The Nespresso

Winning Formula

Continuous innovation

and highest quality as

cornerstones for

sustainable growth

Lily Chen Li, Andrew Liu,

Julien Toulouse & Jérémy Brache

Lehrstuhl für Absatzwirtschaft und Marketing

Katholische Universität Eichstätt-Ingolstadt

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Contents

Nespresso’s History

The Market and Nespresso’s Competitors

Nespresso‘s Strategy and Competitive Advantages

Perspectives

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Nespresso’s History

The Market and Nespresso’s Competitors

Nespresso‘s Strategy and Competitive Advantages

Perspectives

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Nespresso’s History

1970: First patented application for ground coffee caps

1986: introduction of a system of extracting coffee from

capsules by Nespresso (a division of Nestlé) to the

Business and to premium domestic household markets

1988: Beginning of a market success & introduction of

“Le Club” community

1990: Contract signatures with coffee machine manufacturers.

Today: Nespresso remains pioneer and worldwide market

leader in premium portioned coffee, proposing the best

quality « Grand Crus » to be enjoyed in the comfort of your own

home

2000 2009

210mn Turnover in CHF 2.770 bn

868 Cups per minute 10.000

6% Coffee Systems MS (Units) 19.5%

600,000 Global Club Community 8 millions

1 Global Boutique Network 191

331 Nespresso Employees 4,500

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Nespresso’s Fast Evolution

210

2 770

1990 1995 2000 2005 2009

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Nespresso’s Today Situation

Global Nespresso Boutique Network

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Nespresso’s History

The Market and Nespresso’s Competitors

Nespresso‘s Strategy and Competitive Advantages

Perspectives

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Nespresso’s Market

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Nespresso’s growing Competition

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Nespresso’s outperformance

Average annual growth rate exceeds 30% over the last 8 years

Today, Nespresso sells 10x more than in 2000

Worldwide market leader in highest-quality premium portioned coffee

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Nespresso’s History

The Market and Nespresso’s Competitors

Nespresso‘s Strategy and Competitive Advantages

Perspectives

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Nespresso’s Winning Strategy

Differentiation Cost Leadership strategy

Uniqueness competency Low cost competency

Segmentation strategy

Broad

market

scope

Narrow

Market

scope

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Nespresso’s Competitive Adv.

Best in Cup Quality

High Brand Identity

Best in Class Services

Managing the whole

Value Chain: from the

Coffee to the cup

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VRIO

Valuable Rare Imitable Organisation

Best in Cup

qualityYes Yes No Yes

High Brand

IdentityYes Yes Yes Yes

Best in

Class

Services

Yes Yes No Yes

Nespresso

Value ChainYes Yes No Yes

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Best in Cup Quality

Only the top 1-2% of the world’s green coffee crop meets Nespresso

specific taste/aroma profiles and Nespresso’s demanding quality

standards

High Variety & Individual Choice (16 varieties of high quality Grands

Crus)

Dedicated Nespresso team & Rigorous quality management

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High Brand Identity

Nespresso is established as a super premium brand and concept of

perfect portioned coffee worldwide

Unstoppable drive for innovation & distinctive design

Passionate global brand community

Aspirational iconic global brand

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High Brand Identity

1st global roast and ground coffee brand

Since 2008 among the top 20 risers in brand value ranking

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Best in Class Services

Nespresso has successfully shaped a direct contact, a direct consumer

relation, thanks to its premium services

Personalized & exclusive services to create long-lasting consumer

relationship

Flawless execution

Recognition & intimacy, exclusive linked to the brand

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Managing the whole Value Chain

Unique Nespresso Business Model based on vertical integration

Value Chain Machines Coffee

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SWOT

Strengths:

- Market leadership

- Coffee quality

- Large range of products

- Luxury brand image

- Communication

- George Clooney

- High quality of service

- Stand alone globally managed

business

- Synergies with Nestle

Weaknesses:

- Price

- Distribution

- Ecology

Opportunities:

- Foreign development outside

Europe

- Low developed market

- Ecological trend : sustainable

quality development

- B2B development

Threats:

- Patents end in 2012

- Ecological legislations

- A growing number of competitors

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Nespresso’s History

The Market and Nespresso’s Competitors

Nespresso‘s Strategy and Competitive Advantages

Perspectives

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Perspectives

Improving the sustainability performance of Nespresso’s value chain

Conquer new markets outside Europe

Continue urban expansion strategy in big western cities

Defend and grow intellectual property portfolio

Increasing shares on B2B market

Thanks