Business News/ Companies / People/  ‘India ranks among Nestle’s fastest-growing coffee mkts’

New Delhi: India is among the fastest-growing coffee markets for Nestlé globally, a senior executive said, highlighting a surge in consumption of the company’s ready-to-drink cold coffees and deepening household penetration of its instant coffee products.

The Indian market thus offers a huge opportunity for penetration-led growth, both through in-home and out-of-home consumption, Philipp Navratil, head of Nestlé’s coffee strategic business unit said in an interview at Nestlé India headquarters in Gurugram on Tuesday.

“For us, it’s one of the most fast-growing markets today, gaining household penetration very fast. We’re today in 46 million households for coffee; the team has added five billion cups alone in the last five years in terms of consumption. You see this accelerating and that means this country is really ready to adopt coffee, as more of a habit. If this takes off, we need to be ready in terms of obviously the team here, but also the production and the coffee sourcing," Navratil said.

The Swiss packaged foods and beverages company is among the top sellers of coffee globally with brands such as Nescafe and Nespresso; it also sells coffee machines and pods in the West. The company is also the largest buyer of coffee globally; one in seven cups of coffee consumed globally presently is of the Nescafe brand. In 2018, Nestlé agreed to pay coffee chain Starbucks $7.15 billion to market and sell the latter’s ready-to-drink and packaged coffee products in retail stores around the world.

In India, the company’s coffee portfolio falls under the powdered and liquid beverages segment. In calendar year 2022, the business contributed 12% of Nestlé India’s revenue of 16,997.9 crore. Milk and milk products was the largest business segment.

While India has primarily been a tea drinking nation, coffee aficionados are fast emerging in the major cities. New cafe chains serving single-estate brews and roasts are opening up consumers to more flavourful and elevated coffee-based beverages. This is leading coffee drinkers to experiment new brews at home.

Navratil said these trends are fast changing the coffee consumption landscape in India.

“In India and in other Asian markets, there is a trend to more sophistication, we call it authenticity; consumers want to know more about their coffee, what it’s made of, how it’s brewed, its origins, etc. That leads to a trend of premiumization. There is another trend, which is the coffee shop inspired trend and that’s true in India as well where you see coffee shops coming up and specialty coffee brands coming up as well," he said.

Nestlé will also step up local sourcing as well as coffee sales in India amid the shift in consumer preferences, Navratil said.

He said the coffee market in India is premiumizing at a fast clip. “Also, given the size of premium households here in India, there is absolutely an opportunity to start doing that and to accelerate that," he said. However, he didn’t say whether the company will bring its more expensive portfolio of machines and pods to India.

Navratil said Nestlé will continue to focus on its core coffee portfolio of instant mixes and packaged cold coffees to drive penetration in the Indian market. “The speed of growth is faster in the premium segment at the moment. But I think the opportunity or the size of the market is still bigger in what we call the ‘core’ products, which in India sold as Nescafe classic, Nescafe Sunrise, pre-mixed products that we have," he said.

Last year, Nestlé announced an investment of 5,000 crore in India over the next few years to tap consumer demand for packaged foods and beverages.

In an interview earlier this year, Suresh Narayanan, chairman and managing director, Nestlé India Limited, said that over the next two-to-three years half the investments will go into growing the company’s coffee and confectionery portfolio.

As the company strives to reach more households— Navratil said Nestle will also step-up sourcing from India. To be sure, Nestle sources locally for a majority of its coffee portfolio in India; barring Nescafe Gold. “The plan is to grow the business further; to do that we need more Indian coffee. The strategy to increase household penetration of coffee in India is very closely linked to coffee sourcing in India as well. It’s also linked to, keeping a factory updated, and being able to produce the right quantity quality at all time," he said.

Suneera Tandon
Suneera Tandon is a New Delhi based reporter covering consumer goods for Mint. Suneera reports on fast moving consumer goods makers, retailers as well as other consumer-facing businesses such as restaurants and malls. She is deeply interested in what consumers across urban and rural India buy, wear and eat. Suneera holds a masters degree in English Literature from the University of Delhi.
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Updated: 24 May 2023, 01:00 AM IST
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