Nestle brews plans to bring Starbucks to retail outlets

New Delhi: Packaged foods maker Nestle SA is evaluating bringing its global partnership with Starbucks Corporation to India to develop and sell Starbucks' ready-to-drink coffees in the retail market outside cafes.

"Nestle has a global coffee partnership with Starbucks that allows both companies to bring to market a wide range of products. 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," Axel Touzet, the head of Nestle's coffee strategic business unit, said in an interview.

Nestle and Starbucks Coffee Company, under which the American firm operates its cafes and sells products, had signed a global deal in 2018 that gave Nestle rights to market Starbucks' packaged coffee and food service products in retail stores outside Starbucks coffee shops. The deal does not impact Starbucks' joint venture with Tata Consumer Products to operate Starbucks cafes in India.

Subsequently, Nestle and Starbucks said they were extending their partnership to launch ready-to-drink coffee beverages in markets across Southeast Asia, Oceania and Latin America. Under the extended partnership, Nestle and Starbucks said they would jointly roll out products such as Frappuccinos and Doubleshots to select markets in these regions. "We have the rights to distribute coffees as an FMCG product. When and how, we will decide. India is one of the fastest growing markets for Nescafe," Touzet said at Nestle's coffee factory at Nanjangud in Karnataka.

"India has tremendous potential for coffee. That's why the rights to distribute Starbucks coffee outside of cafes is so important for us," he said.

Even so, India remains a dominant tea drinking market at-home. Acknowledging this, Touzet said: "In India, the game is gaining penetration; getting people to consume coffee. So, the size of the opportunity is huge. Because the more we progress in penetration and the more we acquire the coffee habit, the bigger the business."

Products the company could consider developing jointly would include wholebean, roast and ground and premium instant Starbucks coffees, capsules, Nespresso pods and creamers.

Nestle India said last week in its December-quarter earnings that its powdered and liquid beverages business was the largest growth contributor in the quarter with high double-digit growth. The company, which also makes Maggi noodles and KitKat chocolate, said retail sales crossed '2,000 crore in the last twelve months, led by Nestle. Earlier last year, the India unit of the Swiss packaged foods maker rolled out its super premium coffee portfolio, Nespresso, with coffee capsules and machines as well as boutiques.

The arrangement with Nestle is exclusive of Starbucks' joint venture with Tata Consumer Products. Starbucks entered India in October 2012 by signing a 50:50 joint venture with Tata Consumer Products. The JV, which operates more than 470 stores, reported revenue from operations of '1,218.06 crore in the last fiscal year ended March 31, 2024, up 12% from the year before. But its loss widened to '79.97 crore from '24.97 crore.

A report by ResearchAndMarkets.com estimated the global ready-to-drink tea and coffee market to increase to $197.4 billion by 2032 in sales, from $107.18 billion in 2023, fuelled by diversified flavours, increasing consumer incomes and the widespread installation of ready-to-drink tea and coffee vending machines. Large players in the category include Nestle, Coca-Cola, Starbucks and Unilever, the report noted. It added the Asia Pacific market leads ready-to-drink beverage consumption, with Japan, China, India and South Korea topping sales.