Nescafé’s new product launch shows there’s a market for both soluble and concentrates

cold brew and instant coffee
  • Most people associate Nescafé with its instant coffee, but the brand has just launched a new espresso concentrate product
  • In 2023, 32% of the coffee consumed out of home was cold – and now Nestlé is bringing customisable cold coffee into people’s homes
  • This shows coffee concentrates are a viable industry product that cater to young consumer demand

NESCAFÉ, SYNONYMOUS with soluble coffee, just launched its new premium Espresso Concentrate Coffee product, showing that Nestlé, like the rest of the coffee industry, is paying close attention to the phenomenal growth of cold coffee and convenience.

Soluble coffee is a segment that has been doing consistently well and represents a huge global market share – so why is the brand behind what is arguably the world’s most famous instant coffee brand dabbling in concentrates?

“Soluble or instant coffee is a big category,” says Abdullah Ramay, CEO at Pablo & Rusty’s in Australia. “The specialty concentrate, for me, is a more premium substitute for instant coffee while providing additional and unique use cases.”

The launch of the product has kicked off in Australia and China – a far from random selection by shrewd business giant Nestlé. The two markets are well-suited to the product for different reasons, and represent strategic testing grounds.

Nescafé is Australia’s most popular brand in the at-home consumption segment, so it stands to reason that the brand should select an already convinced consumer crowd for a successful launch. 

Australia is a notoriously difficult market to enter – one where even Starbucks initially missed the mark. But other brands are rolling into the famous specialty scene with similarly “young” and convenient value propositions, like Cotti Coffee for example

Specialty iced coffee has become the drink of choice for young Australian consumers, despite its hefty price tag in coffee shops. Nestlé coming in with an at-home solution for a fraction of the price could be a winning recipe.

China, despite Starbucks’ latest report of substantial loss of market share, remains a rapidly growing emerging coffee market with a burgeoning coffee culture and a weakness for quick and easy customisation. Nestlé aims to tap into the increasing demand for convenient coffee solutions among urban consumers.

Gen Z is leading the cold RTD and espresso-based drink surge

The rise of Gen Z as a key consumer demographic has reshaped the coffee industry landscape, with a growing preference for cold ready-to-drink (RTD) beverages and convenient espresso-based drinks. 

“Cold coffee has become one of the fastest-growing segments, especially among younger generations who prefer their coffee cold,” announced Philip Navratil, Senior Vice President and Head of Coffee Strategic Business Unit at Nestlé, in his LinkedIn post on the day of the product launch. 

According to Nestlé commissioned studies, in 2023, 32% of the coffee consumed out of home was cold, the equivalent of 1 in every 3 cups and representing a 15% consumption increase in the past four years.

Nestlé’s decision to launch concentrate products can be seen as a strategic response to this emerging trend, as Gen Z consumers prioritise convenience, flavour variety, and on-the-go consumption experiences.

In the cold coffee segment, consumers now look for convenience, portability, bold flavours, and customisable options. Cold RTD beverages offer a refreshing alternative to traditional hot coffee, appealing to consumers seeking quick and convenient ways to enjoy their favourite coffee drinks without compromising too much on taste or quality.

Gen Z customers are driving the iced coffee category at US coffee chain Starbucks, where four of the top 10 beverages are now iced. Brands like Stumptown, La Colombe, Blue Bottle, Chameleon, and High Brew are already in on this trend as well, offering shelf-ready cold espresso made with coffee concentrates. But Nestlé took it one step further by making concentrates an at-home option with endless customisation.

“Surveys show that Gen Z favours RTD drinks, cold coffee, and lifestyle drinks,” says Abdullah. 

“Concentrates, especially specialty ones, provide a versatile and premium quality option for both cold and hot beverages, with or without milk or plant-based alternatives. This trend offers consumers new ways to enjoy coffee, like cold lattes, iced long blacks, and specialty drinks, making it ideal for various settings like homes, offices, camping, or travel.”

Soluble and concentrates compete in different markets

While soluble coffee may not be considered as trendy as cold RTD or espresso-based beverages, its consistency and widespread popularity have propelled its exponential growth over the years

Despite the rise of alternative roasted coffee forms, the soluble coffee market remains resilient and continues to attract a loyal consumer base globally.

Concentrates, on the other hand, present a new frontier for labels like Nescafé to explore, offering a different consumption experience and flavour profile compared to traditional soluble coffee. 

While concentrates may face challenges in competing with established formats like soluble coffee, their unique attributes of quick, easy, premium and in a slick packaging appeal to mainly young consumer segments seeking innovative and accessible coffee solutions at home.

Nescafé’s dual approach of offering both soluble coffee and concentrates under the same label raises questions about target audiences and potential consumer confusion. 

While the two products cater to different preferences and consumption occasions, Nescafé – and any other brand looking to develop both market segments under the same label – must clearly differentiate their marketing strategies to address distinct target segments. 

Soluble coffee may resonate with consumers seeking familiarity and convenience, while concentrates may attract younger, on-the-go consumers looking for bold flavours, a more premium quality and more customisation options.

“Concentrates may not eclipse instant coffee anytime soon, but will undoubtedly establish themselves as a significant category,” says Abdullah.

“They offer unique use cases and lack the negative sentiment sometimes associated with instant coffee. Whether Nestlé can attract new customers without cannibalising instant coffee sales remains to be seen – quality, taste and the customer’s response will determine its success. Nestlé’s move is for me a validation of our (Pablo & Rusty) long-standing belief in the potential of the concentrate category.”

Nestlé’s foray into concentrates alongside its established soluble coffee offerings signifies a strategic move to diversify its product portfolio and capture diverse market segments. 

The multinational is capitalising on emerging trends, and this latest product launch from the “king” of soluble is a clear indicator for the rest of the industry that coffee concentrates are probably a viable investment.


Coffee Intelligence

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