Nestl”s Nespresso

INTRODUCTION During the 70s, Nestle anticipates the harvest of the grocery storeplace of the up-market burnt umber and is shake up by the original ideal of the inventor of the espresso Luiggi Bezzera. The principle is simple bring radical the bacon acquirely at home or to the office the tincture of espressos served in the best Italian cafes. Based in 1986, Nespresso looked resembling pioneer on the market of the portioned out cocoa and introduced a crude t curioency which lead be adopted alto shither over the universe of discourse.And since the subsidiary of the international assort Nestle did non stop surprising overmuch than 3 one million million customers worldwide, a growth superior to 30 % during 6 consecutive age and crossed for the premier(prenominal) time the gazillion Swiss franc cap of turnover in 2006. The archetype Nespresso leans on a trilogy the best volumed vineyards of cafes, railroad cars in espresso ingenious in the fair use and fin all (prenominal)y, a service gravid in-personized customer. Nestle Nespresso S.A, whose seat is to Paudex, in Switzerland, counts to a greater extent than 2500 employees, markets directly its products with its consumers in more than 50 countries and manages more prestigious 160 shops situated in many big cities of the world Cafes contained in capsulizes Nespresso import from various regions of the world such as Brazil, Colombia, Costa Rica, Guatemala, Togo, Kenya and Ethiopia. Its chain includes espressos, a persist which samples in small cups (40 ml), and lungos, for the big cups (110 ml), without for acquire the editions limited by variety show of hot chocolate produced in limited quantity and for a while given.Nestle Nespresso limited follow of importtained, from its de ands, the narrow business connections with manu situationuring businesss of celebrated ho intenthold electrical devices and c atomic number 18fully selected. both partner hatches is responsible for the distri sole(prenominal) ifion, for the market, for the referencing in boutiques and the after-gross revenue service of the moulds of its own marque. At the moment, Nespresso accounts 10 partners for domestic customs railcars with, avering various models of railroad cars Nespresso. Machines and capsule Nespresso superior argon also available on the Internet site, www. nespressopro. om, as easily as through and through a ne devilrk of importers and indep devastationent distributors, subsidiaries of Nestle Nespresso limited comp whatsoever and local structures of the Group Nestle. Today, the activities except place of residence of Nespresso symbolize 25 % of the turnover of the gross revenue of portioned out burnt umber. And to seduce the consumers, Nespresso uses big instrument place of boutiques, mark of machines, glossy paper magazine, sustainary purified Nothing is left-hand(a) at random, e realthing is thought to evoke the refinement of the chump. The success of this caller-up salutes an interest book case a case of r be pattern.Thats why we chose Nespresso. In the present work, we shall approach first of all the history of Nespresso since its dunk until our days. In a second time we shall speak closely the marketing analysis of the partnership as well as close to main competitors. After the study of the dodge, we shall enclose this report by recommendations. 1. 0 place setting TO COMPANY Strategys history In the 70s, the Research and learning services of Nestle turn to an combined carcass a machine receiving doses encapsulated of cocoa, every dose comparable to a cup of burnt umber of 50 cc.They invent the capsule of umber freshly ground and its concept of pedigree of the hot chocolate under extort. Nestle, world attractor of the cocoa mass market gets ready to attack the segment of up-market bonus deep brown berry berry give convey to this skilful innovation say. A first pa ext of the serve well is regist e bolshie in 1976 by the centre of outgrowth of the Group Nestle. It is b arly in 1986 that the marketing begins. offset of all, by the creation of the company Nespresso S. A, the wholly-owned subsidiary of the group Nestle to Vevey.Then Nespresso dashes by bunsing the assembly line to Business market, particular(a)ly that of offices and restaurants. The company opted for Switzerland, Italy and Japan as landed estate of starting up of its activity of marketing. Turmix, a Swiss company, alsok charge of the end product of machines. Nespresso bought the capsules of deep brown from Nestle, the machines to Turmix and dedicated itself to its marketing in association with a Swiss distributor Sobal . But the success is not in that location trades do not exceed 875 machines first grade and it entrust not be better next family.We atomic number 18 in 1988, Nespresso begins to wonder about the energy of its dodging and in baffle to boost the company, appoints a invigorated universal manager Jean-Paul Gaillard who decides to change all the system. He asks on one class of respite and a marketing budget of 1. 6 millions. His purpose name of the capsules percolator a luxury. Nespresso thus decides to transfer to the private individuals, and chooses to replace the word capsule to speak about vineyards analogous wine and about limited serial universeation .As for the distribution, it will be scoop shovel and direct for the capsules of burnt umber by introducing the concept of rules of put up Nespresso which will allow its members to buy that by dapple, telephone and autotype (internet recently). Year 1989, the new system is launched in Switzerland. JP. Gaillard made a test, in 1990, on the market of the United States by changing variety of java to adapt itself better to the customs of the Ameri privy consumers. At the end of the year the smart set counted already 7700 members. In 1991, The Nespresso system is introduced in France, in Be lgium in Germany and In the Netherlands.And in 1994, Nespresso penetrated into the market of airline companies (First and business class) with its new machine Nespresso Aviation System. Present in 15 countries in 1995, Nespresso granted licenses of outturn to the other manu concomitanturers in a precise purpose the proceeds of the performances, the convenience of use as well as the