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Lotte eyes overseas coffee mix market with Nestle tie-up
Publication Date : 05-02-2014
Lotte joined hands with Nestle, the world’s largest food maker, to target the overseas market where a growing number of people are starting to appreciate the taste of Korean-style instant coffee mix.
On January 27, Lotte Food, the food manufacturing division of the country’s fifth-largest business conglomerate, established LOTTE-Nestle (Korea) Co. with Nestle Korea after investing 50 billion won (US$46 million) in a 50 per cent stake.
The new firm will produce an instant coffee mix consisting of powdered coffee and cream, along with powdered chocolate, fruit beverages, coffee creamer, pet foods and Nestle Professional brand items.
As the country’s largest retailer with department stores, discount stores and supermarkets, Lotte will have no problem getting the products on store shelves, the company said.
In return, Lotte expects to take full advantage of Nestle’s production line and technology to venture overseas.
“Nestle’s coffee mix produced at the Cheongju plant is already sold in about 30 countries around the world including the US, Japan and China. The joint firm will enable Lotte Food to become a global foodmaker,” said Lotte Food CEO Lee Young-ho.
His words indicated Lotte’s hopes for the domestic coffee mix market, which has lately been overshadowed by roasted coffee or “takeout coffee” as it’s most consumed as takeout from coffee shops.
According to market insiders, the Korean coffee mix market was worth 1.3 trillion won last year after seeing 0.11 per cent growth from 2012. In contrast, the roasted coffee market was worth 1.7 trillion won.
Domestic market leader Dongsuh, which partnered with U.S. foodmaker Kraft to create the “Maxim” coffee brand, holds an 81.2 per cent share of the coffee mix market, followed by Namyang’s “French Cafe” with 13.4 per cent and Nestle with 3.9 per cent. Market insiders say the Lotte-Nestle alliance is unlikely to shake up Dongsuh’s status.
Dongsuh, however, cannot go abroad because it is not authorised to use the Maxim brand outside of Korea. The foodmaker only sells coffee creams overseas.
On the other hand, Namyang has been playing in the growing coffee mix market in the US, China, Japan, Australia and Central Asia with its French Cafe mixes. By 2016, Namyang aims to sell 100 billion won worth.
“China is seeing a rise in instant coffee mixes, but it hasn’t caught on in Japan yet. These two countries are thus the market target for coffee mix makers, including Lotte and Nestle,” said one market watcher.
US$1 = 1,100 won