A coffee war is brewing in the Philippines and local farmers and producers might be caught in the crosshairs. Indonesia’s PT Mayora Indah has announced plans to produce instant coffee locally, providing a new hurdle for Swiss giant Nestle and local food and beverage juggernaut Universal Robina.
PT Mayora said it would invest US$80 million in the Philippines over the next five years and build a plant to produce its popular Kopiko instant coffee mixes. While the factory’s capacity was not disclosed, the company stated that it will help meet the growing demand for coffee mixes both domestically and overseas.
PT Mayora’s entrance into the Philippines provides a fresh challenge for Nestle and Universal Robina. Both companies have been making moves to defend their market shares in the Philippines’ US$1.1 billion instant coffee market. Their efforts are predicted to escalate, as according to Euromonitor International, the market is forecast to grow to nearly US$1.5 billion by 2023.
Instant coffee mixes are incredibly popular in the Philippines. According to the Department of Trade and Industry, such mixes account for 90% of coffee consumption in 2017. They also predict that the country will become one of the world’s top-five consumers of instant coffee by 2021.
With the rising cost of raw materials becoming a significant factor, local farmers and suppliers have become a valuable commodity for the big coffee players. PT Mayora has announced that it will source some raw materials locally, but this may prove to be a challenge. Nestle and Universal Robina have stepped up their own procurement of raw materials such as sugar fluctuate.
Nestle is strengthening ties with local coffee farmers by giving them financial assistance. Meanwhile, Universal Robina has purchased local sugar millers to ensure stable supplies. These assets give the companies an advantage over PT Mayora. Nevertheless, the company has remained steadfast in its plans to expand.