Nestlé invests US$ 35 million in Uruguay and makes it a coffee hub for the world

The talent and know-how of its operation in Uruguay allowed the global company to develop the roasting and grinding of its Starbucks line and reached 15 markets in five continents in one year.
Publication date: 17/06/2022

With 45 years of successful operation in Uruguay, Nestlé chose the country again with an investment of US$ 35 million to create a new business unit that allowed it to make the leap from a model designed for the local market to another that also allows it to be an exporter.

This new milestone came after the global group acquired the Starbucks brand for its commercialization in retail and represented the opportunity to add its distribution strength in different channels to the iconic coffee shop brand.

Concentrating on the soluble and capsule coffee categories, of which Nestlé is the creator and leader, the purchase prompted the challenge of finding a market with knowledge in roasted and ground coffee in order to be able to install the first Starbucks factory in Latin America. Uruguay, which in 1987 had acquired the local brand El Chaná, a historical brand in the country and a reference in roasted and ground coffee, stood out.

With the new line of business, Nestlé Uruguay reached the category of exporter and is currently working on more than 12 customized projects to supply different Latin American markets such as Brazil, Argentina, Peru, El Salvador, Panama, Honduras and Guatemala. In addition, as a result of the pandemic, European factories reached maximum capacity and both this market and the Asian market needed a partner to supply them. In 2021, the partner for these demanding markets was Uruguay.

With a dizzying growth from zero to 600 tons exported in one year, Nestlé Uruguay ended 2021 supplying more than 15 countries in the five continents.

"This demonstrated the expertise of the Uruguayan team, its flexibility and agility to be able to build innovation and respond to change successfully," explained the company's general manager, Valeria Rodríguez.

With a team that is currently 100% Uruguayan, the goal for this year is to double the volume exported.


Why Uruguay for a coffee hub

The Latin American country is the one that has the first and only Starbucks line to export to the world. The investment was destined for the development of this new line of business and also for the construction of a new site in the Zona Este Industrial Park in Canelones, which has the whole operation integrated -the factory with a capacity of 5,500 tons, the distribution center and the operation-, which brings them efficiency and competitiveness in the market.

"The Zona Este Industrial Park has other companies such as L'Oréal, Mondelèz, and Danone, among others, which shows the growth of Uruguay in recent years," exemplified Rodríguez Pardal.

The choice of Uruguay as the center of operations for the new line of business was based on three pillars. Uruguayan know-how, with years of history and innovation in the roasting and milling category, was the first attribute taken into account, he explained.

Secondly, he emphasized the nature of the market, which is characterized by legal certainty and economic stability. "These are favorable characteristics for these investments that have a long-term return," he said.

Contrary to what a priori could be imagined, the fact that Uruguay is not a coffee-producing country became the third incentive for investment.

"All the regulations in Uruguay help to make it a coffee hub, because they allow us to bring in blends or green beans from different parts of the world without entry barriers or restrictions", explained the company's general manager.

Within the framework of these regulations, she highlighted figures such as the Mercosur Certificate of Origin, which allows them, for example, to bring blends and beans from Colombia into the country and export them as Colombian coffee produced in Uruguay, and the Temporary Admission regime, which allows the introduction of foreign goods from outside the customs territory, exempt from taxes, which must then be re-exported. "This is an extremely important figure when designing a business and supporting its growth," he said.

As a third component within the regulatory framework that favored Nestlé's investment in Uruguay, he highlighted the figure of the Commission for the Application of the Investment Law (COMAP) and the tax exemptions provided by the Investment Promotion Law. "It is a long-term incentive for the recovery of the investment and undoubtedly a stimulus to invest in Uruguay," he said.

As additional incentives, Rodríguez Pardal also highlighted the openness of the Uruguayan government to facilitate and make itself available. "I highlight it because we have brought several concerns and they always opened their doors to help us in the process. From that point of view, one feels accompanied and that one has a partner to make things go well," he added.

He also emphasized Uruguay's energy transformation, which currently produces 97% of its electricity from renewable sources.

"When it comes to opening markets, it is not minor to consider that all the energy used in Uruguay is green. It is attractive, especially in this context in which sustainability rules the world. In this sense, Uruguay is a key and critical point today," he said.

Nestlé Uruguay

To its traditional local work in more than 10 categories, among them soluble, capsule, and roasted coffee, pet food, infant nutrition, breakfast cereals, chocolate powders, and confectionery products, Nestlé Uruguay added the new business unit through which it imports green beans from different origins, receives them at the factory, roasts and grinds them according to the client's needs and then exports them.

During this process, the company worked to obtain gluten-free and halal certifications, and will soon have kosher certification, which will enable it to continue opening markets. In addition, they were able to meet the goal of having 100% of their grains sourced responsibly, a mission that the company has set itself globally for 2025. "This speaks of the capabilities we have and the possibilities that Uruguay offers for this type of project," the company said.

They are currently working on the development of innovation pipelines. "This is our second year exporting, the first was to receive needs to supply Nestlé around the world and now we want to develop sales to third parties", explained Rodríguez Pardal.