Facing a vast but quietly changing Chinese coffee market, Nestlé has begun to accelerate its pace in building high-end coffee. The latest attempt is to rely on local coffee bean resources. Recently, Nestlé announced the launch of its '感CAFÉ鎏光咖啡云南新生' (Gan CAFÉ Radiant Coffee Yunnan Rebirth). This means that within half a year, Gan CAFÉ has launched three new series, following the debut of its first drip coffee 'Latitude Coffee Series' in May this year. Various signs indicate that this high-end coffee brand, described by Nestlé as 'created for the Chinese market', will play a more important role in the future. Xiaoshidai learned that Gan CAFÉ plans to launch more new products in the future, including the 'Building Block Coffee Series' and 'African Origin Coffee Bean Series'. Previously, He Wenlong, head of Nestlé's coffee business in Greater China, clearly stated that premiumization is one of Nestlé's key strategies in the Chinese coffee market. -01- Coffee Premiumization It is understood that in addition to the Latitude Coffee and the newly launched Radiant Coffee, Gan CAFÉ also introduced the A Cappella Instant Coffee Series earlier. This series claims to use coffee beans from Colombia, Ethiopia, and Yunnan in different combinations, featuring a faster dissolution technology as its selling point. A Cappella Instant Coffee Xiaoshidai noticed that the three product series under Gan CAFÉ are priced at approximately 7 to 13 yuan per cup, significantly higher than regular instant coffee. However, in Nestlé's view, premiumization is precisely the new opportunity it sees in the Chinese coffee market. He Wenlong once told Xiaoshidai, This year, the biggest change for Nestlé coffee is the shift from being solely focused on instant coffee and not involving freshly ground coffee, to a more diversified role as a supplier of all coffee categories. "We found that if we really want to promote coffee culture, we need to develop other product lines." He Wenlong, Head of Nestlé Coffee Business in Greater China (second from left) According to reports, on one hand, during the pandemic home-stay period this year, many Chinese coffee consumers 'upgraded'—they had time to delve into coffee, including different origins and grinding techniques, and were willing to try various coffee products. At the same time, offline coffee shop consumption was restricted during the pandemic, which undoubtedly represents a market opportunity for Nestlé to develop more high-end coffee products. On the other hand, for Nestlé, beyond cultivating new coffee consumers, the ultimate goal is to establish its coffee brand positioning through premiumization and increase brand loyalty. -02- 'Yunnan Story' Additionally, telling the 'Yunnan coffee story' well is also a direction Nestlé is actively promoting in China. "The Chinese market is unique—it has both production areas and is a major consumer country, a condition many countries do not have," said He Wenlong. Nestlé has been rooted in Yunnan for 30 years, introducing high-yield, high-quality Arabica coffee varieties, and seven generations of agronomists have helped improve the quality of local Yunnan coffee. He pointed out that to help achieve premiumization and specialization of Chinese coffee beans, Nestlé has launched several high-end products using Yunnan coffee beans this year. In the future, Nestlé also plans to build a premium Yunnan coffee product matrix and even bring Yunnan coffee beans to the global market. Taking the Radiant Coffee launched by Gan CAFÉ as an example, Nestlé noted that this product is a 'localized high-end coffee product' specifically incubated for the Chinese market and consumers, using the globally unique, China-first Radiant patented technology. The brand's earliest Latitude series includes three products using coffee beans from Baoshan and Pu'er in Yunnan. In Nestlé's view, the 'Yunnan coffee story' is also a way to attract more young Chinese consumers to try coffee. He Wenlong explained that for today's young consumers, "you can't just put a product in front of them." China happens to have a Yunnan coffee base, and Nestlé has cultivated it for many years, so it can tell a good story about coffee. -03- The Battle Behind For a long time, Nestlé has occupied a very significant share of the Chinese instant coffee market, with a clear first-mover advantage. Interestingly, behind Nestlé's latest bet on the Chinese coffee market is a quietly changing competitive landscape. According to a report by Mintel earlier this year, after years of marketing cultivation, coffee has gradually been accepted by Chinese consumers, and consumption has increased year by year. In recent years, new instant coffee brands have also risen with the help of e-commerce platforms and achieved good growth. Statistics show that in the first half of this year, San顿半, 时萃咖啡, and 永璞咖啡 received capital attention, with the latter two claiming to have completed tens of millions in financing. Mintel's report noted that during the pandemic, the growth rate of new coffee brands on e-commerce platforms is estimated to be 80%, due to increased at-home consumption. The report stated that new instant coffee brands have become a consumption upgrade choice compared to regular instant coffee by focusing on quality, taste, and trendy image. Mintel's online survey of 2,600 Chinese consumers aged 20-49 also showed that 48% believe coffee has become a part of their lives, 54% think coffee quality is more important than convenience of purchase, and 45% agree that freshly ground coffee is too expensive. In the past, instant coffee was often considered cheap. However, Chinese consumers now want a solution that doesn't sacrifice taste for convenience. New instant coffee brands have discovered this opportunity by using higher-quality coffee beans and advanced manufacturing techniques, consolidating their product advantages over regular instant coffee. Among these, features like cold brew and freeze-drying technology are often used in consumer communication by manufacturers. The report suggests that in addition to improving quality, instant coffee can also leverage its unique advantages to provide consumers with the opportunity to make their own handcrafted beverages at home. For example, instant coffee products, especially when mixed with other beverages, can help expand the category into more consumption occasions. The survey shows that 64% of people say they have tried mixing beverages to create new flavors. "Startup brands have discovered the opportunity to transform instant coffee into trendy beverages," Mintel said in the report. Notably, the strong growth of new coffee brands may pose a threat to major global instant coffee brands. "Clearly, these brands need to further innovate and develop products suitable for the Chinese market." Mark Schneider, CEO of Nestlé In February this year, Nestlé CEO Schneider stated that Nestlé already has some high-end products performing well in China, and Chinese consumers are pursuing better food and beverages, so Nestlé has made premiumization a key focus. At the same time, Nestlé also has many mass-market products and has been doing a lot of work to move these products upscale and make them more attractive. He believes that Nestlé will also invest globally in products that grow faster, have higher profit margins, better align with industry trends, better meet the needs of younger and higher-spending groups, and are more premium. Source: Xiaoshidai (ID: foodinc) Tips will be paid 400-2000 yuan upon adoption.