design. Nespresso S. A blew its 10 potfuldles of success, in 1996, with 3 500 selling points and 180 000 members. Targeted the welkin of restaurants and hotels in Belgium and in France and went in Great Britain, in Malaysia, in Singapore and to Taiwan.In 1998, it expands its airfield of action thanks to a new Web site tout ensemble dedicated to the members of the order so tornadoing the possibility of rambleing online 24 hours a day, and 7 days a week. This distribution phone line also provides a personalized service, advices on blends of coffee and the maintenance of machines. In 2002, the pr oduction capacity of capsules is multiplied by 4 to answer the futurity growth and the orders placed on Internet k instanter an net profit of 94 % during year. The deals on Internet face then 30 % of the turnover of the company.After 5 years of research and development, Nespresso launches in 2003 the first machine Nespresso Concept Automatique which allows the facility of capuccino. Other grievous point the company goes into the sustainable development by trying to combine role of selected vineyards of coffee and condition of production look out to the rules of the sustainable development with its program abdominal aortic aneurysm Sustainable Quality. It was a respectable initiative, especially after the contrary criticisms that the company received.Notably as regards to the capsule Nespresso which is in aluminum, hence pollution and a spending of energy, not compatible with the post pick up and the Natural image. Given that the success of Nespresso and the unitary workaday purpose, this problem of the lack of recycling presents a big blackhead at the comparable moment on the ecological plan and of the image. In 2005, the sales of the coffee machine Nespresso Essenza contribute to make of Nespresso the European leader of machines in espresso.Then in 2006, Nespresso does not hesitate to engage the imposter George Clooney further to the superior made by the members of the floorshow among a list of celebrities which they had subjected them. The use of this actor as media vector gets above all at consolidating the positioning of Nespresso as a sophisticated brand and up-market. Nespressos figures World Turnover 2007 1034600000 milliards Number of stores 160 Number of clients 3, 6 millions Number of machines sold in the world 1, 4 millionsNumber of capsules sold in the world 2, 3 billions market share 2007 of the espresso market 26, 7 % 2. 0 MARKETING ANALYSIS 2. 1 MARKET TRENDS burnt umbers inlet Source National umber Drinking trends stu dy Coffee is the virtually popular beverage worldwide. In 2008, 17% of the adult population consumed this gourmet drink everyday, compared with 14% in 2007. What is more, positive health messages drove the consumption Espressos market (2008) instance Market shares Individual coffee pods/portioned coffee 57%Traditional 19% Filter combined 12% Automatic 10% Espresso without philia 2% As we dissolve see, this market is essentially characterised by individual coffee pods sales. Types of most popular home espresso machines Espresso pump machine (Nespressos) automatic pump to bring forth the spotless summate of water tweet (usually the most expensive) lever or piston machine manual or human cater pump to clear the pressure it conveys to make espresso. The lineament of the coffee hobo vary, as it depends on human provide.Steam powered machine flora by warminging water and using steam power to create the pressure needed (usually the cheapest and practically the worst qual ity) Moka pot espresso machine works by boiling water in the bottom of the pot, creating steam and wherefore forcing that steam through the coffee and into the top portion of the pot. Overall, trends are well-disposed concerning the espressos consumption. Thanks to positive messages about coffee and health, raft are slowly changing their mind. The sector is developing well, creating opportunities.More and more citizenry buy home espresso machines and this trend will surely follow its growth. 2. 2. TARGET AND post The site Types Characteristics B to C * Members of Nespresso beau monde * Prospects * From 35 to 60 * AB B to B * Hotels & restaurants * Luxury retailers * Companies * Airline companies * Sponsors et partnership with events organizers * Conference room * Wel seeded player rooms * Hotels, restaurants and cafes * Airlines * SME * Big companies Needs in B to C Needs in B to B To consume diametrically but in a better focusing * Need to be dexterous and to dream * To search for new sensations * Innovative products * High quality products * To rely in key respects of the company * To create a watching atmosphere virtually the coffees tasting as if it was a tall-pitched quality win * Recognition through the Nespresso Club * To retrieve the best coffee of the actual market * Innovative and up-market products = brand image * High quality products to offer to customers or associates * Value of exception emitted by the Nespresso brand * To give to the company or to the event a modern, advanced and dynamic image through an up-market brand * To offer a exquisite moment * Recognition trough the Business coffee solution Actually, Nespressos typical customer is either a person linked to the statue conveyed by the brand and prone to the quality of the service, or a infidel attached to the quality of the product. Positioning Nespressos positioning is up-market, in verges of quality and service. The brand is the worldwide leader of the up-marke t coffee. Nespresso aims at profitability per unit and their croak on investment rather than volumes. This is the former why the brand targets a niche with towering prices. 2. 3. ENVIRONMENT 2. . 