By Daily Mail (U.S.) | Created at 2024-11-20 20:02:17 | Updated at 2024-11-24 00:35:43
3 days ago
Coffee is about to get more expensive thanks to a major company adjusting for the rising cost of beans.
Nestlé has announced it will hike its prices and make its packs smaller to limit the impact of higher bean prices, Bloomberg reported.
The company, which is behind the Nescafé and Nespresso brands, also said it would be focusing more on soluble and capsule coffees, according to David Rennie, the company's head of coffee brands.
These coffee products are more insulated from the ever-changing value of the underlying commodity because it represents a lower proportion of their prices.
'We are not immune to the price of coffee, far from it,' Rennie said during Nestlé's capital markets day on Tuesday. 'But we have priced and we will price.'
Nestlé has increased prices twice since 2022, Rennie added, saying that the company is advantaged by it diverse product portfolio.
This includes things like instant coffee, making Nestlé less dependent on ground and roast coffee than some of its other competitors.
By offering a range of capsule sizes, including single-use mixes and refills, at various price points, Nestlé hopes to attract inflation-wary consumers.
The stubbornly rising price of coffee beans is the reason why Nestlé is hiking prices
An Nestlé executive said the company will pivot to soluble and capsule coffees in the face of rising commodity prices
The company also has a new extraction technology it says can extract more coffee from each bean without impacting the quality, according to a spokesperson.
DailyMail.com approached Nestlé for comment.
Coffee prices have steadily gone up throughout the year because of climate change induced droughts in Brazil and Vietnam, the world's two largest producers of coffee beans.
Futures for arabica beans - those used by chains like Starbucks - have jumped by 50 percent this year.
Futures for robusta beans, which usually have a harsher taste and are used in instant coffee, have gained about 65 percent.
This comes as Nestlé reels from 2.4 percent drop in sales for the nine months ending September this year.
Nestlé doesn't just make coffee. It also makes Purina and Felix pet food, Lean Cuisine and Stouffers ready meals, San Pellegrino water and DiGiorno pizza.
Executives said that consumers abandoned them because they raised prices too steeply over the past two years.
'The perception of consumers everywhere but especially in the US is that food prices are high,' Nestlé CEO Laurent Freixe said in interview with The Wall Street Journal.
Inflation fell to 2.4 percent on an annual basis in September.
That figure rose to 2.6 percent in October, just as the Federal Reserve cut interest rates for two months in a row.
