Globally, the coffee business has been one of the key strategic growth drivers for Nestle. The Swiss packaged food major is now betting big on the fast-growing coffee culture in India too and gearing up for higher demand. In an interaction with businessline, David Rennie, Deputy Executive Vice-President, Nestle and Head of Nestle Coffee Brands said the company is in the process of increasing coffee production capacity in India and accelerating the pace of innovation in the category.


Where does India stand globally for you in terms of the coffee business?

India is among the top 20 markets globally in terms of the coffee business. And it’s rapidly moving up the rankings every single year. The coffee business in India has been growing in double digits. We’re growing in terms of absolute size because the category is growing in India. We’re also growing in terms of market share. So it’s a combination of being the preferred brand in the market and that preferred brand driving the category growth.


What kind of investments are being planned for the coffee business ?

Our factory, in Nanjangud was opened in 1989 and we’ve been producing coffee in India directly since then. The vast majority of the production is made in India, with Indian coffee, for Indian consumers. We’ve announced last year, a further investment in the factory of 110 million Swiss Francs to enhance its capacity by 2025.


Do you see coffee becoming a much bigger business for Nestle in India? Has India reached a certain inflection point in terms of the development of the category?

In India, on an average, about 30 cups of coffee per annum are consumed. In comparison, the average globally is about 200 cups . So there is a huge potential for growth and it is being driven by a couple of factors.  There is a growing interest and experimentation happening in both hot and cold coffee formats driven by young consumers.

I think the coffee culture has definitely seen an acceleration in the last 2-3 years in India. I think in the next five years we could see some really interesting growth in the coffee segment. India is also a coffee producing country. We have the ability in India to create jobs and create infrastructure in terms of growing coffee, which will also be another key driver for the growth of the segment in the long term.


Will you continue to grow household penetration with the existing core coffee portfolio or will you also look at introducing other brands ?

Under the Nescafe brand, we’ve got products such as Nescafe Classic and Nescafe Sunrise. There is huge potential for these products to continue to drive household penetration. So I don’t think there’s any limit to what we can do with the core portfolio and we are seeing an acceleration in terms of household penetration of these brands over the last two to three years. At the same time, innovation is very important. One of the key innovations has been ready-to-drink coffee in cans and its gaining traction especially among young consumers. This year, we have also launched Nescafe Frappe which is doing well.


Do cold coffee formats offer bigger potential for growth given India is a tea-drinking nation ?

I think both hot and cold coffee formats offer big potential in India. There are a number of markets that were traditional tea drinking markets and over a period of time have developed the habit of also drinking coffee. And I think that’s exactly the journey that India is on. 


How are you looking to tap into the premiumisation opportunity in the coffee segment ?

Nescafe is is a truly global brand that offers a range of products at different price points. This includes premium products such as Nescafe Gold product, which has a different taste profile. E-commerce is making the premium products more accessible and is giving consumers an opportunity to experiment more. We also offer roast and ground coffee through the Nestle Professional portfolio in India. As consumer demand builds up for these products in India, we will also make them available for at-home consumption segment.


Nestle has made huge commitments to tackle the impact of climate change on coffee production. What are your plans for India ?

We know that if we don’t tackle the impact of climate change, half of the coffee producing regions of the world could end up not producing any coffee in the long term. So, there is a big threat to coffee production. The notion of intercropping by growing different crops alongside coffee is part of the Indian tradition. So I think India starts from a very solid base in terms of regenerative agriculture .Our commitment is that by 2025, 100% of all of our coffee, sourced in India, for the market ,will be done responsibly. We’re working with over 5000 farmers directly across India, giving them on-ground support and educating them in best practices. We want to make sure that the Indian coffee farmers have a sustainable future.