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Nestlé sells silver heron
In response to earlier rumors of “selling silver heron,” Nestlé finally let him go. Nestlé recently responded to the rumor of selling Yinlu for the first time: The company is conducting a strategic review of Yinlu, with the intention of selling Yinlu’s Babao peanut milk and porridge business, and retaining the ready-to-eat coffee business. drink. Regarding the identity of the recipient, the person responsible for Nestlé told reporters at the Beijing Business Daily that since the strategic review has just started, it is too early to answer this question. However, some industry insiders said Yinlu Peanut Milk and Babao Congee have bigger dishes. From a demand and match perspective, COFCO is a more likely investor.
Retain the coffee business
On April 24, Nestlé released its 2020 First Quarter Earnings Report. For the first time in the 2020 First Quarter Report, Nestlé responded positively to the possibility of selling Yinlu assets and adopted a sales and retention strategy based on different businesses.
Nestlé said in the report that Nestlé’s board of directors decided to conduct a strategic review of the Yinbao peanut milk and Yinbao canned porridge business in China, including the possibility of sale. Its goal is to ensure the growth and long-term success of the Yinlu business, which has sales of 700 million Swiss francs in 2019. Nestlé will retain the Nestlé ready-to-drink coffee business that is currently filling and distributing Yinlu. This business is the engine that drives Nestlé’s strategic growth, and Nestlé will continue to invest heavily in the brand in China.
Yinlu is understood to currently have three main businesses, Babao Congee, Peanut Milk and the instant coffee business presented by Nestlé. Since Nestlé’s last response, the instant coffee business is not within the scope of this strategic review. Yinlu currently has 5 production bases in Xiamen, Shandong, Hubei, Anhui and Sichuan.
In fact, as early as October 2019, there were rumors in the industry that Nestlé was selling silver herons. In March 2020, the news was further confirmed: Nestlé is working with JPMorgan Chase to prepare for the Yinlu sale and find buyers.
According to industry experts, all Nestlé ready-to-drink coffee is produced by Yinlu, and Nestlé will not easily sell Yinlu. The current sell and hold strategy is also a decision based on actual conditions.
In 2011 Nestlé acquired a 60% interest in Yinlu and achieved a controlling interest in Yinlu. In April 2017, Nestlé again acquired a 20% stake in Yinlu. In June 2018, Nestlé acquired the remaining shares in Yinlu and fully controlled Yinlu.
It is worth noting that since the Nestlé acquisition, Yinlu has shown a state of weak growth. Nestlé said in its financial report that Yinlu’s performance in 2015 decreased and that its growth rate in 2016 was a double-digit decrease. Starting in 2019, Yinlu’s peanut milk and peanut porridge sales continued to decline. Industry insiders noted that current CEO Mark Schneider (Mark Schneider) has been eliminating Nestlé’s non-core business since taking office in 2017.
“Babao Congee” malfunctions
Because Nestlé sells the Yinlu peanut milk and Babao porridge business and retains the ready-to-drink coffee business, Chinese food industry analyst Zhu Danpeng also said that Yinlu’s peanut and babao milk products are not high in technology and lack of performance growth, which is not in line with Nestlé’s strategy.
Data shows that among the 6.9 billion Swiss francs of Nestlé Greater China’s sales revenue, sales of the Yinlu business are approximately 1 billion Swiss francs, of which Babao’s peanut milk and porridge business It represents approximately 2/3 of the instant coffee business. It represents about a third. From 2013 to 2015, Yinlu’s total revenue gradually decreased, from 11.1 billion yuan in 2013 to 9.647 billion yuan in 2015. 2016 experienced a double-digit decrease in the growth rate. Yinlu’s peanut milk currently represents only 6.2% of the market segment.
In the second half of 2019 and the Mid-Autumn Festival, Yinlu’s performance did not meet expectations.In addition to the fierce competitive environment, Nestlé reviewed Yinlu’s strategy, product portfolio and business plan. Nestlé CEO Schneider told the media that although related companies like Yinlu Peanut Milk and Babao Porridge have stabilized, there is still a lot of work to do.
Zhu Danpeng said the most important reason for the sale was that Yinlu peanut milk and Babao porridge were not in line with Nestlé’s development strategy.
In 2017, the newly appointed Schneider once proposed that Nestlé go for four high-growth products such as coffee, pet food, baby nutrition and bottled water products in the future.
This is also an important reason for Nestlé to retain the ready-to-drink coffee business. The 2019 annual report shows that among Nestlé China products, cooking seasoning (Totole), coffee and ice cream performed well, driving positive performance development in China. According to Nielsen’s retail market share report in December, Nestlé ranked first in China’s ready-to-drink coffee market share and has maintained double-digit growth for many years.
COFCO has a greater chance
Nestlé launched an olive branch, but who can take over the two business segments of Yinlu Peanut Milk and Babao Gachas? Zhu Danpeng believes that Yinlu peanut milk and Babao porridge channels are also very mature, and the top two companies are mainly for the 3-5 low-end market, with a volume of about 4 billion yuan. It is difficult for ordinary companies to take over. , The need for companies with state records to take over.
Regarding who Nestlé intends to sell its business to, the person responsible for Nestlé told the Beijing Business Daily reporter that since the strategic review has just started, it is too early to answer this question.
According to previous reports, potential buyers include Wahaha, Unity, Dali, COFCO, and other well-known companies. However, these companies said at the time they were unaware or declined to comment. In Zhu Danpeng’s opinion, COFCO lacks a billion dollar beverage tray. By purchasing Yinlu, you can quickly improve your performance and synergize with your Coca-Cola bottling business. From a demand and match perspective, COFCO is a more likely investor.
In addition to who the buyer’s prediction is, industry insiders are also concerned about the sale prices of the Yinlu peanut milk business and Babao Porridge. There were rumors in March this year that the price at that time could reach around a billion dollars.
However, Xu Xiongjun, a strategic positioning expert and founder of Jiude Positioning Consulting Company, believes that right now it is not easy to determine which company will take over, but if the price is low enough, someone will definitely take over, after everything, Yinlu is a national brand, the eight porridge of the Yinlu treasure, Peanut milk has a certain market size.
Some experts also analyzed: “If the price is too high, Nestlé may consider dividing the sale of Yinlu peanut milk and Babao porridge, so that the volume is reduced, the difficulty of selling is reduced, but the difficulty of operation at selling will increase. “
