How luxury is NESPRESSO ?


Invented by Eric Favre in 1976 while he was working at Swiss consumer goods giant NESTLE, Nespresso is known worlwide as the capsule coffee leader. For a long time, the company has maintained very strict distribution of its machines as well as coffee capsules mostly in its own retail chain as well as major luxury hotels. The company has expanded tremendously since, and today, Nespress is everywhere, from offices to four star hotels, homewear shops, airports and more recently department stores.

The inventor, 63, stopped working at Nestle in 1990 and later founded Monodor, which developed a capsule that’s not compatible with Nespresso. Monodor’s system is produced by Italian coffee company Luigi Lavazza SpA outside Switzerland. As many as 20 rivals may eventually offer coffee that can be made with Nespresso machines, Favre said.

Sara Lee Corp. and Ethical Coffee Co. became the first Nestle competitors last year to make pre-filled capsules that are compatible with Nespresso coffee-making machines. Vevey, Switzerland-based Nestle has challenged the rival products through courts and intellectual-property regulators.

The question remains whether NESPRESSO will maintain its leadership as patents on the product expire in 2012. Nestle has more than 1,700 patents on the Nespresso capsule and machinery. A company spokesperson insist “There are no patent expiries in the foreseeable future that would lessen the current protection of the intellectual property of our current capsules or product range”

I believe it is not only a question of patents but also of brand identity and positioning and whether Nespresso will be continue to be perceived as luxury. The wide availability and the increased visibility of the product may have a negative long term impact on the perception of the Nespresso brand. For instance, luxury hotels would consider a Nespresso machine a highlight and a value added service in their superior category rooms, while nowadays, Nespresso machines are available not only in standard category rooms but in hotels ”more premium than luxury”

ILLY, one of the leading international luxury coffee brands has been making important moves from HORECA distribution to its own coffee shops. Unlike most other luxury sectors which have a clear lining and ranking of brands, coffee and tea represent a sector with great potential for growth, especially considering the opportunity that the brand can rely on both its product as well as its retail, there being few truly luxury coffee shop chains.

(from CPP and Bloomberg)