Unpacking the Nescafé Hot Knot – Seven Key Takeaways from Nestlé's Stance

The recent legal wrangling between global food giant Nestlé and the Thai Mahagitsiri family over the production and distribution of the iconic Nescafé brand has raised eyebrows in the business world.

In a Q&A released on Wednesday, Nestlé tackled key questions surrounding the dispute, which included a disruptive court injunction and a subsequent ruling in its favour.

This special report distils the seven crucial points raised by the company:

The Genesis of the Conflict: Nestlé clarified that the dispute arose from the non-renewal of a joint venture agreement with Quality Coffee Products Co., Ltd. (QCP), a company co-owned with the Mahagitsiri family.

While the family held a 50% stake in QCP, Nestlé managed all aspects of Nescafé production, distribution, sales, and marketing, with the core recipes and technology belonging solely to Nestlé.

An international arbitration court validated Nestlé's decision not to renew the contract, yet the Mahagitsiri family sought a local court injunction.

Legal Strategy Moving Forward: Nestlé firmly stated its commitment to protecting business operators, consumers, and the coffee farmers it works with from any adverse effects stemming from the actions of the QCP shareholder.

This suggests a robust legal strategy aimed at ensuring minimal disruption and safeguarding its stakeholders.
 

Distinguishing the Case: Nestlé emphasised the crucial difference between this situation and past contract terminations in Thailand.

The key distinction lies in Nestlé's outright ownership of the Nescafé brand itself, unlike scenarios where brand ownership might be shared or reside with the local manufacturer.

The company underscored its control over the intellectual property, production processes, and management teams.

Future Manufacturing in Thailand: While not divulging specific locations, Nestlé affirmed its commitment to continuing the manufacture of Nescafé products within Thailand, signalling a long-term strategy for local production despite the recent legal challenges.

Dismissing Price Hike Conspiracy: Nestlé vehemently denied any suggestion that the court injunction was a marketing tactic to inflate product prices.

The company stressed the genuine disruption caused by the temporary ban on distribution and its concern for the entire value chain, from small businesses to Thai farmers.

The Status of the Injunction: Nestlé confirmed adherence to the latest Central Intellectual Property and International Trade Court ruling, which affirms Nestlé (Thai) Ltd.'s exclusive right to the "Nescafé" trademark. This allows them to resume full operation of Nescafé products for the Thailand market, effective April 11, 2025.
 

Why QCP is No Longer Producing Nescafé: Nestlé reiterated that QCP’s right to produce Nescafé ended with the expiry of the contracts, a point upheld by international arbitration.

To maintain supply for Thai consumers, Nestlé has temporarily outsourced production to other local companies and is importing some products while it works to fully restore its own production capabilities in Thailand.

Looking ahead, Nestlé has pledged to "continue to do everything we can to ensure that business operators, consumers and the farmers we work with will not be affected by the actions of the QCP shareholder."

While committing to future Nescafé production in Thailand, the company declined to provide specific details about a potential new factory location at this time.