F&N, Nestle extend dairy brand licence for 22 years

Under the agreement, F&N will continue to manufacture and distribute Carnation, Bear Brand, Bear Brand Gold, Ideal Milk and Milkmaid in Singapore, Thailand, Malaysia, Brunei and Laos, until 2037. 

The new deal is also to secure business expansion over the next two decades as well as to enter emerging markets such as Myanmar, China, Cambodia, and Laos.

The licences, which were originally granted by Nestle in 2007 under a 310-million ringgit deal until 2017, saw the F&N Group acquiring Nestle’s canned liquid milk, UHT and chilled dairy and juice business, in addition to acquiring relevant Nestle production facilities and equipment in Thailand, and the Tea Pot brand.

According to F&N’s Ng Jui Sia, chief executive officer for non-alcoholic beverages, the 22-year licence agreement for Nestle brands in Asean will strengthen them in the marketplace. “F&N’s strengths in manufacturing and route-to-market in liquid milk in Thailand, Malaysia were further enhanced via the new agreement,” he said.

“F&N will invest Bt300 million in 2015 on an additional filling and packaging line in Rojana [industrial estate] for the manufacture of Carnation evaporated milk to cater to the growing demand, as current capacity is already maximised. The investment will help increase production capacity up to 30-40 per cent per year, he said.

F&N will also continue to manufacture, promote, sell and distribute Carnation in Thailand, Laos and Cambodia, which include Carnation sweetened condensed milk and evaporated creamer, Ideal evaporated milk, Milkmaid sweetened condensed milk and sweetened beverage creamer for Malaysia, Brunei and Singapore. It will also continue to manufacture and distribute Bear Brand sterilised milk and Bear Brand Gold for Thailand and Laos. 

Meanwhile, Milo UHT and Bear Brand UHT for Thailand and the Indochina market returns to Nestle in a strategic realignment that will enable Nestle to strengthen its regional strategy in this category. 

F&N expected to boost sales volume in Thailand to Bt12 billion and also hoped to maintain Thailand as one of the top three markets in the region.

F&N Holdings chief executive officer Lim Yew Hoe said the new licence agreements and renewal agreements would deepen and widen the group’s footprints in Asean. 

“This extended tenure granted ahead of its expiry in 2017 is a testament to Nestle’s confidence in F&N Holdings. The long time-frame offers us many options, as it enables us to plan and invest to ensure that we exploit and grow every opportunity for not just Carnation and Bear Brand, but our full portfolio of canned milk products.” said Hoe. 

Nophadol Siwabutr, corporate affairs director at Nestle (Thai), said it was an opportune moment as Asean is steadily moving towards the goal of becoming one economic community.

He said the deal between Nestle and F&N was important for the ThaiBev Group as Nestle had again entrusted the future of our core brands, notably Carnation and Bear Brand, to F&N, to continue to build on each other’s strengths.

Carnation is No 1 among condensed milk brands in the premium segment with two-thirds of Thailand’s total condensed milk market and a strong 20 per cent growth in sales last year, even as the condensed-milk sales in Thailand declined slightly. Similarly, in Malaysia and Singapore Carnation enjoyed a strong double-digit volume growth last year.