☕ From the Ashes of a Financial Disaster: Nescafe
From crisis to innovation: Here's how a stock market crash gave birth to your favourite morning coffee.
5,500 cups. That's how many cups of Nescafé are consumed every second!
Nescafé is the 4th most valuable beverage in the world after Coca-Cola, Pepsi and Budweiser.
The cup of Nescafé that you have every morning was actually brewed during a stock market crash!
Today we will discuss:
How Nescafé was born out of a historic tragedy
How it entered India
What Nescafé’s future looks like
Grab your cup of coffee, sit back and read on.
📉 A Market Crash that Made Your Mornings
It was 1929.
The US Stock Market was seeing rapid expansion. Prices of stocks soared to insane heights. People went frenzy over the bull market: from the banker to the cook, everyone rushed to invest in the stock market, hoping for high returns.
Alas! This bull run was short-lived.
The market finally crashed in October. By November, the market lost almost half of its value, from $64 Bn to $30 Bn.
The aftermath of the great crash was worse: The Great Depression, which lasted for 10 whole years from 1929 to 1939.
Now, because people lost money, they didn't have enough to spare on luxuries like coffee. So, Brazil, a major coffee exporter, was sitting on huge reserves.
Brazil tried to burn coffee to reduce supplies and increase prices, but it soon realised it would have to find a more permanent solution to this problem.
So, it approached Nestle with a unique problem: take our coffee and prolong its shelf life.
How would Nestle do that? By creating instant coffee: the kind of coffee that we have now.
The only problem?
People had tried to do this before but failed.
However, Nestle took up the challenge.
After 8 long years and several failed attempts, it delivered a solution to make instant coffee that would retain coffee’s natural flavour.
All thanks to the mastermind: lead scientist, Max Morganthaler.
His breakthrough work not only became a hit, but it gave birth to a whole new industry of instant coffee.
In just 2 years, Nescafe was selling it in more than 30 countries!
This popularity was until…
World War II (1939).
The political unrest in the world impacted the now-global Nescafe. It had to do something.
By 1941, it included instant coffee in the emergency rations of the US soldiers. And after the war ended in 1945, it included its product in the care packages for the needy across Europe and Japan.
The next target for Nescafe was tea-drinking nations like India.
☕Nescafé's India Strategy
To crack India, Nescafe used the 4Ps of marketing:
Promotion: It used celebrity endorsements ranging from actors like Deepika Padukone and Purab Kohli to collaborating with the radio on shows like Mornings with Nescafe.
Product: In South India, Nescafe introduced Nescafe Sunrise to match filter coffee. To enter the chai-loving north, it introduced Nescafe 3 in 1, a premix of coffee, dairy creamer, and sugar. It also introduced foaming mixes of Cappuccino, Vanilla Latte & Choco Mocha to attract young consumers.
Price: For price-sensitive and value-seeking Indian consumers, Nescafe kept coffee affordable, making it available for Rs 2 in the form of a sachet.
Place: With favourite brands like Maggi and Kitkat in its portfolio, it was easier for Nestle to introduce Nescafe and distribute its through its distribution network.
The brand is growing with advancing technology. It is rolling out AR innovation where customers can enter different locations by scanning the Nescafe Ready-to-Drink Cold Coffee sachets. Crazy, no?
But like every journey, Nescafé’s journey ahead is also not an easy one.
🔮 Challenges to Nescafé's Future
The Rise of D2C brands: Several new D2C brands are currently setting foot in this space by targeting the millennial and GenZ. This demographic not only prefers coffee to tea but also want to experiment with their coffee (remember the Dalgona craze during Covid)? So, these brands could soon snap up a chunk of Nescafé's market share. Plus, it is increasingly facing more competition from other FMCG companies like Tata that are also innovating coffee brews to appeal to a wider audience.
Climate Change: Climate change is raising temperatures, and decreasing the areas in which coffee can be cultivated. This poses a huge threat to the future of the entire coffee industry. So, Nescafé needs to invest in research and development to curb this threat.
If Nescafé can counter these threats, the future looks extremely bright as more youngsters now prefer coffee to tea. In fact, India's coffee consumption is set to double by 2027!
Will Nescafe manage to maintain its legacy among fancy new-age D2C brands?
Let us know if you found this informative? You can reply to this email with your responses or ping us directly on WhatsApp!
Nice article! 😀 Would be interesting to hear more about how the scientist came up with the idea for instant coffee
and how he went about creating it ☕
As always brilliant piece of information and a very interesting read 👍