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By: Hope Lee

Coffee multinationals saw a huge shake-up in 2012, reflected in the birth of Mondelez International from Kraft and DE Master Blenders 1753 from Sara Lee. Coffee marketers are thus
assessing the changed competitive landscape, new challenges and new strategies.

Nestlé maintained its strong leadership with a 23% share while second-ranked Mondelez trailed way behind with 11%. Armed with three global brands, Nespresso, Nescafé and Nescafé Dolce
Gusto, Nestlé is likely to maintain its leading position over the next few years. Nestlé, however, has no presence in Brazil’s standard fresh ground coffee category, which is forecast to be a key growth driver, and so should rectify this situation quickly. On a positive note, Nespresso currently dominates Brazil’s pod sales and is well positioned to grow the category. However, the expiration of some of Nespresso’s patents, combined with players attempting to cannibalise Nespresso’s share of coffee pod sales, will pose a challenge.

In terms of new category development, Nestlé has stayed largely out of tea thus far. The Special T system, however, marks another innovation from the company. Like Nespresso, it uses pod technology to offer a superior tea product. The question for the company will be whether it can capture traditional tea consumers as it did in coffee with Nespresso. While in 2012 Nestlé expanded the system to five new European countries, it faces competition from Starbuck’s Tazo tea, which is included in Green Mountain Coffee Roasters’ Keurig K-Cup line-up. Starbucks
also acquired the Teavana chain of premium tea stores in 2012. Nestlé would be wise to enter the premium tea segment if it wishes to compete against Twinings or Lipton.


Global Major Coffee Company Sales 2012

Mondelez’s coffee sales are half those of Nestlé and so the company poses no threat to Nestlé’s leadership unless it makes a major acquisition. Mondelez has a strong presence in Eastern
Europe, ranking second in 2012, based largely on the Jacobs brand in coffee. The company’s presence in Asia Pacific, however, is largely focused on the markets of Japan and South Korea, with only a modest presence in China. Meanwhile, Mondelez remains entirely absent from the Brazilian hot drinks market, while players such as DE Master Blenders and Melitta have been
investing heavily in it. Since the acquisition of Cadbury, the company has focused on the development of its confectionery brands and so now is the right time to focus on coffee and identify growth categories and geographies. Mondelez may also face a conflict of interest in coffee as it shares global ownership of Maxwell House and Gevalia with Kraft Foods Group Inc, both its
sister company and rival. Thus, the two should work together to minimise this conflict of interest.

DE Master Blenders’ aspiration is to overtake Mondelez and assume second position over the medium term. The company can only achieve this ambitious target by acquiring several major
players and further pushing its presence in major markets such as Brazil.

Green Mountain Coffee Roasters has moved quickly up the rankings, benefiting from strong growth in coffee pods. Its presence, however, remains restricted to North America and it has not
shown any international aspirations as yet. Nestlé’s Nespresso leads fresh ground coffee pods in Western Europe but has thus far failed to gain traction in the North American market. Over the next few years Green Mountain Coffee Roasters will face stiff competition from Nestlé in the pod category. As Western Europe is entering maturity, North America is likely to be the key
battleground.

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