On Monday, Mondelez said it would launch its own capsules for use in Nespresso machines under its own Jacobs and Carte Noire brands in Austria, Germany, France and Switzerland in H2 of 2013, and Roland Weening, global VP, strategy, marketing and innovation, coffee, promised competitive pricing and consumer “freedom to prepare the coffee they love in the manner they like”.
We asked Nestlé whether it considered the Mondelez move legal – given that it has launched legal action in various European countries to try and halt sales of rival pods from the Ethical Coffee Company (ECC) – and how confident it was that it could compete in terms of quality and price?
Nespresso won’t speculate on future legal strategies
Diane Duperret, Corporate PR Manager, Nestlé Nespresso, told BeverageDaily.com this morning: “As you know, competition is nothing new for Nespresso and today we compete against approximately 100 competitors worldwide, including 50 that claim compatibility with the Nespresso system.”
She added: “While we are not going to comment on the plans or actions of specific competitors, we have found that despite the entry of competitor capsules that claim compatibility, consumers continue to choose Nespresso for the quality of our coffee and service.”
Nestlé does not break down financial results for its $4bn+ Nespresso business in detail, but in FY2012 the company claimed double-digit growth in its Nespresso business worldwide, and said in its FY results announcement that it “continued to reinforce its position in Europe”.
Duperret refused to “speculate on our future legal strategies”, but said that the company continued to monitor the market, and would “take action against products that we believe infringe our intellectual property”.
'Cash-strapped consumers' will vote with feet: Jonny Forsyth
For Nestlé, the Mondelez move means it faces the double indignity of not simply having a powerful multinational competitor produce pods for its machines, but also the fact that these carry rival brand names such as Carte Noire and Jacobs, which carry significant heft with consumers.
The move is especially disquieting given Nespresso’s premium credentials (Grand Cru launches in 2012, for instance) given that Carte Noire claims to be the leading premium coffee brand in France (a key EU market for coffee capsules), while Jacobs is a $1bn brand dating back to 1895 in Germany.
Jonny Forsyth, Mintel global drinks market analyst, told BeverageDaily.com today: "My view is that, this is very bad news for Nespresso and will eat into its European profits substantially.
"Despite many attempts Nestle has so far been notoriously unsuccessful in mounting a legal challenge to stop these imitators. While the Nespresso machine itself has real kudos in Europe, cash-strapped consumers will welcome cheaper compatible pod options - especially those from a brand they already trust," he added.
"The only way I can see it not working is if consumers notice a big difference in taste, and this is really unlikely," Forsyth said.
Also on Monday, Mondelez said it would launch Carte Noire and Jacobs capsules for its own Tassimo coffee system, hailing the move as a significant investment in Europe’s $2.8bn single-serve category.
In mid-February the Dusseldorf District Court ruled against granting Nestlé an injunction to stop sales of ECC capsules in Germany, stating that latter was not in breach of patent.
The court said that capsules made by third-party manufacturers do not form the key element of Espresso machines, or have the distinctive features of an invention.