Published on March 5, 2014
INTRODUCTION • Instant coffee – No specific appliance • Coffee pods – Specific machine • Ground coffee – Classic coffee maker • Coffee beans – Automatic coffee maker with grinder
INTRODUCTION • Coffee shop • In the street • In-home • At work • Handpresso
INTRODUCTION Coffee Market
INTRODUCTION FOCUS ON : Coffee Pods market in the UK // global coffee market in the UK
t PESTEL ANALYSIS
POLITICAL Stability in government Cost-cutting plan by Cameron Britain's corporation tax rate reduced from 24% to 20% BBC iCan and the Royal Society of Arts have launched the Coffee Shop Challenge in association with Starbucks, Costa and Caffé Nero to throw again the idea of UK Coffee house • Trading agreements WTO = World Trade Organisation & ICO/A = International coffee Organisation/ Agreements • • • •
ECONOMICAL 56M£ UK coffee pod Market value1 7,5% growth in the coffee market in 20122 1The 2 X 2 in the past 6 years2 rise of coffee pod machine, The Guardian, 10 April 2013 Hospitality and catering news.com
ECONOMICAL • Economic crisis since 2008, 3rd recession • The UK deficit is expected to reach 6.1% of GDP in 2013 • The UK’s lost top AAA credit rating for the first time since 1978 • Income inequality • Inflation’s steady at 3% • UK = 3rd rank in the top 10 total purchasing power • Flexible economy
SOCIOCULTURAL COFFEE, SO TRENDY! > Barista is the new job > Latte art trend > A cup in every hand 22-28 April 2013 UK Coffee Week 500’000 participants in 4’000 coffee shops 3-6 April 2014 The London coffee festival
SOCIOCULTURAL FROM A DRINK TO A PASSION/DEGUSTATION
SOCIOCULTURAL CONSUME FRESHER & MORE ARTISANAL PRODUCTS & PROVIDE INFORMATION ON HEALTH ISSUES +/- MORE TRANSPARENCY
SOCIOCULTURAL SMALLER HOUSE Redesign smaller machines
SOCIOCULTURAL COFFEE SHOP FEELS LIKE HOME
SOCIOCULTURAL ALWAYS ON THE MOVE + LONGER WORKING DAY
SOCIOCULTURAL CRM & LOYALTY PROGRAMS MEAN A LOT
TECHNOLOGIC • Biodegradable pods / reusable / washable • Digital allows the brand to optimize communications > Reducing budget + Eco-friendly • Hyper connectivity : Mobile and tablet device • Multiple payment methods : Fingerprint on mobile/ pay with a tweet/ paypal/ contactless payment • Internet shopping trends
ENVIRONMENTAL • • • • • • Reusable & Greener cups & pods Composting of coffee ground Include water-saving technology in machines Recycling in store Development of hybrid vehicles > delivery Sustainable energy shifting > solar panels, wind power in factories
LEGAL • Labelling of ingredients is mandatory in Europe • Scotland has a GM-free policy, as does Wales. • In 2012, the GM industry met with ministers to promote the return of GM crops to Britain. In late 2012, Environment Secretary Owen Paterson and Prime Minister David Cameron began to make public statements in support of GM crops. • Employment laws : working time, age, minimum wages rate with farmers • Food standards agency is controlling food hygiene for safer goods
DEMOGRAPHIC 63M Of citizens in the UK in 20121 A cosmopolite country with 4 millions of foreigners > Various tastes 1 Demography of the United Kingdom, wikipedia
DEMOGRAPHIC AGEING SOCIETY
DEMOGRAPHIC GENERATION Y Headspace availability, fickle, instant gratification Children
DEMOGRAPHIC Regional GDHI per person UK map, 2011
DEMOGRAPHIC Proportion of people with no qualifications
GLOBAL • OECD international tax reforms • International coffee organisation was created in 1963 and is located in london, in charge of Improving quality, promotion, sustainable coffe, diversification, consultation, private sector, information provider, food safety • World Trade Organization (WTO): regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements
IN BRIEF PESTEL IN BRIEF P: Coffee shop Challenge initiated by the government E: Still in crisis, but coffee is considered as an affordable indulgence S: Passion for coffee, but as a strong trend it will fade away T: New means to facilitate consumption and payment E: New means to lower the footprint carbon & be more eco-friendly L: Labelling mandatory & GM future policy? D: Ageing society G: Great # of coffee organisations
RIVAL FIRMS A VERY STRATEGICAL AND ATTRACTIVE MARKET 70 million # cups of coffee drunk 74% of english people drink coffee and 48% drinks coffee pods each day In 2011, consumer retails spend on coffee was 941M£. The market is set to grow to a £7bn turnover by 2015 Mintel Coffee UK April 2012 Report.
