by Sarah Schmidt
October 11, 2018
The information below is based on the article "Nestlé bets on coffee as the next winner in the craft evolution" by Food Dive. The full article can be read HERE. Packaged Facts discusses Nestle, Chameleon Cold-Brew, and Blue Bottle in our July 2018 blog, "Cold Brew Coffee: Consumer Demand Heating Up" and in the related market research report Office Coffee Service in the U.S.: Market Trends and Opportunities.
Nestlé is making a bold bet on sustained growth in the coffee space as consumers look for the same kind of specialty craft products that have infiltrated beer and wine.
“Coffee has become a very important category for the company, and we have really dialed up the level of resources” that Nestlé devotes to it, Daniel Jhung, president of Nestlé USA's beverage division, told Food Dive. "I think that is why you are seeing some of the partnerships and acquisitions that we have done over the past couple of years to make sure we play in all facets of coffee, not just in the mainstream area.”
The Swiss company, which had for years defined its presence in coffee with Nescafé, Taster's Choice and Nespresso, has recently bulked up its presence in the premium side by acquiring a stake in popular coffee shop chain Blue Bottle and snapping up Chameleon Cold-Brew. And in May, it spent $7.15 billion to purchase Starbucks’ retail products. This move brought the ubiquitous Seattle coffeeshop's namesake brand, Seattle’s Best Coffee, Starbucks Reserve, Teavana and Starbucks VIA to Nestlé's brand family. Jhung said Nestlé is focusing its efforts on integrating and growing these brands, but the company wouldn't rule out another purchase in the near term if it was the right fit.
Coffee has become a very important category for the company, and we have really dialed up the level of resources that Nestlé devotes to it.
Daniel Jhung President, Nestlé USA's beverage division
Coffee has become an attractive space for other food and beverage companies too, most notably J.M Smucker and Coca-Cola. Earlier this year, Smucker debuted 1850, a new line of premium coffees geared toward millennials and longtime Folgers customers that plays up the brand's connection to the California Gold Rush. In August, Coca-Cola announced it would purchase Costa Coffee from U.K. drinks and hotels group Whitbread for £3.9 billion ($5.1 billion). The deal was approved by Whitbread shareholders on Thursday.
"Coffee is one of the strongest growing categories in the world, and Coca-Cola needs to expand into coffee and hot drinks," James Quincey, Coca-Cola's CEO, said in a video after the deal was announced.
For Nestlé, coffee is an attractive target because the beverage is rapidly expanding to include different facets that give it a craft feel, making it a draw among consumers looking for variety or a healthier pick-me-up. Coffee can be made using innovative processes specific to the brand. It can have a unique flavor, aroma, texture or originate from a specific region to separate products from competitors. A poll from Nestlé and Morning Consult found nearly 65% of coffee drinkers consume the beverage every day, and 70% of those who drink it would rather skip breakfast than go without their brew.
Jhung said Nestlé's coffee platform has been tailored to give consumers more choices throughout the day — from a hot cup of Taster's Choice or Nespresso brewed at home in the morning to a bottle of Chameleon Cold-Brew later in the day.
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