Sector News

Nestle close to signing off on $50 million-$60 million factory in Cuba

March 9, 2017
Food & Drink

Swiss firm Nestle is close to reaching a deal with Cuba on forming a new joint venture to build a $50 million to $60 million factory to produce coffee, biscuits and cooking products, company Vice President Laurent Freixe said on Wednesday in Havana.

Freixe, head of Nestle’s Americas division, was visiting the Communist-ruled island to negotiate the new investment in the Mariel special development zone west of Havana as well as to renew for another 20 years an existing joint venture producing ice cream.

Cuba has upped its drive to attract foreign funds in a bid to stimulate the economy in recent years, introducing a new investment law and creating the Mariel zone, which offers companies significant tax and customs breaks.

Nestle has been one of the largest investors in the country since it opened the door to Western capital in the 1990s after the fall of former benefactor the Soviet Union.

“The idea is to create a new joint venture to produce and distribute these products mainly for the Cuban market but also with the idea of exporting some products,” Freixe said in an interview.

Coffee in particular is ideal for export, he said, pointing to the success of a limited edition of Cuban coffee by Nestle’s Nespresso last year – the first Cuban coffee sold in the United States in more than 50 years.

“Talks are very advanced, now it is more a question of finalizing them and completing the issue of financing,” Freixe said, adding that Nestle would have a 51 percent share in the company.

That is comparable to Nestle’s share in its two other Cuban factories, one producing ice cream and the other bottled water and other beverages, he said. Nestle also imports food products for sale in Cuban stores.

Cuba said last November it had approved 19 ventures so far in Mariel, which is centered around a container terminal that the country hopes will become a regional hub.

The development zone is part of Cuba’s drive to update the centrally planned economy under President Raul Castro, who took over from his brother, the late Fidel Castro, in 2008.

Nestle’s new factory, set to begin operations in the second half of 2019, will cater to growing demand after a surge in tourism and help replace imports with locally made products, Freixe said. It will employ around 300 people.

“Tourism is going to double in the coming years, meanwhile demand is today only partially covered by local production,” he said, adding that Nestle was considering expanding its two other factories in Cuba.

Nestle’s sales in Cuba grew last year, in tandem with its revenues throughout Latin America, Freixe said.

“It was single-digit growth, so not spectacular because there are also liquidity limitations that limit potential, but demand is there and we are growing,” he said.

Cash-strapped Cuba has struggled to pay providers on time recently as revenues decline due to a drop in exports and the crisis in key trading partner Venezuela. Its economy shrank 0.9 percent last year, according to the government.

By Sarah Marsh

Source: Reuters

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