Nespresso’s India launch reveals a broader strategy for emerging coffee markets

Nespresso capsule with Indian flag
  • Nestlé plans to launch Nespresso in India by the end of 2024 
  • India’s retail coffee market is projected to grow by 13% by 2025
  • This growth has been driven by a growing middle class and Gen Z

Nespresso’s announcement to launch in India by the end of 2024 marks a strategic turning point aimed at tapping into the burgeoning coffee market in the region. 

With plans to inaugurate its first boutique store in Delhi and expand to other key cities, Nestlé’s signature premium brand is laying the foundations to strengthen its market presence in the country.

Offering premium coffee products and immersive brand experiences is designed to build an “elegant” culture of coffee consumption with a wide appeal.  

Leveraging e-commerce platforms will help capture a wider audience of Indian coffee drinkers and consumers in general. Nespresso aims to balance the allure of “premium” with accessibility and convenience, positioning itself as a leading player in India’s evolving coffee scene.

The Indian retail coffee market, valued at $570.3 million in 2022, is projected to grow by 13%, reaching over $640 million by 2025. While it had a fleeting decline in consumption a couple of years ago, today it is bouncing back and gaining momentum.

The decision to enter the Indian market underscores Nespresso’s commitment to exploring new growth opportunities and engaging in emerging markets. 

“With its growing young population that has exposure to global trends and is open to new experiences, India is one of the fastest-growing coffee markets for Nestlé,” said Suresh Narayanan, Chairman and Managing Director of Nestlé India in the brand’s press release announcement.

By introducing its signature coffee capsules, machines, and accessories to Indian consumers, Nespresso seeks to capture a share of the growing middle and upper class. With currently only 56% of the population being coffee drinkers, there is significant room for growth.

“Even if Nespresso targets just the top 0.5% or 0.2%, of the population who can afford their products, it’s still a huge market,” says Binny Varghese, founder of the Barista Training Academy in New Delhi. 

“Nespresso might feel that now is the time to enter the Indian market, as people are starting to get a taste for espressos and new ways of drinking their coffee. I think it’s well-planned.”

The rise of elegance, convenience, and the middle class in India

In Delhi, as well as across India, there is a noticeable shift towards a growing coffee culture driven by a burgeoning middle class seeking convenience, sophistication, and elegance in their beverage choices. 

This transformation isn’t just about the shift from tea to coffee; it’s about the evolution of taste, culture, and social experiences.

The demand for premium coffee – characterised by specialty blends, artisanal brewing methods, and stylish coffee outlets – is on the rise, reflecting changing consumer preferences and evolving lifestyle trends in urban centres like Delhi.

Delhi serves as a hub and playground for coffee enthusiasts and experts, and is piloting the premium coffee experience before it takes off across other large cities in India.

The coffee market in India is witnessing a transformation with an increasing emphasis on quality, variety, and experiential consumption – largely driven by a growing middle class and younger generations that are connected to global consumption trends.

“I think India is one of the largest and fastest growing nations in terms of coffee consumption,” says Binny. 

“I think one of the biggest reasons is the fact that the spending capacity per person amongst millennials and Gen Z has increased, and more people are now able to spend money on coffee – which is still considered a luxury.”

As coffee consumption becomes intertwined with social rituals, work routines, and leisure activities, there is a growing demand for diverse coffee products that cater to different tastes and preferences. This makes India the perfect place for Nespresso to take root in.

The move also underlines a paradoxical situation of India importing coffee and capsules, despite being the 6th largest coffee exporter in the world. India exports three quarters of its production and its coffee exports are braced to surge in 2024, and meanwhile domestic coffee consumption is increasing. 

This could point to value addition opportunities in India, yet instead there is an influx of international premium coffee brands and products into the Indian market that underscores the importance of brand image in the premium coffee experience.

Nespresso boutique

Premium coffee in emerging markets: a gateway to higher quality 

In emerging coffee markets like India, China, and the Middle East, brands like Nespresso are introducing premium coffee products as a transitional step towards more refined and specialty offerings. 

“I feel like India is operating on a consumption of all three waves of coffee at once,” says Binny. 

“The largest segment is still instant coffee. Second is the chain cafes like Starbucks or CCD, the Indian brand, and premium at-home products. And last is specialty coffee, but it’s a tiny segment when you compare it to the country’s total consumption.” 

By positioning themselves as purveyors of luxury coffee experiences, Nespresso and similar brands leverage the allure of exclusivity, quality, and sophistication to attract consumers seeking elevated coffee experiences.

The introduction of Nespresso’s premium products in emerging markets serves not only as a short-term commercial strategy, but also looks at the long game of elevating the coffee culture and cultivating appreciation for specialty coffee later on. 

As consumers in these markets develop a taste for the premium coffee experience, it feeds into a growing demand for authenticity, craftsmanship, and uniqueness in the coffee products available.

Nespresso-type premium products cater to these evolving consumer preferences, while paving the way for a more diverse and sophisticated coffee market in emerging economies. 

As global coffee consumption dynamics shift and new countries position themselves as important market players, brands like Nestlé are strategising to ensure that they can remain central to this coffee consumption evolution.

Coffee Intelligence

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