Nestle SA, the food giant, plans to invest nearly $100 million in Indonesia to produce Milo chocolate-flavored products and Cerelax weaning formula on the island. The move comes as the company reports strong earnings in the Asian economy.Nestle estimates that its factory in West Java will employ about 300 people and will be operational by the end of 2012. Its Indonesian president of operations, Arsha Chaudhry, affirmed that the company intends to purchase 10,000 tons of cocoa powder per year directly from local farmers in Milo, a move that will increase its supply chain efficiency as shipping costs are decreased.
The move is a strategic one and Nestle asserts that it will focus on selling to Indonesian households with a monthly income between 800,000 rupiah ($89) and 1.45 million rupiah, a segment of the population whose purchasing power is swiftly climbing. By expanding its operations on the island, Nestle ensures that its supply chain is diversified and can respond quickly to both supply and demand changes.
Between 2013 and 2015, Nestle plans to add capacity to its manufacturing facilities on the island. Currently, annual sales for Nestle Indonesia are about $1 billion, but the KitKat maker hopes that they will rocket up as its manufacturing processes are tweaked and it can stop importing products, eliminating extraneous shipping costs.
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