nestle bought 60 percent stakes in Hsu Fu Chi International Ltd., a Chinese snack and candy maker, and Yinlu Foods Group last year to expand in the market. The company said Feb. 16 its sales in China were approaching 5 billion Swiss francs ($5.3 billion).

Increasing Investment

The Chinese government is trying to increase domestic consumption as Europe’s deepening debt crisis and a slowing recovery in the U.S. reduce export demand. China’s growth expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years.

Decorvet said he expects “double digit” growth in China next year.

Nestle, which makes Nescafe instant coffee, Kit Kat candy bars and Polo mints, has no plans to slow down its investment in the world’s most populous country.

“We are increasing our investments in every single category,” the executive said. Chinese consumers on average drink four cups of coffee each year, while the figure is 150 in Hong Kong, 400 in Japan and 600 in the U.S., he said. “So we can build dozens of more factories over the next decades.”

Nestle shares fell 0.1 percent to 58.35 Swiss francs as of 10:43 a.m. in Zurich.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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