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Yinlu Foods to Increase Production After Nestle Investment

Yinlu Foods Group, the Chinese foodmaker in which Nestle SA took a stake last year, plans to invest about 3 billion yuan ($480 million) in the construction of two new factories and increase capacity by two-thirds.

Production capacity at the maker of ready-to-drink peanut milk and ready-to-eat rice porridge will rise to 5 million tons of goods a year by the end of 2014, from 3 million tons, Chairman Chen Qingyuan said today in an interview at Yinlu’s plant in Hubei province.

Nestle bought a 60 percent stake in Yinlu last year as the Vevey, Switzerland-based company sought to increase business in emerging markets. A new plant in Anhui province will begin production by the end of this year, while a factory in Sichuan province will begin output in 2014, Chen said.

“Per capita consumption is starting from a low base and is growing every year,” with significant potential to expand, Chen said.

Yinlu had 2010 sales of about 750 million Swiss francs ($812 million) and hasn’t disclosed revenue numbers for last year. The Chinese company’s goal is to boost revenue by a double-digit percentage annually over the next three to five years as per capita consumption rises and consumers focus more on nutrition.

Nestle China

Chen was one of the founders of Yinlu in 1985 and the company has expanded since then to three factories in China with more than 10,000 employees. Nestle last year also acquired a 60 percent stake in Hsu Fu Chi International Ltd., a Chinese snack and candy maker.

China is set this year to become Nestle’s largest market after the U.S., according to Warren Ackerman, an analyst at Societe Generale in London. He estimates Nestle’s sales from that market may reach 5 billion Swiss francs in 2012, rising to nearer 6 billion francs including the still-to-be-completed purchase of Pfizer Inc.’s infant-nutrition unit.

Nestle will announce its nine-month results tomorrow, the first time it will do so from a Chinese location. The company may say that revenue on an organic basis increased 6.3 percent in the nine months through September, according to the average of 12 analysts surveyed by Bloomberg.

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