RIVAL FIRMS HIGHLY COMPETITIVE MARKET WITH APPROXIMATELY 50 RIVALS • • • • Coffee Shops chain Independent coffee shops Traditional cafetieres Pods machines Nespresso owns 34% of market shares The most sales are made by Nescafe Dolce Gusto and Tassimo Britons spent £56.1m on pods between February 2012 and 2013, up 45.1% year on year. Nespresso is the best known brand. The rise of the Coffee Machines, the Guardian, April 10th 2013
RIVAL FIRMS NOT MUCH DIFFERENTIATION Senseo Filter pods NESPRESSO Aluminium pods Tassimo Plastic pods – T discs Machines + pods Different beverages Only Coffee called Grand Crus and Variations Different beverages Same global approach but Nespresso is the only brand to provide a 19 bars power Coffee, “du rififi dans nos capsules”, Arte, April 10th 2013
RIVAL FIRMS FIXED COSTS & ECONOMY OF SCALE Fixed costs are heavier for the Nespresso brand than for the competitors Stores rent / Own employees are part of this feature Economy of scale is largely developed for all brands, as their production capabilities are enormous
RIVAL FIRMS EXCESS CAPACITY & EXIT BARRIERS Excess capacity is a reality in coffee marketing, but tend to decrease with the Fair Trade organisation work High exit barriers: • Specific assets • Existing contract with customers • Block by the brand importance • Cost of exit • Loss of bargaining power with different parts • Loss of the shareholder confidence • Psychologic and affective reasons
SUPPLIERS HIGH CONCENTRATION & A CERTAIN DEPENDENCY TO SUPPLIERS • Numerous suppliers and high concentration but Nespresso choose to build strong and long-lasting relationships with farmers from the rainforest alliance • Employees solidarity and strong sense of firm’s belonging • Supplier switching costs are really high as the pods market has setted new habits • Nespresso choose an ultra premiumisation for its product
NEW ENTRANTS STRONG ENTRY BARRIERS • Initial investment costs are high • Need a lot of time to make the firm profitable • High communication and advertising campaign investments to position a new brand : Nespresso /Star endorsement • Loyalty is very strong in the coffee pod market • Brand awareness of existing competitors • Norms and technical standards are required to start a business • Cultural barriers, even if coffee is growing, the main beverage in the UK is Tea • The expected retaliation is very strong, as all the existing competitors will join to block the new one
BUYERS NUMEROUS CUSTOMERS & NUMEROUS BRANDS 50 70 million Rivals In the global coffee market # cups of coffee drunk each day 3 Major competitors in the pod market Mintel Coffee UK April 2012 Report.
BUYERS DIFFERENT RETAIL / DISTRIBUTON STRATEGY 300 Own stores, Online, Appliances retailer stores No other distribution channels Different distribution solutions Multiple retailers / Online More accessible to the customers Also more dependency to the retailers
BUYERS BUYER SWITCHING COSTS ARE HIGH Machine: 61£-150£ 0,16£ per pods Different ranges Machine: 100£-130£ 0,25£ per pods A lot of different range + Partnerships: Costa/ Kenco Machine: 89£-500£ 0,29£ to 0,35£ per pods « Premium » coffees Grand crus Impossible to use other brands pods NESPRESSO = VENDOR LOCK-IN EFFECT
BUYERS EACH BRAND ITS STRATEGY • Price sensitivity is low as they all have a specific market area. No alignment strategy. • Differential advantage is high, each brand try to build its own image Nespresso : Premium – Eco-friendly Tassimo : Optimisation of the consumption thanks to the bar code, variety of products Senseo : Cheaper, easy, practical • Recency is High. Coffee market is old but the pod ones is new • Frequency is High as it’s a day-to-day product • Monetary is High. Coffee isn’t that expensive in general but the pod products are much more expensive : 3 times more expensive
SUBSTITUTES LARGE SUBSTITUTES CHOICE Buyers can easily change their consumption for a subtitute like: • Tea: Cheaper • Hot chocolate: More expensive • Chicory: Cheaper • Energy drinks: More expensive • Sodas : More expensive • Fruit beverages: More expensive • Subtitutes are generally expensive. People tend to prefer coffee even if the price per Kilo for Nespresso is 60£. Coffee is still perceived as an more affordable indulgence. • The perceived level of product differenciation is high as the customer of coffee pods almost belong to a specific community
NESPRESSO IN BRIEF • • • • • • • • Not a coffee è A Grand Cru + Variations Product presented in a case (Jewellery reference) Specific store in premium areas, no prices posted No sales assistants è Coffee specialists No classic retailers Online buying implies registering High investment in advertising = Star endorsement Vendor-lock in effect = EXTREME PREMIUMISATION
TANGIBLE RESOURCES INTERNE FINANCIAL Nespresso SA is affiliated to Nestle SA Nestle : A very profitable company with great financial capabilities • • • Value estimated: 228 Billion CHF Net margin around: 11,4% Cash flow: 15,8% Nespresso sales progression: +20% (2011/2012) Nespresso annual turnover= 3 Billion CHF in 2013 Comfortable leader position
TANGIBLE RESOURCES INTERNE PHYSICAL • 2 factories for the pods + 1 more to come • Over 300 Nespresso Stores in 2012, compared to 1 in 2000 • In almost 60 countries • One step ahead the competitors thanks to regular competitive intelligence HUMAN • Over 8300 employees around the world including 1’300 coffee specialists
