Wyeth woes

The decision is based on demand reduction in China and a consequent intention to streamline Nestle’s infant-formula processing capacity. The company has reduced its labour force substantially in recent years. However, even after that, revenue generation and output per employee at the Askeaton plant continue to decline as the company’s main market in China reduces its infant formula imports year on year. Fewer babies and increased domestic infant formula production inevitably mean lower demand for imported product. Any potential purchaser of the Askeaton facility would have to reduce the cost base further and a due diligence exercise would question the viability of the existing salary and personnel number profiles. In addition to upfront production cost cuts, there is the reality that further output reductions and/or lower product prices could be needed in the coming years. All these challenges would have to be factored in by any new operator to preserve the viability of infant formula production at the Wyeth facility. On the positive side, there are alternative market prospects, especially among other fast-growing population centres in Asia and Africa. Buying the manufacturing facility and restructuring the production cost base is only one part of the equation. The processing and product patents, the marketing expertise and the brand strength belong to Nestlé. How many, if any, of those critical, non-tangible assets would be part of the purchase price? The value of the Askeaton facility would depend on how much of the intellectual and marketing resources would remain with the business. Nestlé says its research and development (R&D) work at Askeaton will be absorbed into its Konolfingen R&D centre, in Switzerland and a satellite R&D centre in Shanghai would be strengthened. That confirms an expectation that only the stainless-steel production hardware would be available to purchase if a buyer does come forward.