Nestle loses monopoly, but does new Nespresso

Despite having lost the absolute predominance in the sale of coffee capsules market, the Nestlé Group begins the construction of a factory for Nespresso, which is one of its most profitable brands.
The "war of coffee in capsules" is waged by Nestle against dozens of rival manufacturers. The Swiss brand created for more than 25 years the coffee capsule and design machines for high income consumers, and continues to be the reference in this segment, which represents about 10% of the consumption of coffee in the world and more than 34% of the total value.
But new competitors are emerging to attack what was until recently a monopoly of Nestlé. Are attracted to a business where you can sell five grams of coffee for a price five times higher than would be obtained with the normal torrefado coffee, according to expert calculations.
Nespresso informed the value that competes currently with more than 100 coffee capsules offerings in the world, 50 of which are compatible with their machines. The company says that opened in 9 of the 60 countries where it sells the capsules. Accuses rivals of making cheap imitations that violate the intellectual property rights of the system created to make a good cup of espresso at home.
In addition to respond in court, Nespresso faces competitors investing "to innovate and anticipate consumer expectations". Today, begins construction of its third plant of coffee in capsules in Switzerland, an investment of more than $ 300 million.
The multinational, which is the largest food manufacturer in the world, estimates that Nespresso and Dulce Gusto (his other trademark coffee capsule) hold 32.5% of sales of premium coffee in the world. Analysts are more cautious. Jon Cox, of Kepler Capital Markets in Zurich, suspects that the slice is closer to 27%, before the appearance of many rivals with elegant machines, capsules with quality coffee and cheaper.
Analysts estimate that Nespresso grossed about $ 4 billion in 2012. But the smaller-than-expected sales of the Nestle group as a whole, in the first quarter of this year, was also assigned to slower sales of its luxurious coffee in capsules.
"Nespresso increased its sales by more than 20% in 2011, then 15% in 2012, and in the first quarter of this year must have been between 9% and 11%," says analyst Jean Philippe Bertschy, Bank Vontobel in Zurich. "This is a result of increased competition."
The profit margin of Nespresso has been estimated at around 30%, one of the largest of the Swiss group. However, rivals doubt that this will continue. "I know people in there, the margin is getting much smaller," ' said the businessman Jean-Paul Gaillard, who ran Nespresso for a decade and today has its own business. In comparison, he says his company of capsule coffee, biodegradable Ethical Coffee, generates 55% margin on the price to distributors.
In addition to several national companies, Nespresso faces famous brands like Sara Lee (which is now called Master Blenders), with your Senseo coffee machine, and Mondelez (ex-Kraft), with the Tassimo. The American chain Starbucks released its Verismo, pod coffee maker, last year. In the u.s., competition from Keurig, marked ' Green Mountain Coffee ', also is heavy.
It is estimated that the coffee capsules are 30% cheaper competitors. Vergnano, group of Turin, was the first in Italy to produce capsule compatible with Nespresso machines. Accused in court, won a stage of the dispute recently. But since opening his business, at least 20 other companies were producing coffee capsule in Italy, to meet customers attracted by the success of Nespresso.
"Nestle is a real war against other competitors, who don't make copies and Yes cheaper capsules ', defends itself Gaillard, of the Ethical Coffee in Fribourg (Switzerland). Nespresso reacts by saying that the "protection of our intellectual property is an important element of our business strategy", and that will continue defending their innovations.
The Swiss group reports that so far no process came to an end. But competitors say that in the early instances Nespresso suffered losses in Switzerland, Germany, France, Italy.
More than legal issues, Nespresso aims to point out that the maintenance of its success will be trying to anticipate customer demands. "We have a unique model that ensures quality throughout the value chain, dialoguing with our ' Club ' members and consumers, and the exclusive boutiques are an advantage in the face of competition ', says the company.
Gaillard says that more than 300 of a Nespresso boutiques in the world, of which 11 in Brazil, has a huge cost that is eroding the gains of the group. Estimates that only a boutique of the Avenue des Champs-Elysées in Paris, 170 people in total would need to work.
In addition to build a new factory, Nespresso has a strong marketing. The expectation in the market is that the American actor George Clooney won't have renewed your annual contract of $ 10 million to spread the message of ' single coffee, sensual, soft, deep and mysterious. The company says that ' for the moment ' everything continues as before.
"Nespresso grew very fast and cannot continue at the same pace," says Cox. For Patrick Schwendimann, of the Cantonal Bank of Zurich, increasingly the brand will have to seek expansion outside Europe in crisis.
According to analysts, Nespresso aims to increase revenue by $ 500 million a year-the company does not make comments on the topic.
Asked if confirmed an offensive in the South American countries, Nespresso spokesman responded that sees strong growth potential globally and different types of opportunities in developed and developing markets. More than 20% of sales in 2012 occurred in non-European markets, compared to 15% in 2011. At the end of 2012, Nespresso had 19 boutiques in Central and South America.