Nestlé, the world’s largest coffee company, is considering launching Starbucks-branded coffee for at-home consumption in India. This move would be part of its 2018 alliance with Starbucks, which granted Nestlé the rights to package and sell Starbucks’ speciality roasts and instant mixes outside of coffee shops.
In 2018, Nestlé announced an agreement granting the company rights to market Starbucks consumer and foodservice products globally, outside of the company’s coffee shops. Through the association, Nestle sells a wide range of products, including Starbucks capsules for the Nespresso and Nescafé Dolce Gusto coffee machines apart from whole bean, roast and ground and premium instant Starbucks coffees, K-Cup pods, among others, in supermarkets. The agreement, however, excludes sales of any products within Starbucks coffee shops.
While the association has been extended to major markets, it has yet to reach India.
“Nestlé has a global coffee partnership with Starbucks that allows both companies to bring to market a wide range of products,” said Axel Touzet, head of Nestlé’s Coffee Strategic Business Unit. “We continue to evaluate similar opportunities to expand our coffee portfolio in India to target different coffee consumption moments as more and more people in India look to coffee as their favourite beverage.”
Speaking to reporters at the company’s coffee plant in Nanjangud near Mysore Touzet highlighted the opportunity to sell such premium products in India.
Rise of cafe culture
Even though India is a large tea-drinking market, the cafe culture in large metros over the last decade has inspired interest, with more consumers now willing to make coffee at home.
To be sure, Starbucks operates over 450 stores in India through an equal joint venture with Tata Consumer Products Ltd. However, with a few exceptions, Nestle owns the rights to sell and distribute packaged products such as whole bean, roast and ground, and premium instant Starbucks coffees to retail stores.
As of 2023, the two companies expanded the reach of Starbucks-branded premium products to nearly 80 markets worldwide. In 2022, the Starbucks business generated $1.6 billion in incremental sales for Nestlé.
“The (Starbucks) cafes are always a separate activity. We have the rights worldwide, essentially, to distribute FMCG products, with one exception, which is ready-to-drink coffee. That is with different distributors around the world. However, roast, ground and soluble coffee is with us,” he added.
India is one of the “very fast” growing coffee markets for the company. “Anything that is double-digit growth is fast,” he said. “Overall—coffee as a category that is very resilient and doing very well for Nestle. It’s a huge part of our business,” he said about the global business.
In the December quarter, Nestle India’s powdered and liquid beverages business was the largest growth contributor to the company’s quarterly revenues, clocking in at a high double-digit growth. Total sales were up 3.9% to ₹4,762.1 crore during the quarter. The company’s beverages retail business surpassed ₹2,000 crore in the last 12 months, led by brands such as Nescafe Classic, Sunrise and Nescafe Gold, the company said in its earnings announcement released last week.
Small but significant
However, the category is still small; in the 15 months ended 31 March 2024, the category contributed 12.4% to Nestle India’s total sales. Milk and milk nutrition products account for the largest share of the company’s sales.
The move comes as more companies chase both in-home and out-of-home coffee drinkers. Nescafe, for instance, has introduced its coffee to over 30 million Indian households in the past seven years, according to the company’s annual reports.
The trend is also fuelled by the emergence of speciality coffee chains that sell small-batch coffee sourced from local estates in Tamil Nadu and Karnataka. However, per capita consumption of 30 cups per annum is low compared to the global average of 200 cups per annum.
Nestle is the world’s largest coffee company—the category makes up over a quarter of Nestlé’s global sales. The company also sells packaged infant nutrition, ketchups, instant noodles, plant-based foods, and chocolates. In 2022, the company promised further investment of 110 million Swiss Francs in its Nanjangud coffee factory to expand capacity by 2025.
The author was in Mysuru at the invitation of Nestle India.