On October 16, Nestlé Group released its financial report for the first nine months of 2025. The report showed that the company’s total sales reached 65.9 billion Swiss francs (approximately 565.277 billion RMB), with an organic growth rate of 3.3%. All regions and globally managed businesses achieved positive growth.
Nestlé CEO Mark Schneider emphasized in the report, “Driving business growth through real internal growth rates is our top priority. We have consistently increased investment to achieve this goal, and initial results are already visible.”
From a product category perspective, coffee and confectionery were the main drivers of organic growth. The coffee segment showed rare resilience, maintaining a positive real internal growth rate over the first nine months, contrasting with declines in some other categories.
Guanlan Business Review observed that Nestlé’s global coffee footprint continues to expand. Just this September, Nestlé Brazil announced plans to invest roughly 1 billion Brazilian reais (about 1.3 billion RMB) from 2025 to 2028 to modernize and expand its instant coffee factory in Araras, São Paulo.
On the surface, these figures and investment moves portray a global food giant on a steady growth path. Yet, behind this seemingly positive global performance, Nestlé is facing serious channel management and partnership crises in the Chinese market.
1. Distributor Crisis: Channel Conflicts Erupt
Nestlé Coffee is confronting a deep-seated trust crisis within its Chinese distribution network.
In April this year, several distributors from southern China brought detailed account records to Nestlé China’s headquarters to negotiate long-overdue market fees.
One distributor, Mr. Zhang, began representing Nestlé’s ready-to-drink coffee products in 2022. Initially confident in the international brand, he soon realized he was trapped in a “sell first, settle later” predicament.
Unlike typical FMCG companies that provide distributors with upfront promotional support before shipments, Nestlé requires distributors to push products without guaranteed profit, reimbursing promotional costs afterward based on circumstances.
This means distributors must front the marketing and promotion costs, then seek reimbursement from the company after the goods are sold.
For instance, with a major SKU like the Silk Latte, Zhang’s cost per case was 62 RMB. To achieve a basic profit, the retail price needed to be at least 64 RMB. However, to meet sales targets, he often had to sell at 56-58 RMB per case, losing several RMB per case. Over just three years, these losses accumulated significantly.
By the end of 2023, Zhang estimated he was owed roughly 500,000 to 600,000 RMB. In a private meeting, seven or eight southern China distributors tallied up their collective unpaid fees and found the total exceeded ten million RMB.
“And we’re not even the biggest clients,” Zhang added. In Guangdong, two larger distributors reportedly were owed several million RMB each.
When these distributors sought repayment, a senior executive at Nestlé China did not deny the overdue payments but stated the company was willing to pay only up to 50% of the accumulated debts.
This is not the first time Nestlé has faced such issues. As early as 2017, the company owed hundreds of distributors, ultimately settling at “half the amount.”
The recurrence of historical issues highlights a lack of fundamental reform in Nestlé’s channel management.
The crisis is triggering a chain reaction: some distributors are banding together to defend their rights, while others are switching to competitors. Nestlé’s corrective measures, such as restructuring the channel value chain and encouraging distributors to transition into “operators,” have yet to restore confidence fully. Pilot markets like Jiangsu have seen some success by giving distributors autonomy over product assortments, but overall, channel ecosystem recovery will take time.
Guanlan Business Review suggests that this crisis essentially questions the traditional FMCG distribution model. In China’s increasingly fragmented and digitalized market, Nestlé’s long-reliant “push-heavy” sales approach is no longer sustainable. Rebuilding trust with channel partners while balancing short-term performance with long-term growth will be a key challenge for Nestlé in China.
2. Price System Disorder: Channel Management Out of Control
Beyond overdue payments, Nestlé Coffee is facing a systemic crisis in China’s pricing structure, manifested across three interconnected dimensions: normalized price inversion, institutionalized channel conflict, and continual erosion of brand value.
Price inversion occurs when the cost price exceeds the selling price, leading to losses per shipment. Normally, this is irrational, yet over the past two years, Nestlé distributors have treated it as routine. From 2022 to 2025, Nestlé coffee’s ex-factory prices increased by over 15%, while retail prices dropped by more than 20%.
