Photo by Cliff Venzon
By Cliff Venzon/asia.nikkei.com – A coffee war is brewing in the Philippines after Indonesia’s PT Mayora Indah announced plans to produce instant coffee locally to take on Swiss giant Nestle and local food and beverage juggernaut Universal Robina.
PT Mayora early this week said it would invest $80 million in the Philippines over the next five years and build a plant to produce its popular Kopiko instant coffee mixes. The company said the factory will help meet growing domestic and overseas demand, but it did not disclose the plant’s capacity.
The move is a fresh challenge for Nestle and Universal Robina, which are trying to defend their shrinking market shares in the Philippines’ $1.1 billion instant coffee market, which, according to Euromonitor International, is forecast to grow to nearly $1.5 billion by 2023. Snack and beverage tycoon Carlos Chan also ventured into instant coffee recently.
“Competition is always welcome,” said Nestle Philippines Chairman and CEO Kais Marzouki, adding that his company will respond by increasing investment. “We continuously expand our capacity. Investing is a continuous process,” Marzouki told reporters Thursday at the opening of a new 2.8 billion peso ($54 million) plant that will make chocolate drinks and all-purpose cream.
Andy Dela Cruz, a consumer analyst at brokerage COL Financial, said he expects that “competition will become stiffer.”
“This brings down the cost for Kopiko and will allow the company to go full force on its marketing,” he said.
At present, Kopiko coffee mixes are imported from Indonesia. PT Mayora in recent years expanded its product line and employed top Filipino celebrities to raise its profile in the Philippines. The marketing push has been a roaring success, helping the company nearly double its market share over the last five years.
“In recognition of Kopiko’s strong Philippine base, along with our growing business in the region, we are expanding our manufacturing and processing operations beyond Indonesia,” said PT Mayora President Andre Atmadja.
Nestle and Universal Robina are feeling the heat.Grappling with rising raw material costs, a Nestle official last year said the company might move its instant coffee production to Indonesia or Vietnam if the government did not offer incentives for companies that buy and produce locally. After a public outcry, Nestle backtracked and promised to maintain local production.
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