Nestlé, the world's largest food company, has announced plans to close its Wyeth Nutrition infant formula factory in Ireland due to a significant decline in China's birth rate. The plant, located in Askeaton, produces infant formula exclusively for export to Asian markets. The closure sheds light on the widespread effects of China's demographic crisis and raises concerns for Western companies operating in the country. With an aging population and a shrinking workforce, China's economic growth and long-term stability are at risk.
Nestlé stated that the number of newborn babies in China has plummeted from approximately 18 million per year in 2016 to projected fewer than 9 million in 2023. In response to this decline, the Chinese market has shifted towards locally produced infant formula products, reducing the dependency on imported brands. Nestlé's research and development center at the Irish plant will be shut down a year earlier than the factory, and operations will be transferred to existing facilities in China and Switzerland.
The closure of the Wyeth Nutrition plant puts 542 jobs in jeopardy. Nestlé has expressed its intention to commence a consultation process with employees, while also considering potential buyers for the facility. The company acknowledges the need for a credible buyer to step in and save the plant from closure.
This year, Nestlé has faced challenges in its global sales due to increasing product prices, impacting various offerings such as Nescafé coffee and KitKat chocolate bars. The company's reported sales growth for the first nine months of the year fell short of analysts' expectations, leading to a decline of over 2% in its shares. While total sales dropped by 0.4% to 68.8 billion Swiss francs ($76.6 billion), the growth of 7.8% on an organic basis was driven primarily by price increases.
In a separate development, Nestlé had temporarily closed a factory in Israel as a precautionary measure, but it has since resumed operations. The company did not provide any specific details regarding the reason for the closure or the nature of the precaution taken.
The closure of Nestlé's baby formula plant in Ireland underscores the significant impact of China's declining birth rate on global businesses. As China grapples with an aging population and a shrinking workforce, companies that rely heavily on this market should prepare for potential challenges. For Nestlé, shifting operations to local production in China and Switzerland appears to be a strategic response to the changing dynamics of the Chinese market.