NESTLÉ Improving on Coffee

By Daemon Sands

As a major provider of coffee branded products to the consumer Nestlé is dedicated to improving its coffee by carefully examining every component involved in its production. From sourcing highquality beans through sustainable farming practices to refining roasting techniques, Nestlé aims to enhance the flavour and aroma of its coffee. The company also invests in advanced technologies to optimize processing and packaging, ensuring freshness and consistency. Nestlé collaborates with farmers to improve agricultural methods, promoting environmental sustainability and better livelihoods. By focusing on the entire supply chain, from bean to cup, Nestlé is committed to delivering a superior coffee experience for consumers. Daemon Sands reports.

State Of Coffee

Over the past six months, coffee has emerged as the largest contributor to organic growth for Nestlé, driven primarily by the strong performance of Nescafé and licensed Starbucks products across key markets, including Europe, North America, and China. Despite this success, the company continues to face challenges, particularly with declining revenues for its Nespresso brand.

Nestlé recently reported a 2.7% decline in group sales for the first half of 2024, bringing total revenue down to CHF 45 billion ($51 billion). This decrease was observed year-on-year in all regions except Latin America. The company, headquartered in Vevey, Switzerland, manages a diverse portfolio of brands spanning confectionery, pet care, dairy, and baby food industries. Nestlé acknowledged in a press release that it had slowed the pace of its price increases sooner than initially planned, as consumers across various markets have been reducing their spending. In light of these trends, Nestlé has revised its full-year sales growth forecast, lowering it from 4% to 3%.

Despite these challenges, Nestlé’s coffee segment has remained resilient. The company’s retail packaged coffee products achieved mid-single-digit sales growth globally during the first half of 2024, a notable achievement given the broader economic conditions. This growth has been driven by strong demand for Nescafé’s ready-todrink (RTD) products and a new range of health-focused coffee beverages made from upcycled cascara, which have contributed to high single-digit growth in Greater China. In Europe, Nescafé instant coffee and Starbucks-branded products have been particularly successful, driving mid-singledigit growth in the region.

However, the performance of Nestlé’s coffee segment has been mixed across different markets. While growth in China and Europe has been robust, the company has seen flat growth in North America, its largest market. In this region, strong sales of Starbucks and Nescafé products have been counterbalanced by a decline in sales of Coffee mate, the brand’s popular coffee creamer.

Nespresso, one of Nestlé’s flagship coffee brands, has continued to struggle. The brand’s sales fell by 1% in the first half of 2024, bringing total revenue for Nespresso to CHF 3.1 billion ($3.5 billion). This decline has been attributed to weak consumer demand in Europe, a region that has been particularly challenging for the brand. Since the start of 2023, Nespresso has reported a quarterly decline in year-on-year revenue, with total sales falling by 1.2% last year and by 4.1% in the first quarter of 2024.

Despite these setbacks, Nestlé remains optimistic about Nespresso’s future. The brand is under new leadership, with Philipp Navratil taking the helm in July 2024. Nestlé is banking on a series of strategic initiatives to reinvigorate Nespresso’s sales. These include the continued rollout of the Momento professional coffee machine range, which is designed for offices and businesses, as well as the expansion of Nespresso’s home compostable paperbased capsules in seven European markets. Additionally, Nestlé has plans to launch Nespresso in India, a move that could open up a significant new market for the brand.

New And Better Coffees

Recently, the global food and beverage giant announced that it has developed Star 4, a new high-yielding Arabica coffee variety aimed at mitigating the impact of climate change on the coffee supply chain and enabling lower greenhouse gas emissions attributes from coffee farming. According to Nestlé, the new coffee variety is being launched as climate change threatens to reduce the area suitable for coffee growing, citing an IPCC study indicating that land suitable to grow Arabica coffee might be reduced by over 50% by 2050.

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According to Jeroen Dijkman, Head of Nestlé’s Institute of Agricultural Sciences, the new Star 4 coffee variety is characterized by a larger bean size and resistance to coffee rust, a fungus-based foliar disease known to threaten coffee crops, enabling higher yields and greater resilience.

“We are proud to make another important step towards resilient coffee supply chains,” Dijkman said, “Ensuring that consumers can continue to enjoy great coffee in the future.”

He also noted that the new coffee variety will feature reduced GHG emissions properties, driven by the higher yielding plants, as well as by improved farming methods. Two years ago, Nestlé launched a Regenerative Agriculture Framework, aimed at helping the company reach its sustainability and 2050 net zero climate goal through promoting sustainable farming practices and responsible sourcing. The company also launched its Nescafé Plan 2030 in the same year, outlining its initiatives to improve the sustainability of coffee farming, and helping farmers transition to regenerative agriculture practices, including planned investments of over one billion Swiss Francs (USD$1 billion) by 2030.

Head of Green Coffee Development at Nestlé, Marcelo Burity, said, “Optimizing cultivation practices remains vital as they are the primary factor contributing to the environmental impact of a cup of coffee.”

Breakthrough

The coffee itself is not the sum of the drink, and Nestlé have reached a new breakthrough as they cut fat in milk powder by 60%. Through the hard work of their R&D teams they have identified a method to reduce the fat present in milk powder by up to 60%, without compromising on quality, taste, and texture.

Developing new science-based solutions to enhance the nutritional value, affordability and sustainability of its products is a key pillar for Nestlé. This includes reducing added sugars, sodium, and saturated fat, while providing positive nutrients and ensuring minimal impact on the taste and texture that consumers enjoy. Key to this breakthrough innovation is the controlled aggregation of milk proteins, where the size and texture of milk fat is mimicked by protein. This fat reduction leads to lower calorie levels compared to full-fat milk.

“Leveraging our expertise in nutrition science and product development, we have successfully introduced this proprietary technology in NinhoAdulto in Brazil and reduced the level of milk fat in the product significantly. Our new milk brings creaminess and mouthfeel and is preferred by consumers,” explains Isabelle Bureau-Franz, Nestlé’s Head of R&D for the Nutrition Business.

Nestlé’s new fat reduction method is just one of many existing, science-based solutions developed by the company’s R&D experts. These include an enzymatic process to reduce intrinsic sugars in key ingredients, as well as a proprietary micro-aeration technology that increases the creaminess of chocolate while also meeting consumer taste preferences.

Laurent Alsteens, Global Category Head in Nestlé’s Nutrition Strategic Business Unit, wraps up, “This innovation revolutionises the way that our consumers can enjoy dairy products while improving their experience. It marks an important milestone in our approach to offer healthier options without compromising on the taste that consumers love. Ninho is a hugely popular brand in Brazil, and our sustained innovation will ensure that we continue to meet ever-evolving customer expectations. I am delighted that we are rolling out this technology across our Nido portfolio globally, which will help to drive demand for this product offering.” www.nestle.com