Nespresso

I’ve been thinking about Nespresso for a little while now.  I think it would be foolish to ignore them, not only because they are growing explosively but because of how and why they’ve been so successful.  I’ll admit this post was further spurred on by Oliver Strand’s post on the NYT site today, and some of the reactions around that.

Nespresso are perhaps the focus for me, more than the K-cup, because I think they are a more global player – operating retail units in 150 countries, with 10 million+ active members of the Nespresso Club.  I think our side of coffee has underestimated them for far too long.  My company shares more customers with Nespresso than I am comfortable admitting to myself.  I don’t think the quality of Nespresso is amazing – but it is better than most retail espresso and it is better than what someone would get at home with a starter home espresso machine and pre ground coffee, or even a bad grinder.

I don’t want an espresso machine in my house.  I don’t want to wait to heat it up, dial in the grinder, then clean it thoroughly in order to drink an espresso.  I’d rather pay someone else to deal with the challenges of espresso, so I go to a cafe for my espresso.  Most people around the world don’t have a good cafe close by, or really just want espresso at home.  Lots of these people buy great coffees to drink as drip – they might buy fresh whole bean coffee, well farmed and roasted, to drink alongside their Nespresso.

I remember watching a video as part of the presentation of Nespresso at the Allegra European Coffee Summit and being impressed, demoralised and a little inspired all at once.  Nespresso dominate in one particular aspect of coffee:  accessibility.

They make buying the product as friction free, easy and enjoyable as possible.  They make brewing it as easy as possible.  No skills, no cleaning, just push a button.  As the video showcased their new retail concept it seemed as if they’d made a list of the reasons people might not want to buy their coffee, and then built a store that ticked that list’s solutions off one by one.

Ultimately my point is this:  Nespresso and K-Cups success clearly demonstrate that people are happy to pay more for coffee.  They are happy to pay a lot more.  Their enormous sales volumes are solid evidence of this.  I don’t think we should be angry about how much they charge, unless we’re directing this at our own failures to reach that price point despite having better product.  One could infer that Nespresso’s success implies we’re way too cheap.

I’m not suggesting poor business practices amongst great roasters- but think about the possibilities for sourcing and financing great coffees, or building relationships that drive up quality, that Nespresso’s retail price point would give a speciality roaster. Nespresso have been pretty smart in their purchasing practices – certainly an entirely different animal to their parent company Nestle.

Ric Rhinehart’s quote in the NYT piece gets to the heart of things:  Selling by serving is a lot easier, more tangible and yet somehow more affordable to most people.  Selling by the serving has an out of home retail benchmark. In conversation on this topic Ric pointed out that many people don’t benchmark their K-Cup against a cup of black coffee from Starbucks (less than $2), instead they compare it to what they might have at a cafe, usually something much more expensive ($3.50+).

I don’t think we should be beating the drum of anger about Nespresso and K-Cups retail prices, unless we never aspire to them ourselves.  We should be learning the lessons they provide us – how to sell coffee effectively, how to make coffee at a higher price point more accessible – and answer some less comfortable questions such as why we’re considered overpriced, and why we might be inaccessible in comparison.

 Responses

One Bag at a Time – How much does your coffee cost

Daniel of Arabica – Hoffmann and the Nespresso

15 Comments

  1. James, I feel like your last paragraph there is just 100% spot on. I feel like accessibility and being able to brew great coffee at home, coupled with teaching consumers how to identify poor quality coffee (stale, past crop, faded) are definitely where we should focusing energies as an industry

  2. Quality vs Price vs Convenience shares an inverse relationship

  3. isn’t the success of nespresso due to their patent protected capsule design? no other roaster can legally sell beans to work in their machine. apparently the patent is due to expire soon, so that’ll be interesting.

  4. Sean, Here in the Netherlands the patent has run out and Sarah Lee jumped on the Nespresso bus. The long time users are used to the quality and selection Nespresso offers and are unwilling to change. I expect Nes will lose a small part of the market to SL but the original will keep outselling every fake.

  5. I think part of the reason a great shop is often viewed as overpriced (and inaccessible) while an expensive single-serve is celebrated in the home could have a lot to do with both the environment and attitude of the shop.  If the environment feels expensive inside, and perhaps the layout or menu doesn’t make it easy to know how or what to order, people are going to feel intimidated no matter what the price.  Price becomes sort of a scapegoat at that point I think, something to blame.  Top that off with baristas trying to “educate their customers” and suddenly someone feels like they need to read-up before they can get what they want.
    There needs to be some very serious care put into the topic of how to help customers identify, care about, and perhaps make a better cup of coffee without making them feel they have to adopt it as a permanent new hobby in order to have something decent.

  6. What an enormous success the Nespresso model has been. I saw a new company in Ireland (of all places) is now selling Nespresso compatible coffee pods at a discount! Check out http://www.justapod.com 

  7. Hallie, Im a barista at a specialty shop here in the US, and while I try to educate my customers, I 100% understand what you are saying.  Its difficult to find the fine line between being an educated and passionate barista, and coming off as a snob.  Its something that I attempt to not become every day.  Education of customers should be voluntary.  At the shop that I work at, we just started a public education program, where members of the community can come to our shop on thursday nights, and get free (or low priced) courses on cupping, brew methods and coffee production.  I really believe that this model is working better.  

  8. Excellent points!  Appreciate the honesty and clarity.

  9. If it is as said and Nespresso’s patent expires soon, would it not be possible to introduce our coffee into the industry via a reusable capsule that could be filled with fresh ground coffee. Our iside of the industry has been good at creating innovations for most equipment we use for brewing coffee?
    Just a thought :)

  10. The problem, as someone looking at the jump into home espresso, is that it DOES require commitment to a permanent (and expensive) new hobby to have a decent result, if you go the traditional route. Go on to any espresso forum and ask about a minimal home espresso setup, and people immediately start talking about $500 grinders and $1000+ HX machines. If you’re really willing to rough it, you’re told, you might be able to get a more modest setup for ~$600, and achieve “acceptable” results… sometimes, after months of practice.

    In the face of that, a $150 Nespresso brewer does not come off as the “more expensive” option, even if the shots do cost $0.60 each.

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