23 May 2019

Nespresso commits $9.8m to safeguard high-quality coffee production globally

Coffee pod manufacturer will work with organisations including TechnoServe, Fairtrade International, Fair Trade USA, and Rainforest Alliance to bolster coffee production viability amid growing industry concerns that producers will struggle to meet increased demand for premium coffee

Bags of high-quality Colombian coffee destined for Nespresso capsules. There is growing industry concern that farmers enduring climate change and sustained low profitability will no longer be able to meet increased consumer demand for high-quality, single origin and specialty coffees



Nespresso confirmed the $9.8m fund would be allocated over the next five years to encourage economic development and bolster high-quality coffee production in regions such as Colombia, Zimbabwe and Puerto Rico. The announcement comes after Nespresso’s September 2018 pledge to revive Zimbabwe’s beleaguered coffee production by purchasing up to 95% of high-quality coffee grown in the southern African nation.

"For decades, we have worked directly with our partners in coffee growing areas across the globe to help build sustainable coffee sectors. We are proud to enter new regions and help farmers replant their land, one coffee tree at a time, and reclaim their future, while bringing new and exciting coffee experiences to US customers,” said Guillaume Le Cunff, President and CEO of Nespresso USA.

Allegra research shows pods and capsules are the second most favoured method of at-home coffee consumption after ground coffee in the US. In the UK, pod and capsule coffee is the third most popular coffee consumed at home among consumers surveyed, behind ground coffee and instant.

With capsules preferenced for convenience and perceived higher quality on both sides of the Atlantic, premium and single origin capsules could be a safe bet for Nespresso in wooing pod machine owners wishing to develop their coffee palate with more sophisticated products. In May 2019 the first ‘Starbucks by Nespresso’ capsules were launched as part of Nestlé and Starbucks’ $7.15bn ‘Global Coffee Alliance’, a move which further boosts Nespresso’s premium coffee brand narrative.

Nespresso’s initiative to safeguard high-quality coffee supplies comes amid growing industry concern that farmers enduring climate change and sustained low profitability will no longer be able to meet increased consumer demand for high-quality, single origin and specialty coffees.

In a 22 May interview with Bloomberg, Vice President of US specialty coffee chain, Klatch Coffee, and Board President of the Specialty Coffee Association, Heather Perry, echoed concern on the future viability of specialty-grade coffee in the wake of historically low prices for standard arabica and robusta beans.

“If these coffees cease to exist, how do we differentiate in the market where you are essentially left with two options? As we look two to five years out, what concerns me about coffee prices is: What does my business model look like?” She said.

Nespresso is not the only major coffee company to support struggling farmers at origin. In May 2019, Starbucks issued a $1bn sustainability bond that will, in part, be used to support coffee farming communities across Latin America, Africa and Asia. In late 2018 the world’s largest coffee chain announced a $20m fund to support its struggling smallholder suppliers in Central America. Around the same time, fellow US coffee chain, Dunkin’, announced a $2m financial contribution and five-year agreement with World Coffee Research (WCR) to boost coffee farm climate resilience and profitability.
 

 

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