Company Trend Analysis - Nestl? Strengthens Coffee Portfolio With Chameleon Cold Brew Buy - JAN 2018


BMI View: Nestle's strategy to focus on its high growth coffee segment, has pushed the company to strengthen in this space by acquiring organic coffee house, Chameleon Cold Brew. The acquisition is understandable, as spending by the US consumer on coffee continues to increase. Via this acquisition, Nestle will be particularly boosting its presence in ready-to-drink coffee , where competition is intensifying as foodservice chains and coffee houses continue to launch their own offerings to meet consumer demand.

Nestle is further building its coffee portfolio, with the acquisition of organic coffee company, Chameleon Cold-Brew. The Austin-based coffee house sells a variety of coffee products, including: ready-to-drink (RTD) cold brew, cold brew concentrate, kegs, cold brew kits and whole bean coffee. Chameleon cold brew will continue to be sold through Whole Foods Market, Target, Safeway, Albertson's and Bed, Bath and Beyond. This development is part of a wider diversification strategy by Nestle in its coffee segment, with the company acquiring a majority stake in California-based coffee chain, Blue Bottle, in September 2017 (see 'Nestle Boosts Premium Coffee Portfolio With Blue Bottle Deal, September 22, 2017).

Nestle's acquisition is in line with the company's strategic focus on the high-growth food and beverage categories of coffee, petcare, infant nutrition and bottled water. Furthermore, Nestle has been reporting strong growth for its coffee segment (comprising of the NESCAFE brands like NESCAFE Dolce Gusto and NESCAFE Gold Blend, and Nespresso ) with the company reporting mid single-digit organic growth globally, fuelled by double digit growth in North America over Q117 and Q317, according to the company's financial results. We believe Nestle's focus on coffee is due to a need to strengthen its existing US portfolio, as it plans to sell its US confectionery business (see 'Nestle Sheds Underperforming US Confectionery Business ', October 27, 2017).

Coffee Showing Strong Growth In The US
Coffee Sales (USDmn)
e/f= BMI estimate/ forecast. Source: BMI/National Statistics

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