1 PEST Analysis mention points P * The bullet ban impact on coffee machines sales E * A luxurious machine for a high purchasing power S * Coffee can be considered as a kind habit T * Implementation of the latest new technologies fluid The sole(prenominal) interesting political aspect in this case is the smoking ban. Indeed, this law has created a change of atmosphere in all public premises where multitude were utilize to engender a coffee. Several pubs and cafes feature been affected. Some smokers bear preferred to have their coffee at home and to make it mouthful as good as cafes ones, they invested in high quality coffee machines. EconomyCoffees market is characterised by very beardown(prenominal) prices fluctuations. Like in every market, coffees price is set by the rati o amidst the quantity of coffee available and the amount of people who want to consume nearly (in fact, this amount represents the quantity coffee merchants need to buy). If the quantity of available coffee exceeds needs of coffee merchants, coffees price decreases. Conversely, if there isnt enough coffee to execute demand, the price summations. In this way, this international prices instability may, at any time, increase or decrease volumes of supply or demand. But the worlds actual economic situation influences those fluctuations.Indeed, recession affects everyone and it is leading to new behaviours and new consumption strategies. Nowadays, coffees supply overtakes demand. However, people targeted by companies alike(p) Nespresso are usually wealthy. This is the reason why sells of luxurious coffee machines have increased for a couple of years. Social fit to market trends, coffee is the most popular beverage worldwide with over 400 billion cups consumed individually year. I t usually refers to social and family gatherings. Coffee is also associated with white stoppage jobs and office workers. Nowadays, coffee breaks at work are considered as social habits as they are pleasant ways to chat and relax.However, unripened people and elderly people restrict coffees consumption. Indeed, young people usually prefer soft drinks and seniors care about their health. Technology Coffees market is characterised by high technologies. Each coffee merchant is looking for the latest technology in terms of capsules and coffee machines 19 Bar pressure pump, automatic and programmable coffee quantity, capsule container, cup-warming side plates, electronic control of the level in the water tank are examples of necessary new technologies found in modern coffee machines. However, most of these new products dont correspond to actual environmental criteria. 2. 3. 2 get up Analysis -STRENGTHS * Diversification in parallel with its activities in the home sector, Nespresso all -embracing to out-of-home segment (hotels, restaurants, cafes, aviation, SME) * Up- market positioning * Fame and brand image high quality coffee perceived by the customer as a luxury product * Personalized marketing Nespresso Clubs (luxurious shops which represent Nespressos universe) and website * Own capsules fend off rival and reduce distribution costs * Constant innovation to state its brand image, Nespresso deals with sectors leaders such as Krups, Miele or Siemens * Growth higher than 30% per year * Knowledge an exclusive accessories honk of high quality * Experimented sales force - WEAKNESSES * Limited target from 35 years old with a high purchasing power * Mono-use of the coffee machine * Ethic and practical issues concerning capsules * High competition with swallow prices and good quality equipment * Limited distribution but through the Internet, by phone or in Nespresso shops - THREATS * Competitors numerous and strong * Capsules patent comes to an end in 2012 if co mpetitors reduce capsules price, huge margins squareized at the moment wont endure anymore * Multi-use coffee machines people like to have many options (hot chocolate, tea) * Negative environmental image - OPPORTUNITIES * Development on American and Chinese markets * Opening of new shops * B to B * The youngs market Thanks to its positioning, Nespressos sales increase a lot every year since the companys creation. Indeed, Nespresso wants its coffee and its coffee machines to be considered as luxurious products. However, even if theyre meant to target a niche, more and more people buy those products. For example, during offers periods customers can afford the simplest coffee machine for lone(prenominal) ? 50.In fact, the companys turnover is not establish on machines sales (only 4%), they are more considered as a strategy. When Nespresso first set up, it offered free machines to companies. Once the customer has the coffee machine, he can only buy Nespressos capsules. On the one hand , this system represents the main strength of the company but on the other hand, it can be perceived as a weakness. Indeed, many people are not used to buy through the Internet for some(prenominal)(prenominal) antithetical reasons and there arent enough shops. Moreover, Nespressos coffee is often too expensive for potential difference difference customers. But Nespresso has planned to open new shops all around the world in order to function more accessible.The Nespresso Club is a good way to add a luxurious value to products. It creates a privileged transactionhip with customers. What is more, the experimented sales force of the company will be able to open up new products, new coffee machines and unlike kinds of coffees. 2. 4. COMMUNICATION ANALYSIS Direct marketing Through its livelong communication, joyousness and quality is always at the heart of Nespressos strategy. Having a coffee isnt an everyday act anymore it became a real sensorial experience. To understand this d eep experience proposed by the company, it is necessary to get first into a Nespresso shop. Indeed, this is where Nespressos communication starts.In the shop, everythings meant to create an memorable atmosphere characterized by luxury, peace and sensual pleasure. A very handsome and smart employee welcomes potential customers. They directly feel comfortable and are adroit to follow him/her to discover products. In this environment, severally coffee machine looks like the unblemished last element that will jazz the decoration of the potential customers kitchen or living room. Moreover, a large start out of tasting implements is minutely presented cups, glasses, teaspoons, shakers, chocolates, sugars and of course coffee. A vast number of bleached capsules are exposed, and obviously it is possible to taste them.Once the coffee machine and capsules bought, customers release members of the Nespresso Club in the same way as Georges Clooney Hoarding unravel Nespresso chose the American actor Georges Clooney to represent the brand. Through this choice, the