Internationalization of a brand: The case of Nespresso
— International Marketing — 2nd December 2009 www.oboulo.com
First, to introduce this company one should notice that it is one of the most successful global brand that hasbeen recently launched. Despite being physically present in only 35 countries, Nespresso is worldwide famous. Thanks to its consistent premium positioning and a long-term innovative strategy, the brand manages to reach a wide base of customers. Created in 1986, the company is wholly owned by the Nestlé group but remains an independent entity dedicated to the homebrew premium coffee market.Secondly, one could only be impressed by the successful strategy the brand put into place. Combining a specific distribution strategy with a strong and consistent positioning, Nespresso succeed in turning a daily product into a luxury good and therefore changing consumer habits. Thanks to its numerous competitive advantages that we will analyzed further on its study, the brand establish itself as thereference for premium homebrew coffee on this highly competitive market. Most of all the Nespresso case study integrated many concepts we learned during our classes in International Marketing. Our work will begin with a focus on the brand itself and the market targeted. Then the analysis of the triggers for the internationalization will be developed, following by a deep focus on the strategy. The lastpart will finally establish the crucial role of branding and the communication mix of Nespresso. Being iconic and successful, Nespresso is, at our eyes, a great example of a born global brand that implemented a powerful and consistent international marketing mix.
Here are some key facts about Nespresso in 20081 : • • • • • • • • • • • 25 % annual growth since marketintroduction in 1988 34% growth rate in 2008 Turnover of €389 million More than 1’000 employees Global leader 18.5% market share in espresso machines worldwide Present in more than 35 countries 17 subsidiaries More than 70 independent agents representing Nespresso Professional 16’000 points of sale 33 Boutiques 1,6 million active affiliated Nespresso Club members
The history began in 1970 when theNestlé Group filed the patent for its unique pressurized coffee extraction process (see appendix 1 for the description of the patent). Ten years later was created the Nespresso SA Company which is until now wholly owned by the Nestlé Group. The Nespresso System was launched at first in Switzerland and Italy with coffee machines manufactured in partnership with Turnmix while the capsulesproduction was in Nestlé’s factory. From 1987 to 2004, the brand began its expansion firstly to Japan, followed by main European countries and the U.S.A. Nespresso is also launched in the Middle East, Malaysia, Singapore, Taiwan and Hong Kong. In 1986, the Nespresso Professional line of products is developed. It aimes at provinding convenient coffee machines and premium-portioned coffee to SMEs and topremium hotels as well as many airline companies. Launched only in Switzerland, Italy and Japan this line was a complete disaster. Only 875 machines were sold the first year. Why such a failure? The line was first sold as a system : one product, one price. The distribution system was too ambitious. The purchase of a Nespresso system would engage the company into a new retail system. The change ofsupplier was considered as too costly. Moreover the daily consumption is very high in offices, the coffee expenses would have explosed. The question for the budget responsible remained : how to justify such a high price, especially when the daily consumption is very important ? Secondly, of all the countries targeted have very various representations and consumptions habits toward coffee.