Single-Serve, Developed Markets Help NESCAFÉ Continue Growth Story

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NESCAFÉ is getting a new lease on growth thanks to the venerable brand’s strong presence in emerging markets and the increasing popularity of its Dolce Gusto single-serve coffee machines and pods.

As Nestlé’s world-leading coffee business, Nescafé faces a fresh challenge from JAB Holding, which has spent more than USD $30 billion acquiring assets such as Keurig Green Mountain, maker of America’s most popular single-serve coffee system.

Nescafe Dolce Gusto

But through NESCAFÉ, its most storied coffee brand, and the newer Nespresso brand, Switzerland-based Nestlé retains plenty of opportunity for growth as value-added forms of coffee continue to gain popularity in Western markets and also gain traction in more developing countries.

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“With NESCAFÉ and Nespresso we have been inventing and reinventing the coffee category,” Nestlé CEO Paul Bulcke said earlier this year. “And we have the intention to continue doing so in the future, and lead in this fascinating competitive growth category.”

NESCAFÉ also is trying to keep pace as a marketer of how millennials are changing the coffee business. In 2015, NESCAFÉ moved its entire online presence over to Tumblr, seeking the platform’s “co-creation and user-generated content” over the stale confines of a corporate website, according to Marketing Week.

The move “definitely helped ease consumers into being inspired to buy,” Michael Chrisment, NESCAFÉ’s Head of Global Integrated Marketing, told publication. The action has significantly boosted consumer engagement, qualified purchase leads and sales — and spurred more creativity in its marketing.

NESCAFÉ instant coffee originated in Brazil in the 1930s, expanded to Switzerland in 1938 and then into France, the UK and the US. Nespresso was introduced in 1986 as an upscale brand and the pioneer in single-serve coffee at home.

“NESCAFÉ is a big brand with different faces,” Bulcke said three years ago. Only one face is the instant coffee brand, whose popularity has declined in the West as Starbucks-style out-of-home coffee has gained favor and as single-pod instant dispensers have become popular in the home.

Another face of NESCAFÉ, which is enjoying continued growth, is its appeal in China and other traditionally tea-drinking countries of Asia, including Japan. NESCAFÉ launched in China more than 20 years ago and saw growth rates of around 20 percent a year over the next 15 years, according to Euromonitor. With tiny per capita consumption relative to developed markets, Nestlé sees lots more growth potential in China.

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Other major markets for NESCAFÉ soluble coffee identified by Bulcke in his first-half 2016 report include Russia and Turkey.

In 2006, NESCAFÉ launched Dolce Gusto to profit from soaring Western demand for single-cup coffee systems, and it has become a key growth driver for Nestlé in the decade since. Bulcke cited Dolce Gusto as an important contributor to growth in Brazil, Mexico, and Western Europe.

One reason Dolce Gusto machines have caught on is that the system is relatively inexpensive compared with both Nespresso machines and competitors, while Dolce Gusto machines offer a wider range of drinks.

“With Dolce Gusto, Nestlé has cemented its lead in coffee and can hit every taste, every budget and every age group,” Patrik Schwendimann, a European analyst who studies the market, told Bloomberg.

Added Robert Waldschmidt, a London-based analyst: “The baton is being passed. Nespresso was out as the lead runner, and now Dolce Gusto as the second or third guy is coming in to take the baton and move forward.”

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