company expresses the following message drinking a Nespresso is kind of being like Georges it means integrate the elite, access a higher rank. Advertisers use here an identification process they run consumers to adopt some behaviour and some feelings from the person they would like to be. The aim of this campaigns strategy is to impose Nespresso as a worldwide brand and to reinforce its icon statue.Georges Clooney is The man who best represents Nespressos values, as he is sophisticated, chic and charming. Georges, as the brands ambassador, gives some legitimacy and some leadership to Nespresso. Actually, this campaign is ground on two types of purchasing motivations. Coffee refers to a simple alivenesss pleasure but a Nespresso aims to be considered as a kind of head game desire. This delightful idea of having a Nespresso at home is a hedonist motivation. On the other hand, advertisers use the fact t hat having a coffee has become a social habit so having a Nespresso machine is a good way to show off, as it can represent an extern sign of success. This is the auto-expression motivation. Visual analysis The logoThe N of Nespresso is made of curves, which brings vim to the word. This shape and warm colours refer to the idea of a nice coffee and to relaxation. We can also imagine an allusion to Italy. at that place is a direct relationship with yin and yang that remembers equilibrium. Yin is associated with moon, which represents the feminine part of nature. Yang is associated with sun and represents the masculine part. The visual way Nespressos advertising is adapted to the European market. Indeed, the picture is meant to be red from the left to the right and from the top to the bottom. The lighting, the look and the hands position snuff it the audience to the guideword, because to the machine and to finish to the brand.The main colour used is black it remembers coffee. Georg es Clooney is at the centre, he directly catches the attention. There is a hand-play and a look-play. His eyes are creating a delicious moment of impatience. The composition is simple, there are few movements Georges is acting as a figure of authority. Concerning the slogan Nespresso What else? , the italic typeface remembers the idea of quickness when making a Nespresso. What is more, this all of a sudden question refers to seduction, still according to the brands up-market position. Press relations * Communication relating to events Nespresso always organises an event when a new product is launched.For example, the brand organised a big show in December 2007 at Bon Marche, Paris, to promote 2 new coffees. Nespresso is also an active partner in gastronomic events, such as the Bacuse dOr competition and the option of the Worlds 50 best restaurants. * Press reviews The press reviews plectrum is strategic. Nespresso is present in some magazines, some newspapers, and in specialised reviews of data, strategy and opinion leader. * Press Once again, the choice of magazines is strategic. Nespressos ads are promulgated in some magazines like feminine up-market, travels, sciences, decoration, news and economy. Most of Nespressos ads are double-page. Nespresso Magazine The brand has its own magazine. It targets all the members of the Nespresso Club. The magazine is publish three generation a year and distributed in about ten European countries. The magazines main topics are coffee and lifestyles. It is a 64 pages magazine with no more than 10 pages of ads for luxurious brands. * TV and Cinema In 2006, Nespresso started to broadcast TV spots of 10, 30 and 50 seconds. Thanks to Georges Clooney, this operation has been very successful. However, it is through its campaign destined to picture that the brand caught all the attention (75% of memorisation against 15% for TV). 3. 0 COMPETITORS ANALYSISOn the market of percolators we attend an increase in the number of par tnerships between household appliances manufacturers and big food groups * kraft paper foods et Braun TASSIMO * Nestle and leaders in the sector of espresso machines such as Krups NESPRESSO * Philips and Sara downwind SENSEO * Procter and Gamble, Black and Decker and Krups HOME coffee * kraft paper foods and Braun TASSIMO 3. 1 TWO LEVELS OF COMPETITION Coffee marketoffers a lot of segments powdered coffee, instant coffee, coffee beans, capsulesEach kind of products offer variants Classical coffee, decaffeinated coffee, Arabica coffee Domestic electrical appliances market offers various products coffee pots, espressos, percolators Concerting to capsules market, two kind of systems exist * Closed proprietary systems Nespresso, Tassimo, that is to say machines which only work with the brands capsules * Open Systems ( diffuse serving espresso) De Longhi, all compatible brands. Coffee marketMonodor, Swiss also, which sold 500 millions of capsules in 2006 in the world (against 2, 3 billi ons for Nespresso). The same design, the same complexions, the same naming with Italian consonance and the same rates as those of Nespresso. The leader of Monodor, Eric Favre, is the inventor of the concept of capsule used by Nespresso. According to the last rumours, he would recently have signed a discreet agreement with Lavazza. Three times smaller with 227 million euros turnover and an annual growth of 10 %, Illy and its cafes-shops (since 2001) aim at the same clientele as at the Swiss roaster. We can sample the coffee in cups there drawn by the biggest designers or make it some purchases of capsules.Hyper Espresso, the new Illys machine already distributed in certain restaurants will be available for the general public via two new machines launched at the end of the year ( nearly 250 and 390 euros). It will require only Illy plastic capsules. Selling price 0, 39 euros each. Starbucks, leader of the retailing and the cook of coffee with more than 10 000 stores distributed betwe en North America, Latin America, Europe, the inwardness East and peaceful region. Starbucks made 7, 8 billion dollars of turnover in 2006 and realized an annual growth of the sales of 20 %. The company launched in the United States compatible capsules with the system Tassimo (kraft paper Foods), it also collaborates with the car manufacturer BMW and the manufacturer of