Nescafe’s Malaysian dominance, will it wane?

We are in the midst of a veritable cannonade of coffee. But that phenomena is not just occurring on our shores, many countries the world over are enjoying all the merits that coffee, and the culture associated with it, has to offer.

It might seem strange on reflection that many nations have their roots in the tea industry and have been turned. One such example is Britain, but another one is Malaysia.

Malaysia has been a traditional tea-drinking nation but the coffee culture over in south-east Asia is currently booming as the beverage is gaining traction amongst professionals and the younger sections of society.

One company who is reaping the rewards is Nescafe, and they remain bullish as more names are beginning to enter the relatively unsaturated market. “In comparison, beverages like carbonated soft drinks…have a much higher penetration than coffee,” Sherif Hani, an executive manager with the firm, said.

Even with that, it is reported that Malaysians drunk around six million cups of Nescafe a day last year.

A longstanding presence and large portfolio is key; Nescafe has been in Malaysia since 1948 and the company’s large portfolio has seen them take a large chunk of the domestic market.

But as the coffee culture continues to expand, Nescafe will be facing competition from coffee shops as big name brands and independent houses pop up driving up the consumption of the drink away from the home and into the open.

The potential for growth, and income, is obvious and chains such as Starbucks and Coffee Bean and Teal Leaf are hoping to take advantage. Consequently, Nescafe now has to face challenges that until now simply had not been there, and statistics from Europe and the US – traditional coffee strongholds – suggest that the company will slide in this ‘new world’ as they don’t have a coffee shop, unlike in other markets.

Instant coffee accounts for just 7% of all coffee drunk at home according to some market research and that figure is even less in Italy and France, though strangely Britain monumentally buck that trend.

Though, Nescafe remain confident with Sherif stating that “the out-of-home and household markets are not competing segments because of the nature of the moment and place it is served.”

However Nescafe might find that their ability to offer simple solutions such as coffee vending machines and other such items could well see them maintain some foothold in the coffee shop sector as people stay loyal to a trusted brand. They are also working on their own pop-up kiosks, which will further extend their own venture out of the home. A smart move to keep themselves slightly ahead of the curve.

Time will certainly unfurl the full story and like many other Asian nations, Malaysia is a market to keep an eye upon.

photo: icoro (flickr)