Mondelez Enters New Coffee Markets

John Revill

  ZURICH - Food company Mondelez International Inc. (MDLZ) said it would enter

two new coffee markets and expand its offerings in another, perking up the

battle with world's biggest coffee seller Nestle SA (NESN.VX) and a crowded

field of rivals.

  The Deerfield, Ill.-based food company, which owns the Carte Noire and Jacobs

coffee brands, said it was entering Australia and the Netherlands. The company

is also introducing new java products in Spain, where it already sells some

coffee items.

  Mondelez's expansion in those countries marks the latest battle lines in the

increasingly competitive market. The coffee market has drawn food companies

because it is relatively recession-resistant and offers high profit margins..

The $75.7 billion-a-year coffee market will grow by as much as 22% by 2017,

according to Euromonitor International, and carries margins of at least 25% on

most products, according to analysts.

  But it is a crowded field. Nestle, Mondelez and privately held DE Master

Blenders 1753 NV together control almost 40% of the market. And competitors,

including Luigi Lavazza SpA, Green Mountain Coffee Roasters Inc. (GMCR) and

Starbucks Corp. (SBUX), are expanding their presence around the world.

  "It's a very competitive market," said Jonny Forsyth, who covers the beverage

industry for Mintel, a market research company. "The only way to grow is by

taking sales off your competitors."

  Mondelez, which was spun off from Kraft Inc. (KRFT) last year, has identified

coffee--in particular the high end of the market--as a key part of its growth

strategy and pits it against Nestle, which has increasingly moved toward

upmarket brands as the popularity of instant coffee declines in developed

markets.

  The two companies will likely clash in France and Germany, two of the world's

biggest coffee markets. Last week, Mondelez launched capsules designed to fit

Nestle's Nespresso system in the two countries.

  Nestle declined to comment on Mondelez's product launches.

  Australia, the Netherlands and Spain are also among the most promising

markets for coffee, with combined sales expected to reach $2.9 billion this

year, according to Mintel. Mondelez says launching in these countries will help

it increase sales, take more market share and build Carte Noire, its premium

coffee product, into one of its most important brands.

  Mondelez will launch a full range of coffee products, including ground and

whole beans, pods for use in its Tassimo machines and capsules that fit rival

Nestle's Nespresso system in the Netherlands. It will also introduce its

Millicano line of instant coffees in Australia.

  Nestle is the market leader in coffee in Australia and Spain, although it is

in third position in the Netherlands, according to figures from Mintel.

  The products will be available in the three countries by the end of the

month.