coffee machines Saeco for the launch of a new machine in espresso, Sirena.Luigi Lavazza is an Italian active company in the coffee market. At the world level, Lavazza distributes approximately 1, 8 billion drinks a year. This company operates in the sector of the espresso in capsule for more than 15 years with the systems ESE, Espresso Point and, since 2004, Lavazza BLUE (Best Lavazza supreme Espresso). Lavazza is present in 80 countries and acquired an international fame. Today the sector Professionals of Lavazza represents 50 million euros. Domestic electrical appliances market Philips Senseo Senseo is a coffee ma chine spring from an association between Philips and Maison du Cafe. The main asset of this coffee pot is its speed and simplicity of use.We do not use any ground coffee in bag, but capsules, dont need to measure anymore, similar for the water, it is measured meadow following the number of cups which we wish. Furthermore, the taste remains considerable and the froth gives one plus to the coffee natural. bring up Factors of Success Speed of use, simplicity of use, design, taste. Philips cucina This second coffee-pot of Philips, is less popular than the Senseo. This is principally had to the fact that its use is totally different. No capsules, but ground coffee and filters. Less rapidity of use, but simplicity is always present. The principal asset of this machine is its design and its simplicity. Key Factors of Success simplicity of use, design. Delonghi espresso Another different coffee pot.Here it is the same system of use that the previous one, but this coffeepot is more worn t owards the quality and taste. Indeed, its main asset is the taste which it produces and its froth as well. Key Factors of Success taste. Moulinex crystal, Moulinex cocoon These two machines are similar this is the reason why they are examined together. Work as the philips cucina, with ground coffee and filters as well. Their major assets are design and simplicity. However, they are common to many coffee pots. Key Factors of Success simplicity of use, design. Tassimo This is a machine which does at the same time filter coffee, espresso, cappuccino, chocolate and tea.Its capsule, called T-disc and patented, is endowed with a bar inscribe which allows to recognize the drink and to adapt the preparation. A undivided button orders the use of the machine. Key Factors of Success Speed and simplicity of use, design, taste, quality and practicality. 3. 2 quintette PORTERS FORCES Competitors The main Nespressos competitors are Compagnies Philips et Sara Leein 2002 Target general public Pri ce 69 Capsules 0,13-0,19 and compatible with the others percolators of import competitor, Senseo naturalised itself as the leader of capsules. The technology is simple and cheap, so easy to access, con sloppeded by the sale volume. We notice a big increase in + 37. 5% for Nespresso, and + 30% for Philips Senseo.Senseo which is often directly criticised concerning the fact its offer is not a true coffee espresso, for lack of sufficient pressure, has and reacted with a kit espresso (carries filters & capsules) being able to adapt it on the machines which already exist. Its positioning is very generalist in comparison with Nespresso which promotes a up market brand image and which aims a certain clientele. Nespresso insists also on the quality of its coffee as being an exception coffee, and does not stint on the means to assure to its clientele the better services and advices. Kraft foods and Braun TASSIMO Target all drinkers of hot drinks Price 129,99Capsules 0,22-0,28 This is a ma chine which does at the same time filter coffee, espresso, cappuccino, chocolate and tea. Its capsule, called T-disc and patented, is endowed with a bar code which allows to recognize the drink and to adapt the preparation. A single button orders the use of the machine. Since its launch in France in 2004 until at the end of 2006, more than two million systems of drinks Tassimo were sold in seven countries. Kraft Foods awaits of its brand Tassimo, a turnover of 200 millions of dollars this year. The threat of substitutes Tea and infusion are markets with well being references contrary to the coffee. Each year, 2. millions of metric haemorrhoid of tea are produced in the world and about 1,200 billion cup of tea are drunk per year, hence 36,000 per second, which corresponds to an average annual consumption of 600 grams per year and per person. Soluble and other coffee varieties the coffee market in capsules would not represent in 2006 that 3% in volume and 7% in value of the total qu antity of consummate coffee in the world. But, nowadays the coffee market increase where sales stagnate. The power of suppliers more or less coffee the coffee market is characterized by fluctuations rather frequent because of the fact that it is governed by the offer and the request, which influences the coffee prices.Example In 2006, Starbucks had bought its grains about 36% above the course of the stock Market of New York. This American offensive labored Nespresso to align itself. The Swiss business thus paid a premium of 33% in comparison with the average course of the stock Market. However, Nespresso has a partnership with a NGO working for durable farming. For the machines Nespresso has partnerships with the machine builders. There are many brands in competition each other Krups, Magimix, Siemens, Miele That allows Nespresso to check easily the pressure of the suppliers. The power of customers The customers have a strong pressure on the market because they have access to a div ersified choice.However, for the systems owners, the pressure is inverted, indeed, once the machine bought, the customer can only to use the corresponding capsules. In addition, the stagnation of the consumption of coffee gives to the customer a certain influence on the sector. Potential entrants * Procter & Gamble * Kraft foods et Braun * Philips et Sara Lee * Salton * Monodor * Illy * Starbucks * Lavazaa The threat of the potential entrants is quite strong all the more so it is the matter of big groups such as Procter & Gamble or Salton. Concerning to competitory force, the pressure is even more important as a event of the presence of many competitors on this sector. Competitive RivarlyIn this sector it is very pronounced as a consequence of the fact that there are several competitors which take strategies of growth and base themselves on the innovation proficient of the products. The competitive pressure is strong considering to the variety of the products and the power of co mpetitors. Some of them do not hesitate to produce open systems, that is to say, usable capsules with others machines. The market is inviting and does not really represent barriers to the entry, thats a real potential. 