By product category, coffee was Nestlé’s largest contributor to organic growth in 2021: fueled by strong momentum across its three main brands Nescafé, Nespresso and Starbucks. The coffee portfolio saw 9.7% organic sales growth in the year.
Coffee has played strongly in e-commerce: a channel Nestlé is targeting for growth. However, an increase in coffee bean prices, as well as inflation and increased costs in transportation, will see coffee prices rise in 2022.
More coffee will be consumed at home
While the working-from-home trend may see Nestlé lose out on some sales out-of-home, its portfolio has been built on a retail stronghold – which is playing out to the company's benefit.
“Coffee to me is the signature category to benefit from what I call the at-home revolution,” noted Mark Schneider, CEO.
“That's the fact that aside from the pandemic and some of the lockdowns, as a part of more flexible workstyles and more work being done remotely from home even after the pandemic, more coffee will be consumed at home. That plays right into our retail strength.
“We may lose a cup of coffee out-of-home, but obviously, our market share in-home is so much stronger so we stand to benefit net-net from this development, which I believe is here to stay.”
Starbucks brand generates 1bn in incremental sales
In 2018, Nestlé and Starbucks created a ‘global coffee alliance’, with Nestlé gaining the global rights to market Starbucks consumer and foodservice products in retail.
Since then it has been growing the portfolio with product launches – ranging from premium instant coffee to cold brew and vitamin fortified products – as well as expanding the reach of the portfolio with RTD coffee drinks set to launch across Southeast Asia, Oceania and Latin America this year.
In FY2021, sales of Starbucks products grew by 17.1% to reach CHF 3.1bn ($3.4bn), generating over CHF 1bn ($1.1bn) of incremental sales compared with 2018, reports Nestlé.
Nespresso and Nescafe join forces with Farmers Origin
Coffee stalwart Nespresso, meanwhile, reached sales of CHF 6.4bn, with organic growth of 8.8%.
Growth was fuelled by new consumer adoption, particularly for the Vertuo system, continued momentum in e-commerce, and the recovery in boutiques and out-of-home channels.
The premium brand, known for selling its capsules in upmarket boutiques, now has around a 20% share of the Nespresso compatible capsules market globally: and says it has been increasing its market share of this category. One of its moves in order to do so was the 2020 launch of Nescafé Farmers Origin: capsules which are instead geared towards mass distribution in supermarkets and similar stores.
“They have been very successful in markets where we introduced them. And I think that's giving us the opportunity to capture a larger share of this analog market," said Schneider.