I disagree with one point that the ratios are getting better. The standalone ratios are showing J curve and return ratios have decreased on standalone basis. Regarding ratios, two things to consider are increased leverage due to capex and also advertising/marketing expenses. Marketing expenses will be higher for an incumbent that is targeting premium categories like arabica and Nestle will always enjoy premium pricing like it does in other value added fmcg products. This is why size of pie is as important as is to draw customers away from Bru, Nescafé to CCL which should incur higher than normal marketing expenses. Capturing 50% market share is too ambitious a target.
They currently pass on spot price risk to buyers but if they own the instant coffee they sell, they may no longer be protect themselves 100% from fluctuations in raw material and currency prices. Going forward you may not see steadiness in return ratios as in the past.