How Close Is Nestlé to Crisis Over Unsold Instant Coffee?

In the heart of China’s booming coffee market, Nestlé—the company that once introduced the country to coffee with its iconic “Nescafé, delicious!” slogan—is now dumping nearly 400 tons of unsold instant coffee. This mass destruction, worth over ten million yuan, is the largest in the history of its Dongguan factory since 1992. It marks the first time in two decades that Nestlé has had to destroy such a large volume of expired or near-expiry coffee products returned from the market.

The short answer: Nestlé is under extreme pressure due to slowing growth in the instant coffee category. While China’s overall coffee market is growing rapidly—expected to double from 70 billion yuan in 2012 to 150 billion yuan by 2017—Nestlé’s core instant coffee business is shrinking, with 400 tons of product destroyed just last month alone.

Nestlé’s Mass Destruction of Instant Coffee

Starting last month, nearly 400 tons of unsold—but not yet expired—Nescafé instant coffee were destroyed at Nestlé’s warehouse in Dongguan, China. The retail value of this waste exceeds ten million yuan. This is the largest such destruction event in the factory’s history since it opened in 1992, and the first time in 20 years that Nestlé has had to dump large quantities of instant coffee. All the destroyed products were market returns nearing their expiration dates.

Why Is Instant Coffee Losing Ground?

Nestlé’s Chief Financial Officer, Wan Ling Martello , explained that the issue lies in the overall slowdown in growth for the entire instant coffee category. But this decline stands in stark contrast to the rapid expansion of the broader coffee market. While consumers once turned to instant coffee out of necessity, today they have far more options—and they’re choosing differently.

The Rise of Fresh and Alternative Coffee Formats

As the Chinese coffee market has matured, consumer preferences have shifted dramatically. The rise of specialty coffee shops like Starbucks and Costa has fueled a surge in demand for freshly ground and brewed coffee, as well as ready-to-drink (RTD) coffee options. According to market research firm Mintel, the current market share breakdown is 71.8% for instant coffee, 10.1% for RTD coffee, and 18.1% for freshly brewed. While instant coffee still dominates, its share is projected to fall by over 5 percentage points—to around 66%—by 2019, as the faster-growing segments continue to take market share.

Nestlé’s Broader Struggles in China

The trouble isn’t limited to instant coffee. Wan Ling also noted that other Nestlé acquisitions, such as Yinlu and Hsu Fu Chi , are underperforming. To preserve freshness, Yinlu has significantly reduced trade inventory levels despite pressure on sales, while Hsu Fu Chi implemented large-scale destocking as early as the end of 2013 and followed up with price adjustments by the end of last year.

Why Consumers Are Moving On

Years ago, Nestlé was essentially the only game in town. Consumers chose Nescafé not necessarily because they loved it, but because there were few alternatives. Today, the market has changed. Consumers now expect personalized choices and refined experiences. The era of mass-market dominance by a few global giants—when “you bought P&G for toiletries, Kraft or Nestlé for food”—is over. With a much wider selection available, consumers are moving away from outdated brands that fail to innovate.

What’s at Stake for Nestlé?

Nestlé’s current struggles stem from a failure to adapt to China’s evolving consumer landscape. The brand’s traditional approach—relying on established products, minimal innovation, conservative marketing, and outdated brand strategies—no longer resonates with a younger, more dynamic market. Without significant changes in product variety, taste development, and marketing innovation—especially in entertainment and integrated campaigns—Nestlé risks falling further behind. If it doesn’t respond to shifting youth preferences, a real crisis could be imminent.

Frequently Asked Questions

How much instant coffee did Nestlé destroy in China?

Nestlé destroyed nearly 400 tons of unsold but not yet expired instant coffee at its Dongguan warehouse. The total retail value of the destroyed stock exceeded ten million yuan, making it the largest such event in the factory’s history since 1992.

Why is Nestlé destroying so much coffee?

Nestlé attributed the mass destruction to slowing growth in the instant coffee category. Much of the destroyed product consisted of market returns that were close to their expiration date. Rather than risk selling outdated goods, the company opted to destroy them.

Is the overall coffee market in China declining?

No, the overall coffee market in China is growing rapidly. Between 2012 and 2017, the market is expected to have doubled from 70 billion yuan to 150 billion yuan. However, growth is concentrated in fresh and ready-to-drink coffee, not instant coffee.

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

Instant coffee currently holds a 71.8% market share, but that figure is projected to drop to around 66% by 2019 as fresh and RTD coffee segments grow faster, according to Mintel.

Are other Nestlé products also struggling in China?

Yes. Nestlé’s CFO mentioned that other acquired brands in China, such as Yinlu and Hsu Fu Chi, are also underperforming. Yinlu has reduced inventory levels, and Hsu Fu Chi underwent major destocking and price adjustments in recent years.

Why are consumers moving away from instant coffee?

Consumers now have access to a wide range of alternatives, including freshly brewed coffee and RTD options. With more choice and higher expectations for quality and experience, many are shifting away from instant coffee, which is seen as less desirable compared to newer formats.

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