Nespresso is Recession-Proof

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The BBC’s Will Smale wrote a fascinating article about Nespresso, Nestle’s esspresso-in-a-pod product, which reported global sales of $1.7 billion for 2008. Overall Nespresso sales have grown an astounding 30% or more for eight years straight. The article explores the reasons behind Nespresso’s wild success:

Ease of Use:
You simply pop the aluminium capsule or pod into the futuristic-looking coffee maker, automatically puncturing it in the process, and press a button that forces through the hot water. Seconds later you have a perfectly acceptable cup of espresso, and the used pod is ejected into the bottom of the coffee maker.

Good marketing that emphasizes exclusivity: “Consumers are automatically enrolled in a loyalty programme, and receive a regular glossy magazine that re-enforces the notion that consumers are members of an exclusive club.”

At the core of Nespresso’s aim for exclusivity is the fact that while the machines are widely available, you can only buy the coffee pods direct from the company. This can be done either via its website, over the phone, or from a very limited number of its own shops – which it prefers to call “boutiques”. Of which it has just five in the UK. The basic pods cost 25 pence each, but when postage and packing is added, the cost of each rises to 30p.

Nespresso coffee machines will only work with Nespresso capsules: “Nespresso is very good at working with the manufacturers to keep the cost of the machines down, and you can get them for less than £100, with special offers on top [such as cash back deals],” he says.

George Clooney: He defines suave for men, and makes women swoon. He’s the perfect brand ambassador.

This strategy reminds me a lot of Apple. It has the right products, the right vertical integration–you can only use iTunes with the iPhone, for example–and affords a feeling of exclusivity. The only thing missing is a powerful brand ambassador. Scarlet Johanssen, perhaps?

Nespresso’s success shows that Nestle’s innovation combination paid off handsomely. Nespresso is a smart product–but Nestle should also consider itself lucky. If it had released the product at the wrong time, say, in the middle of a bad recession, people might not have been interested in pricey coffee pods. Nespresso represents the kind of product every company hopes for.

  • Thank you for bringing the BBC article to my attention. The sales figures and the growth curve are outstanding. If Nespresso can grow like that through the onset of the current recession, it could probably have been launched in any kind of market…

    Market power + smart branding, a cheap machine and exclusive products. Seems like the perfect marketing model for an MBA study.

    Writing in The Times, Alex Renton called it “immoral”, but Martin Vander Weyer’s response in The Spectator was:

    “Immoral? Hardly: at least, not by comparison with what a lot of bankers have been up to lately – and it’s a damn sight cleverer”. [Speccie, 21/2/09 p. 30]