Nescafé Faces Crisis as Instant Coffee Sales Decline in China

In January and February 2015, Nestlé destroyed hundreds of tons of expired instant coffee at its factory in Dongguan, China — a stark sign of trouble in a once-booming category. The move wasn’t about quality control, but freshness strategy. Yet behind the headlines lies a deeper shift: instant coffee, long China’s coffee staple, is rapidly losing ground.

Nescafé dumped nearly 400 tons of near-expiry stock worth over RMB 10 million — its biggest such destruction since the plant opened in 1992. The reason? Plummeting demand driven by changing consumer tastes and competition from fresher, premium alternatives.

Why Nescafé Destroyed Tons of Instant Coffee

Nestlé China confirmed the destruction was to maintain product freshness on shelves. But the real issue was a flood of market returns — mostly expired or unsold stock. According to Nestlé’s CFO Wan Ling Martello, speaking in February 2015, the entire instant coffee category was seeing slowing growth. The root cause? A major shift in how Chinese consumers buy and drink coffee.

The Rise of Fresh and RTD Coffee in China

Market research firm Mintel reported that in recent years, instant coffee held 71.8% of China’s coffee market, compared to 10.1% for freshly brewed and 18.1% for ready-to-drink (RTD) coffee. But the trend lines tell a different story: instant coffee’s dominance is slipping. Mintel projected that by 2019, its share would fall over 5 percentage points to 66%, as both fresh and RTD coffee grew faster.

This shift is fuelled by the rapid spread of specialty coffee shops and changing consumer preferences. As more Chinese drinkers experience café-quality espresso or filtered coffee, instant coffee — once a daily habit — is being sidelined. RTD options, meanwhile, offer convenience without the instant stigma.

Nescafé’s Struggles Reflect Broader Challenges in China

Nescafé’s inventory woes are part of a wider malaise at Nestlé in China. In 2014, global sales hit CHF 91.6 billion — up 4.5%. But in China, the company’s second-largest market, performance was weak. While figures weren’t disclosed, Wan Ling noted poor results not just for Nescafé, but also for acquired local brands like Yinlu and Hsu Fu Chi.

Nestlé CEO Paul Bulcke pointed to profound changes in Chinese consumer behaviour: economic slowdown, anti-corruption measures reducing gifting, and a growing focus on health and digital lifestyles. Foreign brands that relied on supermarkets and hypermarkets — like Carrefour and Walmart — faced shrinking shelf space as those retailers cut costs and inventory. Digital commerce further disrupted traditional sales channels.

Even beyond coffee, legacy brands struggled. At a Shanghai supermarket, imported biscuits from eight countries crowded shelves — perceived as “safer” or more premium than local options like Hsu Fu Chi. Younger consumers now prioritise health, variety, and novelty — a triple challenge for traditional mass-market products.

What’s Still Growing for Nestlé in China?

Not all Nestlé products are declining. The company saw double-digit growth in cooking products, ice cream, ready-to-drink coffee (not instant), and its long-standing KitKat brand. These categories tend to be more experiential — less vulnerable to online replacement. As City Super founder Cui Yixiong noted, supermarkets increasingly rely on experiential goods to compete, since selling standardised items like Oreos online isn’t their strength.

Frequently Asked Questions

How much instant coffee did Nestlé destroy in China in early 2015?

Nestlé destroyed nearly 400 tons of expired or near-expiry instant coffee at its Dongguan factory in January and February 2015. The batch was worth over RMB 10 million and represented the company’s largest such destruction since the plant opened in 1992.

Why did Nestlé destroy so much instant coffee?

The destruction was officially to preserve product freshness, but the underlying reason was a large volume of returned, expired, or unsold stock due to slowing demand. Market trends were shifting away from instant coffee toward fresh and RTD alternatives.

What share of China’s coffee market does instant coffee hold?

Instant coffee held 71.8% of China’s coffee market as of the latest available data, compared to 10.1% for freshly brewed coffee and 18.1% for RTD coffee. However, Mintel projected instant’s share would drop to around 66% by 2019.

Is instant coffee losing popularity in China?

Yes. Instant coffee growth is slowing as Chinese consumers increasingly prefer freshly brewed coffee from cafés and ready-to-drink coffee products. Mintel reported that fresh and RTD segments are growing faster, leading to a forecast decline in instant’s market share.

What other Nestlé products struggled in China in 2014?

Besides Nescafé, Nestlé’s locally acquired brands Yinlu and Hsu Fu Chi also performed poorly in 2014. Combined with slowing instant coffee sales, these contributed to Nestlé’s overall weak performance in its second-largest market, China.

What Nestlé products are still growing in China?

Nestlé saw strong double-digit growth in cooking products, ice cream, its RTD coffee (non-instant), and the KitKat brand in China during 2014. These categories are less affected by e-commerce disruption and more focused on experiential consumption.

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