Nestle banks on premium flavors to drive coffee biz

Nestle is betting on flavor innovation to accelerate coffee consumption in China, launching a new coconut latte product under its flagship Nescafe 1+2 instant coffee line to capture younger consumers' demand for convenience and new tastes.

The Nescafe 1+2 Coconut Latte marks the first new flavor launch for the brand in nearly a decade, said the beverage and food maker. By bringing a coffee shop-inspired coconut flavor into the at-home coffee market, Nestle said the product is designed to offer consumers options during daily coffee occasions, particularly in the morning.

To attract new coffee consumers among younger people in the country, the company has tapped Chinese Olympic table tennis champion Fan Zhendong as Nescafe brand ambassador.

Its launch comes as flavor innovation becomes a key driver of the country's rapidly evolving coffee market. According to data from iiMedia Research, 68.38 percent of Chinese consumers ranked taste innovation as their top expectation for instant coffee innovation in 2025, highlighting growing demand for differentiated flavors in a traditionally convenience-driven category.

Nestle's push into new flavors mirrors broader momentum in its global coffee business. According to the company's first-half fiscal results, organic growth in its coffee business reached 7.5 percent, driven primarily by Nescafe. In the second quarter, coffee accounted for about 26 percent of sales in Nestle's Asia, Oceania and Africa zone, with growth supported by both soluble coffee and ready-to-drink products across major markets.

"The coffee market in China is very exciting," said Pamela Takai, senior vice-president for coffee business of Nestle China. "Chinese consumers are still growing to love coffee, and we are excited to continue helping build the coffee category and coffee consumption habits."

Despite rapid growth in recent years, China remains an underdeveloped coffee market compared with more mature markets, leaving significant room for expansion. Takai said only around half of urban Chinese consumers currently drink coffee, and many consume it only occasionally rather than daily.

"That is also our opportunity: how can we raise penetration, get more consumers to drink coffee, and encourage them to drink it more often?" she said.

Takai said Chinese consumers are increasingly seeking different coffee formats, including hot coffee, cold coffee, powder-based products and liquid beverages, while continuing to prioritize convenience, taste and quality.

"Those are the consumer needs we want to make sure we meet in China," she said.

Nestle sees younger consumers and demand for premiumized flavors as major growth opportunities. The company said the Nescafe 1+2 Coconut Latte is a global first for the brand and was developed specifically for Chinese consumers, where coconut-flavored coffee has gained popularity in coffee shops.

"The flavor has already become popular in coffee shops, but our opportunity is to make it available more conveniently and at better value," Takai said.

The launch is part of the company's broader strategy to expand its coffee portfolio in China across multiple formats. The company opened a new coffee stick production line in Qingdao, Shandong province, last year, reflecting its confidence in long-term local demand. The latest launch is being carried out in partnership with JD as Nestle seeks to strengthen e-commerce distribution and reach more consumers.

Beyond instant coffee, Nestle is also expanding into cold coffee formats. The company launched Nescafe liquid concentrates last year, allowing consumers to mix coffee with cold milk or water at home. The company also continues to invest in premium black coffee offerings through Nescafe Gold and ready-to-drink products.

wangzhuoqiong@chinadaily.com.cn