Nestlé, currently the largest food company in the world, is located in Vevey, Switzerland. Nestlé produces baby food, bottled water, breakfast cereal,
ice-cream, dairy products and of course – coffee.
In order to understand how to make money from selling coffee, a wise way to start would be by taking a quick view into the daughter company of Nestlé, a $3 billion revenue creator per year, with a current record of 10 million customers – Nespresso.
Nespresso offers the consumer the experience of making fresh home-made espresso without the need to leave for Café. Perfect for any sort of house gathering or just to satisfy the desire for an immediate high quality cup of coffee. The secret of Nespresso is the machine as well as its special capsules, which are both officially patented, causing limited competition so far.
Marketing, Marketing, Marketing
Is a high quality machine and special patented capsules enough to be a money making success? FastCompany reports that Nespresso started creating additional value to their brand name, increasing their prestige and reputation by serving their coffee to first-class airline passengers only.
Already by 2000 Nespresso coffee was served in 1100 planes, in 20 different airline companies, exposing 3.5 million travelers a year to the brand.
More than that, celebrities George Cloony and Penelope Cruz were selected specifically to represent Nespresso in prime-time TV commercials. Franz Niedermair, VP-Marketing at Nespresso USA, claims that Cloony and Cruz give the viewers a feeling of European heritage, elegancy and sophistication, all which the American consumer is craving for when drinking his cup of coffee.
Coffee marketing blog the5marketeers, reports Nespresso’s business strategy is to represent life style – a quality product costumers will pay more for. Nespresso uses a unique targeted marketing which allows gathering specific information about the consumer – his age, frequency of his purchases, habits – all which is recorded for future projects. Moreover, One to One marketing strategy is used in the Nespresso stores – individual care for each and every client: referring to the costumer by his family name and not as part of the mass market; the customer is part of the “Nespresso Club” – giving the card owner a dedicated lounge space in the Nespresso stores. There he has the possibilities to try out new tastes, new smartphone applications, access to a quality hotline and much more.
Should We Invest?
Perhaps the most important question of them all. With a growth percentage of 20% a year and billions of dollars of revenues, the answer seems to be a definite yes. However, BuildingStrongBrands reports Starbucks, a stronger brand name than Nespresso in today’s market, is about to launch in the next couple of months its own home-used coffee machine which will most likely decrease Nespresso’s revenues. Another thing to keep in mind is, that at the end of 2012 the capsule patent of Nespresso will expire, opening
competition between new and already existing companies to duplicate
the success of Nespresso.