International coffee leviathan Nescafé is gunning for expanded growth in Sub-Saharan Africa, saying the affordability of soluble coffee and increasingly environmentally aware consumers amid a high inflationary environment make opportunities attractive in the region.
The head of Nescafé’s coffee strategic business unit, Philipp Navratil said though coffee consumption has surged in places such as the UK and the US where drinkers on average consume an estimated 500 cups per person per year, there is huge potential to grow the number of coffee lovers in Sub-Saharan Africa.
“If you look at Sub-Saharan Africa and countries like India or China, per capita consumption of coffee is super low; it’s about 20 cups per person per year,” Navratil told Business Day. “When it comes to recruiting new consumers into coffee we believe that there is still a huge potential out there to get more consumers drinking coffee.”
Serving coffee in various forms across 180 countries, Nescafé is the third-largest beverage brand in the world behind Coca-Cola and Pepsi.
According to Insight Survey’s Coffee Industry Landscape Report 2023, the SA coffee market experienced strong growth of 17.4% year on year in 2022. This increase is expected to continue, at an average of 13.6% a year between 2023 and 2027, though tea is still widely enjoyed in SA.
Navratil said soluble coffee is the ideal gateway product as high inflation and interest rates have made consumers more price-sensitive with some trading down while others stick to their preferred brand but consume less of it.
“Soluble coffee is the way to get consumers into coffee because it’s high-quality, affordable and convenient,” said Navratil. “It’s available in all kinds of formats such as powder, ready to drink, concentrate, all sizes and channels including in-home and out-of-home.”
However, this does not mean a drop in quality but rather cost-effective ways for consumers to get their cup of coffee at home.
The Swiss exchange-listed Nestlé, which holds Starbucks’ distribution rights, announced in August that Nesquik would be discontinued in SA, citing a drop in sales and lower demand.
Navratil said: “Because Nescafé is able to serve coffee in a variety of forms, the company is ideally positioned to provide versatility as we also have affordable products that fit consumers’ budgets.”
As part of its bid to capitalise on local markets, Nescafé’s parent company Nestlé in July injected R79m into establishing a manufacturing plant in Tshwane to produce its range of coffee mixers and serve as a platform to export into the region. This was despite the cost of doing business in SA increasing exponentially owing to structural issues such as unstable power and water supply.
Navratil said the group is continuously looking for opportunities to further develop its activities in the countries in which it operates “either through manufacturing capacity or sourcing of ingredients or raw materials”.
Business Times reported that the local division of Nespresso wants to double its market share in SA in the next three to five years.
On the continent, countries such as Ethiopia, Uganda, Tanzania, Ivory Coast and Kenya are coffee-farming nations.
Head of green coffee development at Nestlé, Marcelo Burity, said global demand for coffee is rising about 1%-3% a year, mainly due to growing populations and the world’s rising GDP. However, coffee production is being affected by climate change with more unusual weather patterns in coffee-growing regions leading to a rise in the incidence of pests.
“By 2040 the world will be drinking 50% more coffee than it is today,” he said. “To meet that demand we will have to have more resilience in the current areas of operation.”
Burity said efficiency, emphasised in the Nescafé plan,is required to meet the growing demand, meaning more productivity per hectare, coupled with water-saving irrigation, better agricultural practices and ensuring the lucrative sector becomes more environmentally responsible to secure its survival.
Consumers are increasingly looking to purchase responsibly sourced coffee. At the same time, the trend of consumption sophistication is gaining traction, said Navratil. The growing number of coffee shops has been dictating coffee trends and a lot of consumers want to replicate what they see there in their homes.
“That is what we ride on and how we innovate as well,” he said, pointing to the plethora of items Nescafé produces including 2-in-1’s, milky iced coffee, capsules and frothy mixes.
In SA consumers are embracing coffee shops as an alternative to the office amid the rise in power outages, according to the Insight Survey report.
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