The Nescafe Story

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  • Topic: Compound annual growth rate, Coffee, Nescafé
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  • Published : January 27, 2013
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Nescafe’s early-bird advantage
Nestle’s marquee brand has maintained its leadership in the instant coffee market even in its 50th year in India

The campaign in 2007...

SOUNAK MITRA
New Delhi, 6 January

“T

he coffee with life in it. Made in
just 5 seconds”. That’s how
Nescafe announced its entry into
India, in 1963. Before the ad campaign hit
bill-boards across the country, Indian coffee
lovers were stuck with the idea that coffee is
something that takes minute attention to
prepare and cannot be instant.
Nestle changed that thinking forever —
as it did elsewhere in the world much earlier in 1938 — which is evident from the fact that more than 4,600 cups of Nescafe, the
world’s first commercial instant coffee, are
being consumed every second.
Year 2013 is an important milestone for
Nescafe in India as it completes 50 years in
a country which took time to warm up to the
idea of instant coffee.
Development of Nescafe
In 1930, Brazil had a huge surplus of coffee
that needed to be preserved. But there was
no way out. The then Brazilan government
ended up approaching Vervey-based food
company Nestle to find a way out. There
was no instant solution. Eight years later –
in 1938 — Nestle came up with an instant
product mix – Nescafe — that became the
second most recognised brand in the world
only after Coca-Cola.
Interestingly, processing instant coffee
was not a new idea. In 1901, it was actually invented by Satori Kato, a Japanese scientist working in Chicago. Though a handful of companies tried to market it, they

... and now

could not make it a success.
Max Morgenthaler, a coffee specialist
working with Nestlé during the 1930s, developed a new process for dehydrating the concentrated coffee that entails spraying a fine mist of the solution into a heated tower
where the droplets turned to powder almost
instantly, keeping the original flavour of the
coffee. And the result of a seven-year
research — Nescafe — became an instant hit
among consumers, as they could have it by
just adding hot water.
The World War-II also played a role.
Nescafe could not secure its popularity
instantly in Europe. In the mid 1940s,
Nestle started exporting to France, Great
Britain, and the US. Surprisingly,
American forces played the key role for
the success of Nescafe, making it a staple
in their food rations.
Still, instant coffee accounts for
just about 25 per cent of the global
coffee market.
Next is more in India
The coffee retail market in India
is growing at 20-30 per cent year
on year and is expected to treble
by 2016-17, according to Sunil
Choudhury, senior consultant, Technova India, a consulting firm. “More than 50 per cent of the Indian coffee
market is instant coffee that is
dominated by Nescafe, a product which is sold as 100 per
cent coffee,” he adds.
The growth of instant cof-

fee has also been fuelled by modern retail
that ensures availability and options to the
consumers. “With FDI being allowed in
retail, this would further expand in the next
four to five years. Even smaller cities would
have the options available with more retailers opening shops there,” Choudhury says. Coffee consumption in India grew by
three per cent, a growth rate more than the
global average, to 1.76 million bags (106,000
tonnes) in 2011 as compared to 2010, according to the International Coffee Organisation (ICO). The country consumed 1.71 million
bags of 60 kg each.
The consumption of the brew in India,
the world's sixth biggest exporter, has grown
at a compound annual growth rate of 5.7 per
cent during 2001-2011, according to ICO
data. According to a recent study by consulting firm Technopak, there are about 1800 operating coffee outlets across the top 60
cities in India, which could easily absorb
about 2,000-2,200 more shops.
By 2015, Nestle hopes to double the

THE TIMELINE
| Nestlé invented Nescafé in 1938
| 5th most valuable food & beverages
brand in the...
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