Nestlé’s management of dairy supply chain in China

Back to Press releasesShuangcheng, China,Oct 23, 2008

In a showcase of its state-of-the-art milk production and processing system, Nestlé today opened the doors of its Shuangcheng milk factory to highlight its world-class quality and safety management system in the industry. The Shuangcheng factory, established in 1987 and located in Heilongjiang province in northeast China, is the largest of its kind in Asia and ranks fourth in the world in terms of annual dairy production in the Nestlé Group.

Led by Mr. Patrice Bula, Chairman and CEO of Nestlé (China) Ltd., the tour of Nestlé’s Shuangcheng factory and its farmers’ training session explained that Nestlé’s manufacturing mission in China is to produce advanced, world class quality milk products for all generations of Chinese from infants to seniors, and at Nestlé, quality and safety are non-negotiable.

In order to deliver this, Nestlé has over the past 20 years put in place comprehensive quality and safety management system that features four key attributes: 1) direct relationship with the farmer; 2) a unique milk collection model; 3) world-class production and processing; and 4) advanced R&D to continually apply the latest technology and safety standards.

Win-Win-Win Partnership between Farmers, Local Government and Nestlé
Nestlé’s high quality dairy production always begins at the source with milk farmers. To build long-term, direct relationships, Nestlé has established a unique milk collection model called 'factory and farmers' through solid efforts over the past 20 years.  Based on a Win-Win-Win partnership between farmers, the local government and Nestlé, this model ensures each party takes its responsibility and works together to achieve highest quality and safety. Government supports have been instrumental in the successful implementation of this model, which also effectively eliminates the 'middleman' and ensures the traceability and accountability of the overall supply chain.  Most importantly, through this model Nestlé dairy farmers are provided with continuous training, technology and skill development – from cow selection, quality feed, breeding practices, disease prevention, milking, storage and transportation – to bring world-class standards and processes to local communities, which in turn produces high quality milk and promotes positive development of the local industry.   Every year, for the last 20 years, Nestlé conducts more than 300 free training sessions for farmers.

Milk Collection Model
The unique milk collection model employed by Nestlé and its farmers includes a computerized system where information on each farmer, cow and batch of raw fresh milk is tracked from pickup to delivery and production. In this model, every batch of milk received needs to pass a series of strict quality checks before it is 'lead sealed' prior to being transported to the factory. In order to ensure freshness of the source milk, every Nestlé farmer is approximately one-hour from the milk stations, which are managed by Nestle-trained staff.

World-class Production and Processing
Over the past 20 years, the Shuangcheng factory has undergone rapid growth and consistent enhancement to become one of the most technologically advanced and largest Nestlé factories in the world. Its highly efficient quality and safety management and stringent regulation over its milk supply chain has ensured the consistent supply of high-quality products made from fresh milk that comply with world standards. In fact, this process includes over 70 international quality and safety tests developed through Nestlé’s worldwide network of dairy scientists and engineers. As a result, the Shuangcheng milk district has been rated as the number one county in China for milk cow production by the China Dairy Association.

Advanced Research and Development
As the world’s foremost dairy and nutrition expert for over 140 years, Nestlé’ is committed to investing in advanced research and development to ensure the quality and safety of products in China. This commitment includes leveraging its 23 global R&D centers, with one in Shanghai and another with the opening of a new state-of-the-art Beijing Research and Development Centre. With an initial set-up investment of RMB 70million, the new Beijing R&D Center provides high-tech quality testing, safety technical and scientific support. The Beijing R&D Center also strengthens Nestlé’s ability to further adapt its products to local taste preferences, and address the nutritional and health needs of future generations of Chinese consumers.

“For more than 140 years, families have trusted Nestlé for the best milk and infant nutrition products,” said Mr. Bula. “At Nestle, consumer safety is an uncompromising priority.  That’s why we have been employing these best practices that set the standard for the industry.”  Mr. Bula also noted that during the current milk crisis in China, Nestlé undertook immediate, decisive actions to ensure continuous and uncompromised quality and safety of its products.

  • Since Sept 14th, no milk products are released to the market before passing internal tests and government lab certifications.
  • To deliver our commitment to our consumers about product safety and quality, immediate voluntary testing is being conducted on all Nestlé milk products produced before Sept 2008. As of today, Nestlé has passed all tests and received more than 16,000 government certifications. This allowed Nestlé to respond speedily ahead of our competitors in making sure that our products remain available on store shelves after the Chinese authorities issued recently its 'Green sticker' policy to satisfy consumer needs.
  • Nestlé massively invested in the quality control of its fresh milk supply in order to achieve best-in-class standard of fresh milk quality. Nestlé has made immediate investment to equip its factories with 20 state-of-the-art analytical machines, including some of the most sophisticated equipment used during the Beijing Olympics.
  • The Nestlé headquarters in Switzerland has sent more than 20 of its leading scientists from Europe who are working on the ground with the local team as well as relevant authorities to ensure the highest product quality and safety. These actions, plus the already existing world class operations in Shuangcheng factory, enabled Nestlé to comply with all government standards and requirements, and ensure that Chinese consumers continued to enjoy our high quality dairy and infant nutrition products with confidence.

About Nestlé (China) Ltd.
Headquartered in Switzerland, Nestlé is the world’s largest food company with a long history in China. Chinese consumers have trusted the Nestlé brand name since its first sales office was established in Shanghai in 1908, making Nestlé one of the first foreign enterprises with a solid commitment to China. In the early 1980s, Nestlé started its negotiation with the Chinese government to set up factories in China, and transferred its world-leading proprietary technologies and rich expertise in nutrition and food processing to China. The first joint venture between Nestlé and its Chinese partners started in Shuangcheng in 1987, and more factories have been established ever since.  Nestlé has helped China save substantial foreign exchange by replacing imports with local products made from local materials of the same quality. Today, 99% of Nestlé’s products sold in the China market are locally made.

Nestlé's milk business
As the world’s largest food producer, milk is Nestlé’s top business line and comprises about 25% of its global sales. Nestlé operates 91 milk factories in 45 countries, and purchases about 12 million tons of fresh milk from 300,000 milk farmers each year.

Nestlé China: He Tong Tel.: +86 10 8434 7656
E-mail: nancy.he@cn.Nestlé.com