Nespresso ain’t espresso

Oct 17, 2011


In:coffee pods, Uncategorized

The single service espresso market is growing rapidly

Coffee capsules represent only 8% of the global coffee market by volume, but an amazing 25% by value

And are forecast to grow at a CAGR to 2015 of c 25% – making the total portioned market worth some 9 B €

Nespresso- the Usain Bolt of the single serve sector was invented in 1976 and first effectively launched by Nestle in 1989

The explosion of cafe culture, combined with a fantastically slick marketing campaign and an iron fist on the supply chain, has turbo charged the recent
global domination mission

Nespresso is the fastest growing of Nestle’s so called ‘Billionaire brands’ and grew last year by +23% to a total value of 3.5 Billion USD

The coffee trade know it is hugely profitable… and margin estimates vary from between 30 > 60%

Let’s be honest Nespresso isn’t about selling coffee

A coffee connoisseur isn’t going to buy the concept, the lifestyle statement, and pay for the privilege

On average each capsule contains c. 5 g of the stuff you want… IE – COFFEE

A traditional espresso shot is 7 g

An ESE pod is 7 > 14 g

And in most high street chains today the typical 16 and 24 oz buckets are double or sometimes triple shot laden

To protect its concept and IP Nestle has resorted to legal activity on two fronts. Protecting its patents and the capsule shape

The recent Zürich case refers to the supposed patent infringement and the St Gallen case to the capsule shape

In both instances it was the Swiss co-operative giant Migros and its manufacturing partner Alice Allison,  which felt the weight of the Nestle legal eagles who in January of this year successfully halted the 15 December 2010 launch of x 4 capsule variants under the brand name NexPod in Migros stores

The follow-up St Gallen action in March 2011 Swiss courts reverse this ruling, with the injunction against Migros lifted enabling them to recommence
production and sale of the capsules

Similar action has taken place against Sara Lee/ Dowue Egbert (who claim to have sold 30m + copy capsules under the L’or Espresso brand) and the Ethical Coffee Company . Interestingly, Ethical Coffee Co is led by the former Nestle man and CEO from 1989 – 1997 Jean Paul Gaillard –and their ‘legally’ compatible capsules are selling via Casino stores in France

From my perspective one of the biggest down sides to capsules is simply their environmental impact

Over 1 g of aluminum in each Nespresso capsule…the carbon foot print of the Nespresso beast must be huge – even the WWF states standard bulk coffee is to be preferred over such costly consumerist service solutions

Compare that to the humble , yet perfectly formed ESE espresso pod…Which is:

Completely bio degradable and compostable

Costs about half that of a Nespresso capsule

Is simple and easy to use

Gives you espresso of excellent quality, flavour and performance

Is quick and easy to use

And delivers portion controlled freshness each and every time..

It really does seem a no brainer to me…..

I am no bearded tree hugger…don’t get me wrong…and I love coffee and want farmers to be fairly rewarded (which incidentally they are at the moment
judging by a market at c 250 c / Lb and very firm differentials!) But let’s not feed the corporate machine whilst we savor great authentic espresso ….

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