INTANGIBLE RESOURCES INTERNE TECHNOLOGY • Great innovation based on Nestle strong R&D capabilities • Nestle was able to partially change the coffee value chain • Nespresso system, a UNIQUE system: The only machine with 19 bars power • 1700 patents, made public since 2012
INTANGIBLE RESOURCES INTERNE REPUTATION The Unique Coffee Luxury Brand 12’300 cups of Nespresso coffee drunk every minutes AAA quality coffee Nespresso Club: the most efficient CRM system in coffee market: 7 millions members • Transparency policy • Recycling: Begin to implement it, but not convincing enough • • • • CULTURE • New way to consume coffee: Indulgence • Belonging sense / The club • Coffee culture : Total expertise
HUMAN RESOURCES INTERNE SKILLS • • • • Perfect knowledge of coffee industry Unique R&D department focused on innovation/ Technology Unique route to market Nespresso = The big Coffee brother COMMUNICATION & COLLABORATION Only few partnerships : Raw material/ the biggest firm of cafetieres manufacturer Advertising+ CRM with big advertising through Star endorsement Nespresso as a sponsor
HUMAN RESOURCES INTERNE MOTIVATION • • • • NCS as a chance of being more flexible & agile Change in management to improve efficiency Innovative climate Salesforce considered as Coffee Expert
STP Segmentation: Drinkers Hot drinkers Coffee drinkers Espresso drinkers
STP Main target: Coffee drinkers • • • • People between 24-80 yo, On average 7 coffees per week Looking for really good quality Easy serving method Persona: Kate, 32 years old, saler, she has a part time job and she is a very demanding person
STP Core target: Coffee Aficionados • • • • • • • 25-60 yo More than 7 coffees a week Considering themselves almost as coffee Expert SPC++, very active workers In search of headspace availability Easyness and instant gratification Coffee is a energizer/ and a degustation = daily indulgence Persona: Georges 52, years old manager in an international company, working 9 hours/day,he can’t begin his day without a Grand Cru coffee
STP Secondary target: B2B / Business Offices: Companies, and firms in search of a more qualitative coffee Hotels/ Restaurants Travel: First class in Airlines/ Trains Influencer group target: Press journalists Offline/Online Bloggers Vloggers
STP Advantage for main target: Tasting and discovering new affordable, premium and easy coffees at home Advantage for core target: Enjoying the most premium and easy-making coffee on a day to day basis, with services that make their lives easier (Delivery…) Advantage for secondary target: Serving premium coffee to their customers, benefiting of the worldwide quality reputation of Nespresso Advantage for influencer group target: Talking about a trendy and innovative product/brand
4P Product: Machine + Pods + Services Wide range STP Place: Unique route to market in own distribution networkOnline/ Call-centers/ appliances retailers stores Price: Machine from £89/1530 Pods from £0,26-0,35 Constant promotion on the machine = Vendor lock-in Promotion: Advertising campaigns, Social Media, SEO/SEM, Buzz, dedicated platforms, Event, partnerships, sponsoring, co-branding, mobile, CRM program, Nespresso magazine, limited editions, app, stores, mailing, goodies. A premium brand providing a highly qualitative all-in-one offer that allow people to consume the best coffee at home
STRATEGIC OPTIONS FOCUS DIFFERENTIATION • Creating highest quality « Grand Cru » coffees • Creating long-lasting consumer relationships • Creating sustainable business success Positioned between selling existing products to existing customers and developing new products to sell to existing customers groups
STRATEGIC OPTIONS FOCUS DIFFERENTIATION THANKS TO • • • • • • • • Luxe / image of exclusivity Based on high-quality products Specific vocabulary Extensive customer service Premium pricing Unique route to market Exclusive club of like-minded « coffee experts » Lifestyle / feel to belonging / elite group of customers
RECOMMENDATION Machines • Create a new coffee machine range è Smaller ones • Including Water-saving technology • Machine pre-adjustable which make coffee one itself at a precise time, on the morning è Woke up by the smell of a fresh auto-served coffee Services • Implement an easier collecting service for used pods è the delivery man takes the used pods • Deepen the experience in store to make a “at home” space for customers è Hybrid space • Selling branded greener cups è Your Nespresso follows you • Coffee workshop to become a Coffee expert • Implement a new tab on the website to help people repairing their machines thanks to an interactive FAQ or a video chat system. CRM programs • Sponsoring your friends in a Win-Win offer • Try the machine for £5
RECOMMENDATION Possible integration Invest as much as possible in the firms which make our machines like Krups or Magimix Development Develop Pop up stores in smaller towns to test profitability If profitable install new stores Invest in a eco-friendly delivery system è Hybrid vehicles
THANKS FOR YOUR ATTENTION Q’S & A’s
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