Nestle (NESN.S) announced on Tuesday that its new coffee processing plant in Mexico, where it invested $340 million to process 670,000 bags of instant coffee annually, has begun operations.
The plant in Veracruz will produce instant coffee for Nestle’s Nescafe brand, with the United States as a potential market for the majority of its output.
The investment in such a large instant coffee plant in a location far from Vietnam, the world’s largest producer of robusta coffee – the type most commonly used to make instant coffee – signals a diversification of Nestle’s sourcing, say coffee traders. Nestle is one of the world’s largest coffee buyers.
“Nestle obtains virtually all of its robustas for its operations in Mexico from Brazil. The price disparity is too great (relative to Vietnam coffee) “A director of a large commodities trading company stated that Brazilian beans are less expensive, adding that they are also of higher quality.
Prior to the investment in the new unit, Nestle already had the capacity to process approximately 1.15 million bags of green coffee at its other plants in Mexico.