3. 3 NESPRESSO COMPARED TO COMPETITORS MULTI-DRINKS CAPSULE VARIETY (COFFEE) MACHINES QUALITY (Power) ACCESSIBILITY CAPSULES PURCHASE POSITIONING (upmarket) engagement MACHINES & CAPSULES PRICES BRANDS MATCHINGPRESENCE IN THE MARKET (Time) Nespresso Tassimo Senseo 4. 0 NESPRESSOS STRATEGY Since its creation, Nespresso has experienced several policies and several strategies which were not always successful, until now. Indeed the current strategy of the company is a clever association of knowledge, creativity and innovation which transformed the firm in a real and particular concept. Nespresso is now one of the most know brands on the coffee market. 4. 1 CORPORATE STRATEGY 4. 1. 1 Differentiation Strategy To deeply understand the Nespressos corporate strategy, we base d our reflection on the Generic Strategies analysis by M. Porter. COMPETITIVE vantage Specific feature seen by the costumer Low cost indemnity of the company COMPETITVE SCOPE Broad DIFFERENTIATION OVERALL COST leading Narrow FOCUS/ NICHE STRATEGY Analyzing the principal characteristics of Nespresso we can view that they use the Differentiation strategy. Indeed, the differentiation strategy implements other factors than the price in order to differentiate the product or service from the competitors. The Nespressos strategy is based on a high quality product and on a luxurious brand image. If you buy a Nespresso product you hold up to the selective Nespresso Club which provides lots of personal payoffs and personal status to the consumers who are ready to pay a high price.The company offers a perfect espresso for hedonist and elitist people who reflect a special way of life the more than 30 year old urban people with a high purchase power. Nespresso use the differentiation th rough the top with a high price and value The Virtuous Circle of the differentiation through the top Characteristics Risks * Intuition and Creativity * Innovation * Business * Partner and cooperative distribution network * Good brand image * Difficulties to manage the supererogatory cost due to the differentiation * Wrong perception from the costumer * parody of the differentiation factor * Lose the interest of the differentiation factor from the costumerWe can easily link this model to the Nespresso concept their creativity innovation and intuition are perceived by the rarity, the quality and the image of the range of capsules or machines they sell. It is perceived as well by the concept of Club and of belonging to a high community good drinking a delicious coffee which answers to their target using the esteem need of the Maslows hierarchy. Its distribution network is an entire part of its concept luxurious places where consumers can join people sharing the same taste and feel t he personal status Nespresso gives them. Concerning the brand image, Nespresso is now one of the most celebrated brands thanks to its clever communication and to the face of the company George Clooney.At the moment Nespresso keeps its competitive advantage and is still a reference in the high quality market. thence the firm is still avoiding the risks linked to this strategy which is the main reason of its marvelous success. If we follow the Strategy Clock of Bowman, we can explain why the differentiation strategy succeeds so much. Indeed, the perceived added value sufficient to bear a premium price. The target buys not only an espresso machine but the entirely culture of Nespresso which give them the possibility to join an elitist community and reach particular privileges. 4. 1. 2 Internal Growth Strategy The internal growth strategy of Nespresso is clear Penetrate and spread.The company currently wants to overcome new markets shares thanks to a strong marketing campaign at on ce push cinema, television, billboards and pull direct marketing, website, sponsoring, in order to become and stay the leader on the capsules coffee market. The firm established an incorporation strategy. It has recently apply some stores in the United States and in China. Nowadays, Nespresso is represented in more than 50 countries by 160 Nespresso boutiques in 2008. Two different kinds of internalization strategies are possible. The first one is the Multinational strategy the organizations activity is implemented in a new area and then modified according to the countrys specificities.Nespresso is developing the Global strategy it proposes on the whole area it covers a standard offer. Nevertheless, the international development of the brand succeeds thanks to a good knowledge of the coffee consumption habits which is very different in each country. According to that, it adapts its strategy to each new market, privileging sometimes the truth aspect of the concept and sometimes to conquer new costumers. 4. 1. 3 External Growth Strategy An external growth strategy could be defined by a merger and science process, by an assortment of companies or by a partnership of different firms. Nespressos strategy is defined by the last one.Indeed, the firm established strategic alliances with some famous companies as SIEMENS or TURMIX (KRUPS) to develop some of their activities like coffee machines. According to the adopts those companies have to respect the Nespressos criteria manufacturing design, refined and luxurious items. Nespresso cooperates as well with the RAINFOREST ALLIANCE, one of the most important ONG supporting agriculture in order to create the NESPRESSO AAA program which certifies the quality of their product. The objective of this program is to produce a high quality Green coffee according to the economics and social consequences for the local producer and to the environments respect. 4. 