How Are The Coffee Giants Dealing With Historic Price Hikes? – CoffeeTalk

Coffee is a rapidly evolving category, with 67% of American adults drinking coffee daily. The next generation is driving increased interest in RTDs and new formats, creating a challenge for brands to create and produce brands that resonate with consumers despite an uncertain background when it comes to raw material pricing. Keurig Dr Pepper, a coffee giant, has been shoring up its coffee business in the US by addressing pricing and expanding its presence in formats and channels where it’s historically been underrepresented. This includes an RTD coffee partnership with La Colombe, which saw retail sales growth accelerate over the last quarter.

KDP’s CEO, Tim Cofer, stated that the company is managing the coffee business with two primary objectives: preserving profit dollars and its ability to reinvest despite escalating green coffee costs. In response to this inflation, the company announced pricing in Q4 that began taking effect in January and saw many competitors take similar steps. However, commodity prices have continued to move even higher since then, and the company is evaluating all available options to offset the incremental pressure.

The second objective is around innovation. KDP will continue to steward the single-served category through marketing, innovation, and activation in brewers and pods, while expanding its presence across total coffee occasions and solutions. They are planning to introduce compelling new products in various formats this year and advancing work on more disruptive launches like Keurig Alta and K-Rounds plastic and aluminum free pods for the years to come.

Nestle, another coffee giant, faces challenges in dealing with a high inflationary environment on two fronts: firstly for coffee and also for cocoa. In FY2024, the company saw gross profit margin decline sequentially in the second half as it saw higher commodity costs across the two categories. Anna Manz, chief financial officer, noted that the environment is not expected to improve dramatically.

Like KDP, the company sees innovation as key to keeping coffee thriving with innovations such as cold coffee (Nescafé Ice Roast Coffee, Nescafé cold-concentrate) and the popular North American Vertuo coffee system.

Despite the challenges, it is important to remain focused on the long-term potential of the coffee category and the positive consumer dynamics. KDP remains committed and bullish on long-term coffee prospects, believing that there is ongoing opportunity for premiumization and an even wider diversity of formats and channel penetration to attract and capitalize on different needs states.

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