Nespresso Marketing Analysis

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The Art of Coffee Marketing
Marketing Analysis of Nespresso

What I got myself into…

Coffee is one of the most widespread and popular drinks next to water and the second most used product right after oil. Being a truly global commodity, its consumption today reaches 2.25 billion cups per day. The biggest importers and thus coffee consuming nations are the US, Germany, Italy, Japan and France. It is everywhere and at any time. People drink coffee while working, relaxing, driving, meeting or communicating, rendering this beverage almost a necessity product with no time factor for consumption. Drinking coffee can be a ritual, a culture, a tradition, a socializing event, a break or a source of energy. Its effects on health are still a subject of debate but according to the Harvard Health Publication; “…in moderation – a few cups a day – coffee is a safe beverage that may even offer some health benefits.” The capsule coffee segment showed the most rapid growth in the coffee market. According to Euromonitor International, prepackaged coffee sales accounts to 20 to 40 % the value of ground coffee sold in Europe; a market worth USD 17 Billion.

The Chanel of Coffee…

Nespresso is a sub brand of the world’s leading nutrition, health and wellness company, Nestle. The brand Nespresso was born in 1986, in Lausanne with the aim to bring the best Italian bar, quality espresso into our homes and offices. The Group was not convinced about neither the product, nor the machine or the brand and it was in this negative, “close to the end” atmosphere that Jean- Paul Gaillard took over in 1988. “Nespresso is a rough diamond handled with the left hand by people with no vision” said Mr. Gaillard and asked for a marketing budget of 1.6 M€. He was granted the half of it and the other half he has borrowed from UBS. His vision: to enter the market through the high end by giving the brand a luxury glow. Today, the “Nespresso brand has become known for the highest quality coffee, sophisticated taste and continuous innovation. It is present in more than 50 countries and is supported by more than 190 boutiques, seven million Nespresso Club Members, and personalized customer service.”

Nespresso’s well protected playground…

Nespresso positions itself as the deliverer of the Ultimate Coffee Experience by combining pleasure, aesthetics, perfection and simplicity. Its customer driven marketing strategy is based on three main pillars: top quality Grand Cru coffees, innovative and stylish machines and an exclusive, personalized service to its clients. Its market leader position is based on 5 competitive advantages: service excellence, smart machines, optimum convenience, variety & choice and outstanding quality with innovation as a conductor line and philosophy on every level. Nespresso’s target market was an unexplored area. By applying the marketing concept, Nestle has come up with the right and missing product for the customers by delivering not only a greater satisfaction but creating the “wow” effect.

With two main target customer segments; In-home and Business, the company today enjoys a 25% market share of the world’s capsule coffee market and a 40% share of the French market. The business segment includes offices (UBS, Deutsche Bank, Publicis), hotels (Kempinski, Relais&Chateaux), airline companies (British Airways, Cathay Pacific), high end event caterers and luxury or designer stores (Mont Blanc, Prada). Note, that in all of the cases Nespresso targets client and service oriented businesses where a small cup of “Grand Cru” will be a value adding factor. Regarding the in-home segment, its criteria is mainly socio-economical. The company targets the 30 and above age range, quality and style conscious, upper middle and upper class epicureans. Their purchase of Nespresso exceeds the basic physiological need and by reaching almost the top of Maslow’s Hierarchy of Needs, it can be qualified as a satisfaction of...
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