This anomaly stems from a distorted sales assessment system. Frontline sales teams, aiming to meet KPIs, often push distributors to sell 30%-50% below cost. Taking the Silk Latte as an example, distributors pay 62 RMB per case but are forced to sell at 56-58 RMB, losing 4-6 RMB per case. This desperate tactic directly collapses the market price system.
Distributors see the root cause in the company’s own channel management. Nestlé’s e-commerce platform frequently offers “half-price promotions,” undermining offline channels. Meanwhile, certain “special channel” distributors receive subsidies up to three times higher than regular distributors.
This imbalance triggers massive cross-regional stock flows—for instance, a special channel customer in Fujian, spurred by excessive subsidies, saw annual sales jump from 10,000 to 50,000 units. Surplus inventory was dumped at low prices into Guangdong and Guangxi. By 2025, “rogue shipments” in southern China accounted for over 30% of official channel sales, according to distributors.
At a deeper level, the traditional channel management model is failing in the digital age. Nestlé’s 22 sales branches and six professional sales teams in China were intended for precise channel management, but coordination is lacking. E-commerce, special channels, and traditional distributors operate like three separate kingdoms.
Though Nestlé has proposed transitioning from a push-based to a pull-based marketing model, in practice the company still relies on the old “heavy push, light activation” approach.
This mismanagement of channels and price disorder not only harms distributors’ interests but also erodes Nestlé Coffee’s brand value.
The impacts are clear: distributor profit margins have dropped from 8% in 2019 to below 2% in 2025; over 40% of core distributors are considering reducing business or switching to competitors. Frequent price wars have weakened brand premium: third-party surveys indicate Nestlé Coffee’s brand value index fell 12 points in 2025.
Clearly, channel mismanagement and pricing chaos are damaging both distributors and brand equity.
3. Self-Rescue and Reform: Challenges and Opportunities
Nestlé is not standing still in the face of Greater China’s market challenges.
In July 2025, Kais Marzouki, newly appointed Chairman and CEO of Greater China, launched the “4D Strategy”—decide in China, design for China, deliver at China speed, and embrace China’s digital trends. This strategy is reshaping Nestlé’s operations in the region.
On the product side, Nestlé implemented systematic upgrades to its coffee line in 2025: technologically, it introduced the Gold Cold Brew Black Coffee using micro-grind freeze-dry technology, solving the traditional instant coffee’s poor solubility in cold water; formula-wise, it upgraded the classic 1+2 instant coffee to a blend of Arabica and Robusta, enhancing flavor complexity.
In branding and marketing, Olympic champion Fan Zhendong was signed to convey the new brand message “More Flavor, More Daring” through his image of relentless effort. These initiatives show Nestlé’s effort to shed its “traditional instant coffee” stereotype and move toward a younger, premium positioning.
However, product innovations have yet to offset negative channel impacts. In the first three quarters of 2025, Greater China’s organic growth rate fell 6.1%, with pricing dragging 3.2 percentage points. The new management team is promoting “de-stocking” and reducing pressure on distributors, but the historical trust deficit still lingers.
Nestlé has also restructured, enhancing Greater China’s decision-making autonomy and localizing the successful “deep distribution” model from the Philippines. Yet this transformation faces challenges: maintaining channel stability while building digital channels creates resource conflicts.
Meanwhile, market shifts add pressure. Luckin Coffee’s 47% growth contrasts sharply with Starbucks’ 2% same-store growth, while Nestlé’s market share continues to shrink. Critically, coffee accounts for only 4% of Nestlé’s global revenue, far below China’s status as the world’s second-largest coffee market.
Clearly, Nestlé Coffee is at a crossroads, facing a path full of both challenges and opportunities. Deeper reforms are needed: addressing channel legacy issues and rebuilding distributor ecosystems, accelerating product innovation to capture consumption upgrades, and truly localizing decisions and organizational structures in China.
This transformation is crucial not only for Nestlé’s recovery in Greater China but also for achieving the global CEO’s vision of “making Nestlé a leaner, more efficient, and digital organization, ensuring its leadership in the industry for years to come.”