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By Marcelo Teixeira
NEW YORK (Reuters) - Food and beverage giant Nestle on Tuesday said it has started operations at its new coffee processing plant in Mexico, its largest instant coffee site in the world, where it invested $340 million to process 670,000 bags per year.
The Veracruz-based plant will make instant coffee for Nestle's Nescafe brand, with the United States as the potential destination of most of its production.
According to coffee traders, the investment in such a large instant coffee plant in a location that is far from Vietnam, the world's largest producer of robusta coffee - the type mostly used to make instant coffee - signals a sourcing diversification at Nestle, one of the world's largest coffee buyers.
"Nestle is basically sourcing all their robustas for the Mexico operations from Brazil. The price difference is too large (compared to Vietnam coffee)," said a director at a large commodities trader, adding that Brazilian beans are cheaper.
Nestle already had capacity to process around 1.15 million bags of green coffee at its other plants in Mexico before the investment in the new unit.
It said it plans to source most of the coffee from Mexican farmers, but the country only produces around 500,000 bags of robusta. The USDA projects Mexico's coffee crop at 3.84 million bags, most of it arabica. While Brazil is seen producing 64.3 million bags (22.8 million of robusta) and Vietnam, 30.8 million bags, almost all robustas.
The coffee executive said cheaper shipping to Mexico from Brazil, compared to Vietnam, is another reason for Nestle to turn to Brazilian robustas.
In fact, Mexico has sharply increased Brazilian coffee imports in recent years, from only 62,000 bags in 2017 to a record 920,000 bags in 2021, of which 85% were robusta beans, according to data from exporters group Cecafe.
(Reporting by Marcelo Teixeira; Editing by David Gregorio)