Nestlé’s double whammy in coffee
I was recently sent a great article about Nestlé’s "double whammy" in coffee, by one of my clients, Cecile Coutens, Global Marketing Director at Mars (The article is here, if you want to practice your French).
Everyone knows that
Nespresso has become a big growth making machine for Nestle, as we posted on here. But it surprised
me to hear that the good old Nescafé is also growing simultaneously: more than 7% volume
growth for example in a mature like France!
But doesn’t everyone have an
expresso machine by now? Well, maybe…but it’s not that simple.
The double whammy of premium and
value:
An interesting market
dynamics in coffee is that expresso machines have actually taken the space of….the old
coffee machine! So in addition to growing at the premium end (capsules – Nespresso), Nestlé is also growing lower down the price curve (instant – Nescafé). Here's how:
1. Localise:
with a 1+2 coffee with milk variant in China and the introduction of a cold
drink called Smoovlatte, designed to educate consumers to the taste of coffee,
Nescafé is actively working on growing the category in a local way. (Chinese
currently drink about 3 cups a year vs. 604 in France!
2. Make it
accessible: like in many categories, single dose formats are being used to
deliver low absolute price points and drive growth in Africa for example.
3. Activate:
In the Netherlands, you might come across a Nescafé Tour event, to help you
find the Nescafé taste for you, which is where you see some of the
sophistication of Nespresso translated for a more mainstream brand.
4. Premiumise:
Nescafé is launching lots of upgrades, including Azera ‘Instant Barista’ coffee, to compete with the likes of Starbucks Via Instant Coffee and Kenco Millicano. Higher up the price curve is a more accessible capsule offer through Dolce Gusto, which retails at about 31 Eurocents a capsule, 15% below Nespresso's starting price of 35 Eurocents. Dolce Gusto is on track to soon be a $billion brand in its own right, according to reports here.
Key lessons ?
- Don’t
give up on growing the core in mature markets: even in
mature markets, opportunities in new occasions and users can pop up, especially
if a new technology is re-shaping the market. - Don’t be
scared by offering overlaps if you have several brands, as long as you are
managing them: work on the product, the occasions and the execution so that
several of your brands can deliver against their own brand vision, and thereby
scoop out more of that growth, as with Dolce Gusto and espresso.
