More than 30 years ago, Nespresso invented the capsule system that we know nowadays for coffee extraction. Being the pioneers of the capsule industry, Nespresso had a long-standing monopoly on the market, which allowed them to put a significant margin on their products. However, as soon as their patent has expired, many brands have tried to conquer the market with similar products or even capsules compatible with Nespresso machines.
Over the years, Nespresso has adopted several strategies to combat competition:
1- Innovation: by continuously innovating, Nespresso tries to beat its competitors. Over the years, the company will have released more than 1 600 patents worldwide.
2- The attack of the competitors: By developing its machines with minimal changes, Nespresso tries to «trap» the other capsules producers when inserting these capsules into a Nespresso machine. In addition, the company continues to sue the manufacturers for “intellectual property” pods despite the fact that they end up losing their case after a few years.
3- Their image: The brand tries to prove that it remains the top-of-the-line in coffee, by highlighting «George Clooney» or «Anton, Alexis and Angélique» (3 coffee experts) in their marketing. They are associated with luxurious environments such as star restaurants (in 2013, they occupied 25% of French gourmet restaurants).
Following qualitative secondary researches, we were able to create this table, highlighting several important competitors of Nespresso and therefore of their boutique in Flon.
If the table concentrates more on brands selling coffee capsules (or pods), it is because the sale of capsules represents 90% of Nespresso’s total sales.
However we also included Starbucks as an important competitor of Nespresso because in the United States, Nespresso is far from having the same fame as in Europe. It is no coincidence that Nespresso’s first “elaborate recipes” were the “latte macchiato” and “cappuccino” that are Starbucks’ best sellers. It was also to conquer the American market that we saw the arrival of their «Vertuo» capsules, designed to create «longer» coffees.
Since 2012, Nespresso started to lose its patents and in consequence a part of its global share on the capsule and pads share due to less protection. Here are the data of the “Wall Street Journal” from 2015:
In conclusion, we note that many brands have managed to sell capsules compatible with the Nespresso system and that Nespresso no longer holds the monopoly. However, while many sell similar products, there are still important differences. Nespresso remains the most luxurious coffee brand on the market.
It remains the only one to offer:
– Extremely personalized sales service to their customers;
– Stores mixing the “store”, “restaurant” and even “event” aspect;
– And in addition to those, a wide variety of capsules and machines for sale only on their platform or in their shops to guarantee direct contact with their customers and to meet their high-end image. We may wonder how long Nespresso will still be able to keep a large market share? How will they continue to innovate? And finally, will they manage to penetrate the American market?
Sources
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Nespresso Boutique Flon 