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[Herald Interview] Nestle hopes for more ties with Korean suppliers

Nestle S.A., the world’s largest food company, is seeking to boost its beverage and coffee machinery purchase from innovative Korean manufacturers, one of the firm’s high-ranking officials said Thursday.

The firm saw the biggest potential of local companies in its leading technologies and dynamics, said Ruguo Hu, head of equipment & system of Nestle R&D Centre Shanghai. The Shanghai R&D center is in charge of sourcing in the Asia Pacific region.
Ruguo Hu
Ruguo Hu

“The difficulty for us (regarding sourcing from Korea) so far was that we didn’t know much about its companies. But I was surprised to see how innovative Korean companies are and how quick they can respond to changes,” Hu told The Korea Herald.

“We consider Korea a goldmine which we need to dig more (in the future).”

Nestle is the No. 1 player in the home espresso machine market worldwide which has been growing largely over the years. It currently offers two brands under the sector, Nespresso and Dolce Gusto.

The home espresso machine sector earned the firm sales of $4 billion last year by selling 5 million units, according to Hu. The figure has been growing at around 3 percent a year.

Despite such competitiveness, Hu said Nestle has not been making equipment purchases from small- and mid-sized Korean manufacturers so far mainly due its low acquaintance with them.

Also, local firms’ quality, compatibility and production capacities have not fully met Nestle’s standards, he added.

Hu and representatives of Nestle are visiting Korea April 7-8 to attend the trade fair Premium Korea 2011 in Seoul, hosted by the Korea International Trade Association.

The trade body hosted the event, based on a belief that more foreign buyers have had growing interest in local firms due to the country’s improved reputation as well as concerns over the recent quake and nuclear crisis in Japan, KITA officials said.

The G20 Seoul Summit and Business Summit held in Seoul last November have particularly raised the country’s brand value, they added.

The KITA selected Nestle, along with firms including Staples, Wal-Mart and Dorel, a member of its Global Sourcing Partners, who are expected to help promote the country’s products overseas.

“Through the KITA event, we have actually reached some deals with Korean companies that are going through final phases,” Hu said.

Meanwhile, from a seller’s point-of-view, Hu saw Korea as a highly prospective home espresso machine market, despite the firm’s instant coffee brand, Nescafe, underperforming here.

Hu expected to see success of its home espresso machines in the local market, as the country is one of world’s 10 biggest coffee consumers and people here have high standards for the beverage.

By Koh Young-aah (youngaah@heraldcorp.com)
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