Nespresso brought its single-serve capsule coffee system into New Zealand in 2011. While Nielsen’s latest report puts New Zealand’s coffee capsule category as being worth just 3 percent of the total coffee market, capsules are experiencing value growth of 202 percent year on year. There’s plenty of room for expansion, as well – Nielsen says that in Europe, portioned coffee accounted for 19 percent of total volume of coffee sales in 2014.
Guillaume Chesneau, Nespresso’s New Zealand country manager, says he’s aware that net consumption of coffee within New Zealand is not increasing, but he won’t attempt a guess at whether Nespresso is replacing instant coffee or espresso. However, he is anxious to emphasise that Nespresso is not here to put anybody’s favourite cafe out of business.
“There’s no wrong way to drink coffee,” he says. “The right way to drink coffee is the way you like.
“We’re not here to try to force people into anything.”
Nielsen reports that the coffee market grew by 4.7 percent in the year to April 2015, amounting to $218 million in sales. It says café-style coffee and capsules are accountable for this increase. Kiwis may or may not be drinking more coffee, but they’re certainly spending more money on it.
Chesneau won’t be drawn on why Nespresso is so popular, but he will say that the product is accessible; the shopping experience is fun; and the convenience aspect behind single-serve capsule coffee is compelling. He believes New Zealand is following a global trend around ‘premiumisation’ of coffee.
“Nespresso generally flourishes in markets where people have a good knowledge of coffee.”
Nespresso’s success comes, in part, from its complete control over every aspect of the brand. It avoids participating in the highly volatile commodity markets by purchasing directly from a pool of more than 63,000 coffee farmers, and maintains tight control over the manufacturing process.
Until 2012, patents ensured that only Nespresso-branded capsules could be used in its machines, but upon their expiration, a plethora of third parties have raced to provide alternatives.
If consumers choose to stick with Nespresso capsules, they can make their purchase through many different channels. There’s an app, an ecommerce portal averaging 320,000 global transactions a day, and New Zealand’s four boutiques, plus a pop-up outlet on Auckland’s North Shore. Data from the ‘Nespresso Club’, Nespresso’s in-house loyalty programme, was used to decide the pop-up’s location.
The direct relationship that the loyalty programme allows has been very important to the company, Chesneau says. The company’s phenomenally successful partnership with actor George Clooney sprung from Nespresso Club input – the company asked club members who they wanted it to partner with, and they nominated Clooney.
“The power of having a direct relationship works very well,” says Chesneau. He adds that this is another way Nespresso can control its customers’ experience.
Each Nespresso boutique is carefully fitted out to create an environment which supports an optimum brand experience. They all contain a degustation area where shoppers can taste the coffee; a display area for Nespresso machines; another display for branded accessories; and a recycling facility for spent aluminum capsules.
Every one of the more than 400 boutiques worldwide also boasts Nespresso’s trademark “capsule wall”. This showcases the 23 different varieties of Grand Cru coffee capsules.
Chesneau believes the capsule wall is the most recognisable feature in the boutiques. It was introduced in the first Nespresso boutique, which opened in Paris around 15 years ago, and while there have been tweaks to the fit-out, the concept remains the same.
“It’s about creating an embassy for the brand,” says Chesneau.
Through branded accessories and machines which require minimal user input, this “embassy” concept is extended into the consumer’s home, meaning Nespresso can guarantee a remarkably consistent result. This translates well across products which have traditionally been treated with little respect by baristas, such as decaffeinated coffee – while many cafes let their decaf beans sit around and oxidise as they’re requested less often by customers, Nespresso’s decaffeinated coffees are sealed to the same standard as its caffeinated varieties. The two are indistinguishable in taste.
Of course, no system is foolproof, and there are a few ways that determined consumers can ruin their Nespresso coffee. Chesneau has heard of people who miss the memo about portion control and try to reuse coffee pods, as well as those who hold the machine’s button down and overextract the coffee until their mug is full. Both mistakes result in burnt, unpleasant coffee.
Nespresso’s next step relates to sustainability, for which the company has been criticised. Its current recycling programme requires customers to bring their spent coffee capsules in to a boutique – it even offers a $35 “sleek and ergonomic” recycling container to help them do it. The aluminum capsules can go into standard kerbside recycling, but the coffee grounds must first be separated out.
The company has recently partnered with florists in Australia and New Zealand to expand its network of recycling drop-off points. There are now 30 in New Zealand. Chesneau says Nespresso is currently in talks with a national player which, if the partnership goes ahead, will expand the network to more than 250 recycling points throughout New Zealand by the end of 2016.
It seems Nespresso is well and truly here to stay.