Company Insights – A cup of coffee with Nestlé
An interview with David Rennie, Deputy Executive Vice President, Head of the Nestlé Coffee Brands Group and Chairman of Nespresso, Nestlé. Interviewed by William Therlin, Investment Insights & Portfolio Adviser, and Willis Palermo, Equity Analyst, Rothschild & Co Wealth Management.
In delivering long-term wealth preservation, our investment strategy requires us to understand the individual pieces which make up your portfolio. This requires an understanding of the companies we invest in and how they change over time.
With this in mind, we conducted the following interview with David Rennie who is Deputy Executive Vice President at Nestlé, Head of the Nestlé Coffee Brands Group as well as Chairman of Nespresso. Our aim is to bring you insights into how Nestlé is addressing investors' growing calls for sustainability and how the company is positioned to benefit from the future of food.
Q1. Which are the most pressing issues in the context of ESG for Nestlé’s coffee business?
Without sustainability there will be no coffee, so it plays a key part in our coffee business. Through programs, such as the Nespresso AAA Sustainable Quality Program and Nescafé Plan, we have been working for more than 15 years with farmers, communities, and stakeholders. These programs strengthen engagement and collaboration across our value chain and enable us to identify sustainability challenges that require targeted interventions. The most pressing issues facing the coffee business are climate adaptation, biodiversity and improving farmer livelihoods. These issues are highly interconnected, as is our response.
Coffee farmers are among the first to feel the negative effects of climate change, through erratic rainfall, droughts, floods, disease outbreaks, and temperatures too high for sensitive coffee plants. Our goal is therefore to promote climate-smart farm management practices that regenerate the environment and energise rural communities while increasing farm productivity and farmer prosperity. Going forward, we will train farmers in regenerative practices, such as agroforestry that reduce land use and help absorb carbon from the atmosphere, driving down emissions.
Q2. On the topic of greenhouse gas emissions, what efforts is Nestlé undertaking?
In December 2020, we published our Net-Zero roadmap, which sets out how and where we expect to use our scale and reach to tackle climate change and lead our industry towards a sustainable future. The plan builds on a decade of action and sets clear milestones on how we will halve our greenhouse gas emission by 2030 and reach net zero emission by 2050 – even as our company grows. However, getting to net zero is a marathon, not a sprint. Some of the actions will include implementing regenerative agriculture practices, expanding reforestation programs, using 100% renewable electricity and switching our global fleet of vehicles to lower emission options where we operate within the next five years.
Q3. Where does the coffee business sit amongst these initiatives?
Our coffee business will play its part in getting Nestlé to its carbon-neutral goals. Nespresso is set to lead the way by becoming carbon neutral in 2022. Our efforts build on experience. For example, Nespresso’s existing reforestation program has planted over five million trees. In most of our coffee factories, we are already using spent (used) coffee as energy. Today 88% of our spent coffee is used to power our factories. The remaining 12% is used on agricultural land as a natural fertilizer.
Q4. Turning to the future, which is one of the next big food trends is relevant to Nestlé?
We see the plant-based trend (see Did you know box) as a generational shift that will transform the food business. We take a holistic view in looking to build growth across our portfolio, with innovative and sustainable products that are 'good for you' and 'good for the planet'.
Nestlé has been active in plant-based and vegetarian meal solutions for some time and has brought to market a range of plant-based meat alternatives. Consumer adoption is rising fast. Nestlé is also collaborating with researchers, suppliers, start-ups and various other innovation partners to develop new products in this field. Our expertise in this area means we can develop a variety of protein sources for different foods and beverages. We are working with soy, pea, oat, rice and coconut to name a few ingredients, as well as less conventional sources, such as microalgae.
In terms of our coffee business, we are already building plant-based options into our portfolio. We are also investing heavily in R&D in this area so that Nestlé can remain at the forefront of the plant-based food movement. For more on Nestlé’s coffee business, see What the future holds for Nestlé & Coffee box.
What the future holds for Nestlé & Coffee?
Coffee is a dynamic category that responds well to innovation. COVID-19 accelerated three of the most important category trends/growth drivers.
The coffee shop at home
Consumers have been re-creating coffee shop experiences by seeking out familiar tastes and textures and experimenting with different brewing techniques and recipes.
Authenticity
We see that consumers are looking for new coffee experiences with carefully and sustainably sourced beans, bold flavours, full traceability, and different roasting and brewing processes.
Prioritising healthier living
This is likely to accelerate the development of 'coffee plus' offerings, which bolster daily nutritional intakes, or target boosting immunity and energy levels.
Please note that the views expressed in this article are from Nestlé and not made on behalf of Rothschild & Co.
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