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Nestlé staying put despite strong coffee competition

Nestlé Philippines said Friday it will continue coffee production in the Philippines despite higher cost and stiff competition by adjusting to emerging demands and introducing innovations that will address market concerns.

The company clarified its earlier statement that it may transfer its coffee manufacturing business either to Indonesia, Vietnam or Malaysia where laws and incentives are more stable than the Philippines.

“We have been operating in the Philippines for 107 years now, and we look forward to doing business here in the next 100 years. Nestlé is here to stay,” the company said in a statement.

Nestlé Philippines vice president for communications Ernesto Mascenon earlier said local coffee producers needed government support against increasing import volumes.

“We’re requesting them [the government] for Train (Tax Reform for Acceleration and Inclusion) 2 to address the disadvantage of local manufacturers who use local agricultural products against those who are importing finished products, especially from Asean,” Mascenon aid.

“Otherwise, we will close down our manufacturing here and just move on to Indonesia, Malaysia or Vietnam and import finished products,” he added.

But Nestlé said it remained committed to support the local coffee industry.

“Coffee under our Nescafe brand remains to be a core pillar for us,” the company said.

Nestlé conceded that inflation had caught up with overhead costs, especially on raw materials and electricity. It is also mulling over an option to discontinue  manufacturing Nesfruta, its powdered juice brand, due to sustained drop in sales.

Nesfruta sales declined 30 percent, year-to-date, after the government implemented a higher excise tax rate.

Prices of sweetened beverage jumped 80 percent when Train 1 took effect January 1, 2018. The price of Nesfruta increased to P16 per sachet from just P7 to P8 per 1 liter pack.

Another best selling beverage Milo, its choco malt milk beverage, registered flat sales year-to-date.

Nescafe, the company’s flagship brand, may also suffer drop in total sales. Compared with companies importing manufactured coffee products, local producers are at a gross disadvantage since sugar and electricity prices are way cheaper in other countries, Nestlé said.

The company said it would offer a list of proposed incentives for the coffee industry for consideration of the government.

Nestlé, which produces coffee products from a factory in Cagayan de Oro City, is among the companies affected by the implementation of the first package of the Train law, which imposed excise taxes on sweetened beverage.

Coffee is a core business of Nestle in the Philippines, along with other beverages such as juices, tea preparations, and milk products.

Topics: Nestlé Philippines , coffee production
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