2 ACTIVITIES STRATEGIES Nespresso SA is one of the most economi c strategic business units of the Nestle group.Therefore, despite the fact that the company owns several activities none is corresponding to a strategic business unit. Nevertheless, as we express the firm operates on different market segments thanks to 4 create businesses the sale of espresso machines, of coffee capsules, of accessories and the managing of many luxurious places around the world. In order to deeply understand the company strategy and to produce a complete study, we will present the different businesses Nespresso proposes and then its strategy applied for each of its market segment using those businesses. 4. 2. 1 Nespressos Businesses Presentation Espresso machines The espresso machines represent the main activity of the brand and generate the most important profit.The company has created 40 models according to the different needs of the target. The machines are manufactured by partner companies as Siemens, Miele, Alessi, Koenig, Turmix, De Longhi, Magimix and Krups . They differentiate themselves by a unique design and a luxurious aspect which perfectly reflect the Nespressos image. As an example, the most famous machine is the MAGIMIX M110 sold for ? 116 New compact brew unit technology, 19 bar pressure pump, thermoblock heating element, automatic and programmable coffee quantity and available in different colors What else? Those machines represent a high technology inside a refined aesthetic.Concerning the distribution network, it is a traditional one we can find some machines in hypermarkets, mail order or in specialized shops. More than 18000 points of sale have been counted. Coffee capsules The Nespressos range of coffee capsules is composed of 9 different blends from the decaffeinated to the strongest one. The espresso blends come from the finest coffee-producing countries Brazil, Columbia, Costa Rica, Togo, Guatemala, Kenya and Ethiopia. Capsules cost ? 0. 25 each and customers can only find it on the Nespresso official website or in Ne spresso boutiques. According to Daniel Lalonde, International Commercial Director, 24 capsules are sold each second somewhere in the world. AccessoriesIn order to perfectly complete their offer, Nespresso sells to its consumers all the accessories which are necessary to make their coffee break a design and elegant moment. A wide range of coffee cups from ? 8. 81 to ? 44. 04 each, sugar bowls, chocolate, items to heat the milk, recipe glasses, candles, Shaker, cappuccino kit, spoons, trays and more. Under the words Presentation is everything Nespresso makes its consumers understand that they cannot drink such a delicious coffee without sophistication. The Nespresso Boutiques The Nespresso boutiques and bars boutiques are the heart of the Nespresso communication strategy. They are allowed only to Club members and are the showcase of the brand. Consumers belong to the club as soon as they buy their first machine.From this moment they are able to buy the capsules and the accessories and they benefit from a personal service for information or reclamations. Moreover they are able to move into the luxurious boutiques in order to taste new blends, buy some products or just enjoy their time in beautiful and refined spaces. Those boutiques generate about 25% of the companys annual turnover in B to C. In order to create those elegant and design spaces the brand worked with the famous French architect Francis Krempp who realized the plan of the biggest boutiques. Each new boutique is strategically located in the most elegant and famous way of the biggest urban centers. We currently count about 160 boutiques and bars boutiques around the world. 4. 2. 2 Nespresso Markets SegmentThe company operates on two different markets segment, the Nespresso Business to Consumers variant for customers or Club members and the Nespresso Business to Business division for the out-of-home sector. In a very competitive environment, the brand is positioned as leadership and as the only distri butor and owner of aluminum capsules and particular machines patents. The Nespressos challenge is that in 2012 the capsules and machines patents will become public giving to the competitors the possibility to create machines with the same technology and the corresponding capsules. Therefore, in the following part we will analyze the strategies that the company is currently using in order to keep its position on the market. Nespresso applies different strategies for each market segment. 4. 2. 2. 1 Nespresso Business to ConsumerIn this scratch the target are the members of the Nespresso Club, the new costumers and the potential customers. Machines promotions and new customer strategy Nespresso aims to conquer new customers until 2012 proposing some promotions on machines at special do of the year. The brand wants to develop its consumer panel thanks to reductions for the new buyers, for the club members and for partnerships. The federation is the fact that a consumer pushes anothe r person to buy a machine, and then the consumer gets a reduction. The club members are the best promotion support for Nespresso, indeed a consumer who talks about the brand to 10 people for example, gives it between 3 and 5 new potential customers.Moreover, once the customer buys his first machine, he becomes a member and whence he has to buy the capsules and enter in the Nespressos database. Differentiation strategy The Coffee In order to keep its dynamic image, Nespresso markets, once a year and in a period of two months, two new coffees from a small production Spring limited edition, autumn club edition and variations. Those very high quality coffees are punctual and limited offers which goal is to make the customers come into the Nespresso boutiques. Those products are very rare and consequently, it does represent a differentiation because Nespresso is the only brand which proposes a different offer from the classic range. Finally the variations are another kind of limited edi tions it is a range of flavoured coffee.Machines In order to differentiate itself from the competitors, the company created a pack machine which contains an instructions file, 12 capsules and some promotional leaflets on accessories. Accessories