February 8th, 2012

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.


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

Daniel of Arabica – Hoffmann and the Nespresso

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