Coffee is the second-most traded commodity in the world after crude oil. The ubiquitous drink commands a sizable US$100 billion market globally, with exports accounting for US$20 billion.
But as traditional coffee drinking markets in the West exhibit signs of stagnation, Asia is stepping up to fill the void. Indonesia, India, and Vietnam are ranked within the top five fastest-growing markets in the world.
Part of the reason behind this spurt is product innovation in the value chain. The number of new coffee products in Asia rose by 95% between 2011 and 2016, offering consumers tantalizing choices and catering to local palettes.
Specifically, it was the growing role of coffee pods that spurred and accounted for 26% of global coffee retail innovation in 2016.
“As emerging market consumers develop their taste for coffee, innovation is stepping up a notch as drinkers trade up from instant to fresher-tasting coffee […] pod and capsule sales will [continue to] increase,” says Johnny Forsyth, global drinks analyst at Mintel.
This presents a rare opportunity for FMCG brands to cash in. Tea has generally been the caffeinated drink of choice across most of Asia but a combination of glitzy marketing, an increased footprint of global coffee brands like Starbucks, and “cafe socialization” is changing habits.
Nescafe Dolce Gusto doubles down on Asia
The Dolce Gusto machine was first introduced by Nescafe in 2006 as a cheaper alternative to its premium Nespresso offering. The mechanics are similar; consumers insert ‘pods’ of coffee to make instant drinks like cappuccinos, latte macchiato, espresso, and hot chocolate.
Sales of the machines have been rising steadily in Asia due to Nescafe’s social media campaigns to engender brand loyalty.
The company launched its first Southeast Asian customer relationship management program in Singapore. The email marketing campaign segmented users based on their individual profiles and alerted them about offers, new flavors, and seasonal products.
“From the highly-engaged Facebook following, we know that consumers enjoy that the brand is sophisticated but not too serious […] It has allowed us to develop a new, innovative programme which really engages members,” said Will Adeney, VP of marketing analytics for Ogilvy One.
More recently, in Malaysia, Nescafe deployed social listening strategies to further entrench Dolce Gusto as a fan-centric brand. The company learnt coffee drinking wasn’t an activity done in isolation; connoisseurs loved to document it on social media with a prodigious amount of hashtags. Engagement from followers was robust.
This helped Nescafe develop marketing campaigns around user-generated content. Its fans were already posting brand images on social – why not give them an enhanced platform?
Why does this matter? Because according to Nielsen, the most credible advertising comes from people we know and trust.
83% of people have faith in the recommendations of friends and family.
Another interesting caveat: 53% of millennials indicated that user-generated content has influenced their purchasing decisions.
To tackle developing markets like Thailand, Nescafe launched a subscription commerce campaign powered by ecommerce enabler aCommerce. The offer, first introduced in August 2016, enticed consumers to sign up for a yearly subscription of coffee pods with the perk of a free Dolce Gusto machine.
Consumers only needed to pay via credit card, which would be billed automatically every month for a total of 12 recurring payments. It was a novel concept in Thailand, which still mainly relies on cash-on-delivery as its primary payment mechanism.
But the success of the campaign prompted the global coffee behemoth to launch another similar subscription campaign, this time revolving around Nescafe Gold & CoffeeMate.
Blending online & offline
Coffee drinking in Asia may be accompanied by a blitz of social media activity, but there’s a large offline component, too. It’s a way for friends and family to bond, building meaningful experiences and connections along the way.
It’s because of this factor Nestle has relied on pop-up campaigns inside shops and department stores. Visitors to a Tokyo mall last month were greeted by Pepper, the famous humanoid robot, who proceeded to ask them if they wanted a coffee.
An embedded tablet helped determine the size, type, and strength of the beverage and payments were facilitated via Alipay.
The timing of the campaign deliberately coincided with Chinese New Year celebrations and was designed to grow the brand in mainland China, where Starbucks is aggressively promoting its stores.
Another campaign in Australia placed expertly-trained staff across large department stores in the country to educate potential customers about the benefits of Dolce Gusto machines.
This particular promotion targeted Mother’s Day, typically one of the busiest retail days in Australia.
In 2013, Credit Suisse analysts estimated that about 55 % of Nestle’s coffee sales came from developing markets.
Such continued product innovation and catchy campaigns probably mean the figure is much higher now.
To tackle new and competitive markets like Southeast Asia, the best retail strategy is a blend of online strategies like subscription commerce to capture Internet-savvy consumers and traditional offline customer touchpoints to win over the world’s next population of coffee drinkers.