As a luxury brand Nespresso has different seasons collections of accessories The Autumn/Winter collection and a Spring/Summer collection. The firm is the only one which creates its own accessories on the coffee market. Loyalty strategy The main strategy of the company in B to C is the loyalty strategy based on an important loyalty program * The delicious in Nespresso concept * The website * The Nespresso Club * The send and emailing campaigns * The phoning campaign called Nursing Newsletter in the monthly Nespresso magazine The Welcome in Nespresso concept This loyalty program integrates on one year long the new customers thanks to discovery boxes or promotions. This strategy not only strengthens the Nespresso perception and its brand imag e it also allows it learning more about their consumers from the beginning, encourages members tasting different blends and buy accessories and generates important orders. The website www. nespresso. com Useful loyalty tool, it generates about 37% of new members. Indeed the consumers can buy some items online and regularly check the new offers and promotions. The Nespresso Club The main dvantage of this concept is to create a long term relationship with the consumer because he belongs to the brand club since his first purchase. He will regularly receive some mailings and emailing and therefore he will be in regular receive with Nespresso. send and emailing When a new customer enters in the Nespressos database he often receives personalized mails about the club services, the accessories, machines and some satisfaction surveys. Nursing Nespresso phones all new customers one month after their first order asking them about their opinion about the Grand Crus and the practicality of th e machines. They also remind him the club services.Public relations As we said previously, the Nespresso magazine is delivered only to the best consumers of the brand. It is generally about coffee but also about different subjects about the luxury sector. It is considered like a privilege for those who receive it. 4. 2. 2. 2 Nespresso Business Coffee Solutions This division of the firm targets companies from different sector Offices, hotels and restaurants, luxury retails (luxury shops, spas) and airlines companies. The B to B prospecting strategy Prospecting Nespreso is currently prospecting new business customers using tools as a trying brochure or telephone number in order to fix an appointment to try a machine.The objective of this strategy is in a first step to establish a contact with the potential business customer for a free try and in a second step to measure his potential and his needs. Try and contract During the try session the aim is to introduce Nespresso Professional , inform the potential customer about the different products and services, create a first flavor and engender the signature of the contract. Loyalty strategy As the B to C loyalty strategy, the company that Nespresso is targeting will receive a welcoming pack, some phone calls (nursing) and a satisfaction survey. 4. 2. 2. 3 Market segments strategy conclusions On the whole we can say that the B to B division is now a mature segment where Nespresso mainly has to develop its relationships with its customers.Nevertheless, despite the fact that the B to C division is well developed and well positioned on the market, the company still has to conquer market shares and customers around the world. Indeed the machine selling is a very important part of the Nespressos profit and needs to be increased. CONCLUSIONS AND RECOMMENDATIONS Unique Personalized Service High be after Machines High Quality Coffee In conclusion, according to the market trends and the Nespressos sales, the company is on a successful way. Success which began with its resources, indeed Nespresso owns determinative in literal resources which are its several patents, its relationships with high technology industries and quality coffee producers around the world and finally, its brand image.They are completed by an imaginative strategy management team the firms main tangible resource. Those resources engender the Nespressos distinctive competencies Ownership of high technology and design process, worldwide coffee supplying and an efficient differentiation strategy. The final result of the Nespressos competencies is the now famous trilogy of competitive advantages That is how Nespresso became one of the most famous coffee brand and that despite high price products, sales exploded. The competition could be severe however each competitor has a different positioning which protects the company from directs competitors. All future consumers are conquered by the system and rapidly become a Nespresso Club mem ber.About the future of the company, it recently conducted a democratization strategy targeting younger customers creating the Essenza and Compact ranges. The reason is probably because their target is getting older which could become risky in long term speaking. The expansion of Nespresso Boutiques confirms that theory, the company is trying to catch the attention of a larger population. As we said the firm has to develop its machines sales as much as possible and young people seems to be a perfect potential target. In order to reach this aim Nespresso should develop its range of affordable machines keeping a dynamic and innovative feature but giving to younger people the access to the brand. Nevertheless, they should not target people under 25 in order to keep their high quality brand image.Recently some competitors launched new technologies able to produce not only coffee but hot chocolate and tea as well. It could be an interesting evolution for the company, still in a view of getting the target larger. Indeed the tea market is full of potential with an change magnitude demand. Moreover, to attract young people Nespresso could create a special range of machines with a trendier aesthetic, keeping its refined design with a touch of dynamism. As final recommendation, Nespresso should find an alternative to the aluminum capsules which are in contradiction in terms with the environmentally friendly and natural image that Nespresso desires to have. Indeed aluminum is known as a very polluting material.