With fierce competition in the coffee market, how can Nestl é maintain its position as the leader in the industry?

Nestl é has failed to meet its annual sales growth expectations for nearly three years, and the upcoming first-half results are the first financial data since Nestl é implemented a cost-cutting program. Nestl é hopes to ease pressure from investors to improve profitability by cutting costs.

Analysts said Nestl é's comparable sales were expected to rise 3.8 per cent year-on-year in the first half as falling dairy prices and deflation in Europe affected second-quarter sales. Both Nescafe and Nespresso grew in the first quarter and are expected to continue their growth momentum in the second quarter.

But Nestl é executives say their current status as the industry leader does not give them peace of mind because a new generation of consumers want healthier food and unique experiences, while competitors can increase brand influence through economies of scale.

In addition to advertisements endorsed by will.i.am, Nestl é has launched high-quality local products to cater to increasingly demanding consumers and has opened stores in cities such as Tokyo and Seoul.

The competition is becoming increasingly fierce.

Nestl é faces all-round competition, but the rise of JAB should exert the greatest pressure on Nestl é.

JAB is controlled by the German billionaire Reimann family and its brands include Jacobs,Douwe Egberts,Caribou and Keurig. The rapidly expanding JAB has also been compared to 3G Capital, a private equity firm behind InBev Budweiser's acquisition of SABMiller, another beer giant. (for details, see the report in Huazhi: the beer industry reached a stunning merger of hundreds of billions of dollars: AB InBev acquired SABMiller, with a total of 224 brands.)

The chairman of Nestl é has accused 3G Capital of "disrupting" the food industry. 3G Capital merged to form Kraft Heinz, which owns US coffee brands such as Maxwell House and Gevalia.

Nestl é CEO Paul Bulcke said he is not afraid of competition, for consumers, competition between businesses will help consumers get a more thoughtful consumer experience.

Nestl é earned more than $15 billion in coffee sales last year, thanks in large part to the global popularity of Nescafe, which is also hailed as the most valuable beverage brand after Coca-Cola and Pepsi.

Patrice Bula, executive vice president of Nestle Coffee, told investors in May: "these achievements are great, but they are a thing of the past. Large scale does not mean rapid development, nor does it mean that it can attract more consumers in the future. "

Glory is a thing of the past.

After the acquisition of American capsule coffee company Keurig Green Mountain (see Huazhi: German investment holding group JAB acquired K-cup single-cup coffee maker Keurig for $13.9 billion), JAB already has the largest share of the capsule coffee market, which is the fastest-growing and most profitable part of the company.

The closed retail system is Nespresso's guarantee of industry-leading profit margins, and consumers can only buy Nespresso coffee capsules in coffee shops or online. But there are currently 210 competitors producing capsule coffee compatible with the Nespresso capsule coffee machine, and Starbucks will also launch its own-brand coffee maker, Nespresso's profit margin is facing challenges.

"Nespresso will face a serious challenge: how to maintain their extremely high profit margins while vigorously carrying out marketing activities and expanding stores," said Jean-Philippe Bertschy, an analyst at Vontobel.

Patrice Bula says Nespresso plans to open 50 more boutiques a year in more than 20 new countries by 2020, most of which will be in Latin America. Nespresso also recently launched a digital coffee capsule vending machine.

Nescafe Dolce Gusto has built a new factory in Brazil to boost growth, the first time Nescafe Dolce Gusto has set up a factory outside Europe, while Nestl é has introduced special milk coffee drinks and premium coffee made from rare beans at higher prices. Nestl é is also supplying drinks to new international markets, such as Coffee Viet made from fish sauce popular in Vietnam and Nescafe Arabiana made from cardamom in the Middle East.

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