Mon, Apr 12, 2010 page11

• Nespresso is a hit in the UK and beyond

  FROTHY CONSUMERS As the recession sank in, coffee lovers began looking for cheaper alternatives to the neighborhood coffee shop — usually a brew at home

  • THE GUARDIAN
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  It is a busy lunchtime in the basement of the Selfridges department store in central London, and a sales assistant is waxing lyrical about the crema on top of a shot glass of espresso, the tan colored layer of froth that traps the flavor.

  The thickness of the foam is evidence, he said, of a good cup of coffee, and increasing numbers of consumers in Britain would appear to be convinced.

  Nespresso machines are fast becoming familiar sights on the kitchen counter tops of the chattering classes. While most of the economy has been struggling under the weight of recession, sales of Nespresso coffee machines have continued to grow at a rapid pace. Figures recently released by parent company Nestle showed the business growing 22 percent globally and by an even steeper 35.5 percent in Britain last year. It is Nestle’s fastest-growing business.

  You will doubtless have seen the advertising. US actor George Clooney, as smooth as the coffee he is selling, is outwitted by a beautiful woman who flatters to deceive and manages to take the last cup from under his nose. Filmed in Italy, by a Paris-based agency, the campaign is screened across Europe, but not in the US, a common ploy for a Hollywood actor looking to make a bit of extra cash without compromising his or her credentials at home.

  The company has one stand-alone store in Britain, behind Harrods, as well as concessions in Harrods and three branches of Selfridges, projecting an upmarket image, the small capsules of coffee presented in boxes like expensive chocolates. Across the world though, the company claims to have 7 million “club members,” people who take regular deliveries of the individual aluminum capsules to make an espresso, latte or cappuccino at home, described by one critic as “consumerism gone mad.” The capsule is placed in the coffee maker, a button pressed, and the hot water forced through, making an espresso. The ease of use is one reason that industry experts suggest Nespresso has been so successful. The machines cost anywhere from £119 (US$182) to £449.

  The strong growth in sales of the brand reflect the changing tastes in Britain that began with the arrival of the first branded coffee shops on the high street and which started to wean consumers off the traditional cup of tea.

  According to Mintel market research, the UK’s in-home coffee market has grown by 17 percent in value over the past five years, in large part as consumers trade up from the jars of instant to more expensive options. The market is expected to grow a further 25 percent by 2014, the research firm said, and will be worth about £976 million.

  Brema Drohan, managing director for Nespresso in the UK and Ireland, however, said habits were changing at an “imperceptible pace” and the company still serves a very niche market. The rapid growth, she said, was from a low base, although the company will not say how many machines have been sold in Britain.

  “Thirty years ago, in restaurants, your choice of wine was white or red,” she said. “Today, any half decent pub will have a choice of six or 10 whites and reds. The coffee market is a bit like that, but we are still at the sweet white wine stage in coffee. People still like long milky drinks with a shot of espresso. People have very ingrained behavior when it comes to food and drinks, and changing habits is a long, long process.”

  The brand was developed by Nestle in 1986 and this year is heading toward £1.8 billion in sales. It was launched in Britain in 1996, but Nestle began investing in earnest in 2000.

  The company licenses its brand to manufacturers including Krug and Magimix, which make the machines, and makes the bulk of its revenue from the sale of the coffee capsules. The coffee is not Fairtrade, but Nespresso said it works with the Rainforest Alliance. Nestle, no stranger to controversy, has been criticized for the wasteful packaging, but claims that it is testing ways of recycling spent capsules. If Clooney, meanwhile, sought to escape the public eye in the US by making the commercials for Europe, he has faced criticism at home for his links to a company that still has problems shaking off a troublesome reputation.

  Drohan stuttered at the suggestion that Nespresso is a purely middle class brand, and said the price of the coffee makers has made them a “treat” purchase at a time when consumers are having to forgo other, more expensive investments. The company wants to open a stand-alone shop in the West End — it has 190 around the world.

  Ben Perkins, head of food and drink research at Mintel, said the market was moving in Nespresso’s favor.

  “Economic turbulence has contributed to a shift in the way that consumers drink their coffee, which has largely been to the benefit of the in-home coffee market. As coffee shops have felt the effects of consumer belt-tightening, the in-home market has witnessed a good deal of trading up, as consumers endeavor to replicate the coffee shop experience at an in-home price,” Perkins said.

  The business is akin to the printer market, where the kit is relatively inexpensive, but the consumer is hooked on the ink for life. Nespresso machines only work with Nespresso capsules, but there have been reports that a former Nestle employee has set up a rival business and intends to start selling cheaper coffee capsules that can be used in the machines, in much the same way that big pharmaceutical firms come under assault from generic drug makers. Drohan said that no one at Nestle has yet seen the product, but not surprisingly, expressed certainty that the business would be able to see it off.

  “Any new competitor is a challenge, but ultimately we’re very confident,” Drohan said.
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