Nespresso Case Study

Nespresso: The Perfect Cup of Coffee and the Changing of a Market

Introduction:

Nespresso is a subsidiary brand of Nestle, based in Switzerland. Nestle was started in 1905 when two companies Anglo-Swiss Milk and Farine Lactee Henri Nestle merged to form the Nestle corporation. The company had great success and grew considerably during both world wars; it has expanded its product line beyond its original products of condensed milk and infant formula products. The company is still mainly involved in the development and production of food and beverages. Nestle is a worldwide business, its main products are Nestle Waters, Nestle Nutrition, and other food and beverage products. Nestle has its primary listing on the SIX Swiss Exchange but also a secondary listing on Euronext. Nestle is too large and complex to analyze in such a short and focused paper. I am interested in the growth of the home and business capsule coffee and coffee systems, specifically Nespresso brand and how it is dealing with new entries into its market.

Nespresso is a system that allows the consumer to make a fresh cup of espresso quickly and easily at home. The system is based on two parts: a coffee capsule, (a premeasured freshly ground coffee in an aluminum pod,) and a machine. The use of a Nespresso system is quick and simple: fill water container with water, turn machine on, drop in the coffee capsule, close handle (which pierces the coffee capsule), press button. This results in a high-quality cup of espresso, which rivals those of most coffee shops. Nespresso offers a number of different machines with varying functions and coffee cup capacities. They start out with a machine with only a two cup size option and no extra features and can go as far a...

... middle of paper ...

...ll help the market expand and increase revenues throughout the supply chain.

Nespresso sells very well in Europe and is experiencing continued growth in the U.S. As we as a country and a world slowly come out of the recession, there will be increased sales in the luxury products and people will be more willing to spend money on luxury products to indulge and pamper themselves. Nespresso has found their place in the coffee market between high-end premium coffee makers and the less expenses lower quality systems. As the New York Times said in 1949, “over second and third cups flow matters of high finance, high state, common gossip and low comedy. [Coffee] is a social binder, a warmer of tongues, a soberer of minds, a stimulant of wit, a foiler of sleep if you want it so. From roadside mugs to the classic demi-tasse, it is the perfect democrat.” (New York Times)