Nestlé's Strategic Move: Shifting Amidst Changing Chinese Birth Trends
Nestlé to close Irish plant manufacturing baby formula due to China's declining birth rate, highlighting the wide-ranging consequences of China's demographic crisis
Nestlé intends to close down its infant formula manufacturing plant in Ireland due to a significant decline in China's birth rate. This decision highlights the profound impact of China's ongoing demographic crisis. The multinational food corporation, known as the largest in the world, stated on Wednesday that unless a buyer is identified, it will cease operations at the Wyeth Nutrition infant formula facility located in Askeaton, Ireland by the first quarter of 2026. The plant is solely dedicated to producing infant formula items for export to Asian markets.
The implications of China's declining population for Western firms selling goods and services in the country are highlighted in the announcement. The impact of an ageing population on China's economic growth is already evident, and policymakers are concerned about the potential long-term threat to economic and social stability posed by a shrinking workforce.
This aerial photo taken on September 28, 2023 shows a housing complex by Chinese property developer Evergrande in Wuhan, in China's central Hubei province.
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China's real estate crisis will continue to hinder its economy for several years. The decline in newborn babies from approximately 18 million annually in 2016 to an estimated under 9 million by 2023 is causing significant impact. Nestlé stated that the market previously relied on importing infant formula products, but now there is a rapid expansion of locally produced alternatives.
The Nestlé research and development center at the plant will close a year earlier, with work being transferred to existing factories in China and Switzerland. These closures put 542 jobs at risk and Nestlé has stated that it will initiate a "consultation process" with employees. Additionally, the company mentioned that during this consultation they are open to considering offers from credible buyers.
Rising product prices, including Nescafé coffee and KitKat chocolate bars, have adversely impacted Nestlé's global sales this year. The company reported sales growth for the first nine months of the year, falling short of analysts' expectations and causing a decrease of over 2% in its shares.
Sales increased by 7.8% on a like-for-like or "organic" basis, excluding the effects of acquisitions, fluctuations in exchange rates, and other changes. Prices also experienced a rise of 8.4%. CEO Mark Schneider stated that the growth in sales was primarily driven by pricing, as they successfully managed the challenges posed by high levels of inflation.
Total sales decreased by 0.4% to 68.8 billion Swiss francs ($76.6 billion). Additionally, Nestlé has temporarily closed a factory in Israel as a precautionary measure, but it is now back in operation.
