From compostable capsules to iced brews: Coffee innovation helps drive growth at Nestlé

Across the whole company, the Swiss chocolate-to-pet food giant boasted 15% more innovation and renovation launches in H1 2024 than in H1 2023, with a total planned increase to 20% by year-end.

With global coffee heavyweights such as Nescafé and Nespresso already the highlight of Nestlé’s H1 sales: with the company emphasizes the promise of innovations such as Nescafé Ice Roast Coffee, Nescafé cold-concentrate and the Vertuo system.

Vertuo: Coffee+ and more

Reporting its H1 2024 sales last week, Nestlé’s group sales saw organic growth of 2.1%.

Coffee was the largest organic growth contributor with mid single-digit growth, driven by the three leading global coffee brands Nescafé, Nespresso and Starbucks (Nescafé and Nespresso being major Nestle brands; while it covers Starbucks in retail outside the US via a global agreement with the coffee giant​​).

Nespresso grew to sales of CHF 3.1bn ($3.5bn), representing 1.8% organic growth.

North America was the best growth market for the brand: thanks to the continued popularity of the Vertuo system.

That system – which allows consumers to access 35 different coffee varieties and create a range of coffees from short, long, iced, gourmet or even a coffee+ option with B12, ginseng or extra caffeine – has been consistently performing well in this market.

“Vertuo is attracting new consumers to the segment and retaining them, and we are doing this through cold formats, which resonate well with younger consumers, as well as limited editions and exciting collaborations such as our recent one with Pantone,” said Anna Manz, Nestlé’s Chief Financial Officer.

Once consumers enter the franchise, the variety of the range keeps them engaged, she added.

Nescafe: Espresso concentrate

Identified as a priority launch of Nestlé is its espresso concentrate coffee: designed to capture the out-of-home cold coffee experience with a premium liquid coffee concentrate bringing barista-style personalized iced coffees to consumers’ homes.  

The beverage brings with it plenty of opportunities for customization: consumers can simply add a small shot of espresso concentrate to milk or water or even mix it with lemonade or juice.

Espresso Concentrate launched with two flavors: Sweet Vanilla ('for a touch of flavor to the coffee ritual') and Espresso Black ('for a bold and intense coffee').

The product launched in May this year,​​ in a bottle format in Australia and on e-commerce platforms in China as a single-serve pod. Global expansion is planned.

Compostable capsules

Other innovations have included the expansion of compostable capsules across Europe over the last half. Initially launched in Switzerland in 2022, these capsules can be disposed of in home compost.

Also tapping into the trend for cold coffee is Nescafé Ice Roast Coffee, which debuted in 2023 as the brand’s first ever soluble coffee designed especially for consumption with cold water or milk, over ice.

That’s because some 15% of the world’s coffee is drunk cold, with the majority of this being among younger people and Generation Z.

Other key product launches across Nestle in H1 include Maison Perrier – a spin on sparkling water Perrier – and Milo extensions.

“In the first half of 2024, we significantly increased our product launch intensity,” Mark Schneider, Nestlé S.A. Chief Executive Officer, told analysts during last week's H1 earnings call.

“These launches reinforce brand and product differentiation, drive incremental sales for the group, and offer retail partners broader consumer value propositions.

“Our approach to product launches is not just about quantity but about precision and focus. We are clear on what we can scale, which segments and brands to build up, and where we seed new growth opportunities to maximize impact. Innovation fuels mix growth and premiumization.

Each of Nestle’s categories includes a ‘priority launch’, which is of particular focus to Nestlé as a barometer of what’s working.

“We track these launches closely to optimize support and have a good view of what is gaining traction with the consumer,” said Schneider.