(Bloomberg) -- The world’s biggest coffee maker, Nestle SA, will continue raising prices and make packs smaller to limit the impact of higher bean prices on its bottom line.
The Nescafe and Nespresso maker will also lean into soluble and capsule coffees, said David Rennie, head of coffee brands, at the company’s capital markets day on Tuesday. The commodity represents a lower proportion of the overall price in that segment.
“We are not immune to the price of coffee, far from it,” Rennie said. “But we have priced and we will price.”
Nestle has had two rounds of price increases since 2022, he said, adding that the company has the advantage of a product portfolio that includes instant coffee and is less dependent on roast and ground coffee than some of its competitors.
The company hopes to attract more consumers by offering a range of pack sizes, such as single serve mixes and refills, at various price points. Nestle’s new extraction technology also allows it to get more coffee out of each bean without impacting quality, according to a spokesperson.
Coffee prices have surged this year after harsh weather for top suppliers Brazil and Vietnam sparked concerns for crops. Futures for the arabica variety, favored by specialty chains, have gained about 50% this year. Futures for robusta — used in instant coffee — have jumped about 65%.
After more than a year of underperformance and the ouster of a long-standing chief executive officer, Nestle is trying to invest more in its brands while cutting costs to protect profitability. Winning back investor confidence rests on its ability to get that balance right.
On Tuesday, the company said it would cut a further $2.5 billion Swiss francs in costs by 2027. The time lag means that higher costs for goods like coffee and cocoa will result in a “lumpy” margin, Chief Financial Officer Anna Manz said.
--With assistance from Megan Durisin.
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