The company is investing 150 million Malaysian Ringgit (about CHF 47 million) in the new facilities in the city of Shah Alam, which will create 160 new jobs when fully operational in 2014.
Nestlé has seen significant growth in its ready-to-drink beverages in Malaysia over the past four years, where its Milo and Nescafé brands are the market leaders in the category.
"Wherever Nestlé operates in the world, we invest for the long-term," said José Lopez, Nestlé Executive Vice President and Head of Operations, at a ceremony to mark the beginning of construction work on the factory.
"We have been present in Malaysia for more than 100 years and we have confidence in the strength of the Malaysian market.
"We are committed to supplying our consumers here with a range of tastier and healthier products to suit their needs and preferences."
The new factory has a number of sustainable design features such as a rain water recovery system to reduce water use and ultra-high-temperature (UHT) processing with built-in heat recovery to reduce energy consumption.