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|7 March 2010
Nestle unit to spend $100 million to double production in Indonesia
PT Nestle Indonesia has expanded the production capacity of its factory in Pasuruan Regency, East Java, in a bid to double its production output to 1 million liters per day, the Jakarta Post reported.
The expansion, which cost $100 million, has established the factory as one of Nestle’s biggest in the world, president director Arshad Chaudhry told reporters on Wednesday.
“This is a long term investment, and I believe it will bring benefits to Indonesia, Nestle and the customers,” Arshad said at the inauguration ceremony, which was attended by Industry Minister Mohamad S. Hidayat.
Arshad added that Nestle would further increase its investment if the factory could meet the new production target of 1 million liters a day. Previously the factory produced up to 585,000 liters of milk per day.
However regardless of upgrades to the factory’s milk production technology, Arshad said, the output could only reach 620,000 liters per day due lack of raw milk supply.
A significant portion of supply of unprocessed milk to the factory comes from some 30,000 farmers in East Java who are also members of 30 local cooperatives.
Head of public relations Brata T. Hardjosubroto said the local farmers contributed between 40 and 45 percent of total milk supply, while the rest was from imports.
“We want the percentages to reverse in the future so that the domestic production will be higher than the imports,” he said.
Industry Minister Hidayat said Nestle’s factory expansion could serve as leverage for Indonesia to become the main milk producer in Southeast Asia.
Hidayat said producing milk locally instead of importing could help increase domestic consumption of milk, which currently only reached 10.4 liters per capita, far less than the average of 20 million liters per capita in other Asian countries.
The expansion of the factory, Hidayat said, would encourage local farmers to improve their businesses so as to meet the growing demand for milk.
East Java Governor Soekarwo said the provincial government had provided a micro-financing scheme that was supposed to be accessible to small farmers with no assets, thereby helping them to deal with the lack of collateral for their loans.
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