Nestle China is embroiled in a "channel crisis." Multiple distributors have reported unpaid reimbursements totaling millions of yuan, with some debts outstanding for years.
These cases may only scratch the surface of Nestle’s distribution woes. In April, a group of South China distributors staged collective protests over unresolved fee reimbursements, only to be told by Nestle that it would "only repay 50% of the owed amounts."
While Nestle China has yet to issue an official response, sources indicate that under new Greater China CEO Kais Marzouki, the company has begun addressing unpaid debts in offline channels in recent months. Nestle may now be willing to repay up to 70%—but only if distributors provide documentation it deems valid.
A former Nestle sales employee revealed that, to boost sales, staff were instructed to have distributors sell products below cost, with the difference later subsidized as marketing expenses. This practice not only led to prolonged reimbursement delays but also caused widespread price inversion and rampant cross-region sales.
**Distributors: Millions in Unpaid Reimbursements?** Fan Bin, a distributor in Taizhou, Jiangsu, claimed Nestle owes him around 900,000 yuan in unpaid reimbursements and display fees from 2018 to 2022. After switching to a dealer role in 2022, he expected gradual repayment—only to see an additional 200,000 yuan in new debts.
Similarly, Feng Qingli, a distributor in Weixian, Hebei, publicly disclosed nearly 995,000 yuan in unpaid reimbursements from 2018 to 2023. Distributors, typically managed by dealers, handle local market development and promotions but often lack direct contracts with Nestle, leaving them vulnerable in disputes.
Former sales employee Li Ming (pseudonym) explained that while contracts are signed with dealers, Nestle effectively controls distributor qualifications and operations. Many distributors provided signed confirmation letters and statements, but frequent staff turnover at local offices has left debts unresolved.
**Internal Issues: Years of Mismanagement** Insiders describe years of operational chaos, with distorted pricing and unchecked cross-region sales. Sales targets often exceeded market capacity, pressuring employees to meet unrealistic quotas. To hit goals, regional managers allegedly encouraged selling below cost, with Nestle covering the gap as "marketing expenses"—a practice worsening since 2017.
Feng Qingli cited examples like Nestle instant coffee (48 cups × 12 boxes), purchased at 600+ yuan per unit but sold for 500+, incurring a 100-yuan loss per unit. Distributors were forced to overstock, leading to unsold inventory and cash flow strains.
Cross-region sales flourished due to weak oversight, with bulk resellers exploiting price gaps. Despite contractual prohibitions, Nestle failed to curb the practice, further destabilizing traditional channels.
**Financial Decline in Greater China** Nestle’s Greater China performance has lagged globally. Q3 2025 saw organic growth drop 80 basis points, with sales declining yearly since 2019 (excluding a brief 5.1% rebound in 2022). Price cuts failed to stem volume declines, signaling flawed product or channel strategies.
Jia Shi Consulting partner Li Yingtao attributed the slump to aging core products (coffee,奶粉,糖果) facing fierce local competition and slow decision-making as a foreign brand. Distributors, disillusioned by unpaid debts, have scaled back operations, with some sales plummeting from 300,000–400,000 yuan monthly to under 50,000.
**Leadership Shakeup: A Turnaround Plan?** In 2022, Nestle elevated Greater China to its second-largest market (after the U.S.), targeting 60 billion yuan revenue by 2025—a goal now out of reach.
Amid continued struggles, 2025 brought major restructuring: Greater China was reabsorbed into the Asia-Oceania-Africa (AOA) zone, and Kais Marzouki replaced Zhang Xiqiang as CEO in July.
Marzouki has since reshuffled leadership, including coffee and finance heads, and emphasized shifting from "pushing distribution" to "pulling demand." At the China International Import Expo, he stressed the need for better products and consumer engagement over expansion.
Nestle Group expects a recovery in Greater China within a year, but Li Yingtao argues deeper reforms—product innovation, streamlined operations, and faster decisions—are essential for lasting revival.
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