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ADVANCED MARKETING

INDIVIDUAL ASSIGNMENT
ANA SOFIA COSTA TERESA FERNANDES

MARIANA LOPES
#2784

NESPRESSO POSITIONING STRATEGY


INTRODUCTION
The aim of this assignment is to analyze the current Positioning Strategy of Nespresso, a
coffee brand belonging to the Nestl Group, the worlds largest consumer goods company.
Characterized by their sophisticated machines that brew coffee from capsules, Nespresso is
an autonomous global business unit of Nestl, catering to both the private and business
sectors. For this report, the focus will remain on Nespressos positioning in the Portuguese
coffee market. There will be a brief description of the brand, its presence in Portugal, and an
overview of the coffee market in Portugal. Later on, Nespressos Positioning Strategy will be
assessed and recommendations will be made.
Regarding methodology, to better understand the perception of Portuguese consumers
towards Nespresso, a questionnaire was conducted, collecting information about
consumption habits, competitors and sociodemographics of 44 coffee consumers, that
include Nespresso clients. Although not particularly representative, this sample was still
valuable in gathering some insights relative to purchasing habits and their experience as a
Nespresso consumer. Apart from primary search, there was also a great involvement
analyzing secondary data, mainly through Euromonitors Passport global market research
system.
THE BRAND NESPRESSO
Headquartered in Lausanne, Switzerland, Nespresso was created in 1986 by Nestl employee
Eric Favre. After its implementation in the Swiss and Italian markets, the brand expanded
across Europe during the 90s. The focus remained mainly in big cities, where Nespressos
values of a cosmopolitan lifestyle matched the local environment.
Nespresso was a pioneer of the portioned coffee segment. Nowadays, Nespresso is a
worldwide icon for coffee consumption and experience, with 400 boutiques present in 62
countries.
The Nespresso system is built upon 3 main pillars: capsules, coffee machines and the
Nespresso club. It combines coffee of the utmost quality, state-of-the-art coffee machines,
and customized exclusive customer service.
Their success is based on the quality of their wide range Grand Cru lines, and only 1-2% of the
coffee produced worldwide matches Nespressos strict standards of taste and aroma.
It has two main business segments: direct-to-consumer and business-to-business sales. While
the former focuses on at-home consumption; the latter focuses on out-of-home
consumption, mainly in restaurants, bars, offices and hotels.

NESPRESSO POSITIONING STRATEGY


Besides, Innovation is a priority, not only through the development of new machines to better
suit consumer needs (e.g. the VertuoLine, designed to specifically address American
consumers preference for larger coffee cups), but also through limited editions and packs of
exotic blends.
In 2014, Nespresso announced The Positive Cup, a sustainability strategy that commits to
achieving environmental sustainability and improving farmer welfare. The goal is to achieve
100% sustainably sourced coffee, along with 100% sustainably managed aluminium and
carbon insetting.
Furthermore, Nespressos customer-centricity is further enhanced through the Nespresso
Club, the name by which the consumer community is designated. Club Members are offered
personalized service and offers, and feedback from clients is fomented in order to provide
the ultimate coffee experience, either through boutiques, Customer Relationship Centres or
the brands website.
NESPRESSO IN PORTUGAL
Nespresso was the first brand to introduce coffee capsules system in Portugal. It joined the
Portuguese market in 2003. Nowadays, it is present through 17 boutiques across the country,
mainly in larger cities (9 boutiques in the Lisbon area alone). The brand is also present through
over 300 retailers nationwide that provide the Nespresso machines. It has an Online Shop,
available through the companys website, where consumers can have access to Ordering and
Delivery Services.
Nespresso also implemented a Recycling service in Portugal, where consumers can easily
deliver their capsules for recycling through 200 nationwide recycling points, or boutiques.
THE COFFEE MARKET IN PORTUGAL
In 2015, the coffee market continued to grow either in current value and in retail volume,
growing 4% and 2%, respectively.
The continued growth of the coffee market is supported by the current success of of fresh
ground coffee pods (capsules). The popularity of this segment is highly intensified by the
presence of international brands such as Nespresso, local brands like Delta Q, or even private
labels like Pingo Doce (that developed its own capsuled-coffee machine). These brands were
the main drivers towards the good results of this category.
Moreover, the ongoing slow recovery of the Portuguese economy (since the end of 2013),
has positively contributed for these outcomes. With positive GDP growth and a decrease of
the unemployment rate; along came a positive impact in the foodservice. Portuguese

NESPRESSO POSITIONING STRATEGY


consumers, that facing an economic recession had suspended the habits of going out for
breakfast or lunch, are slowly picking up on the routine, even if not as frequently.
Nestl Portugal SA remains the leading player in the market, with a 37% value share. Nestl
comprises the international player Nespresso, and also Nescaf Dolce Gusto, among others.
It is mainly thanks to these two brands that Nestl remains leader. During 2015, both brands
experienced the launch of new machines and coffees to continuously attract consumers,
Nespresso focusing on limited editions.
Nutricafs showed the biggest increase in market share. The company, representing brands
like Nicola and Chave DOuro, entered the coffee market in 2012, providing three coffee
blends that were compatible with Nespresso machines. It has since added two more
references to its range and is quickly gaining visibility among customers. Not only they value
the quality of Portuguese coffee, but also the lower price and easier accessibility, since they
are widely available in supermarkets and hypermarkets.
In fact, domestic brands continue to be popular in the Portuguese market. As a result of
Portugals heritage regarding coffee consumption, local manufacturers are leaders, only
surpassed by Nestl. The most important local players are Novadelta (with the Delta brands),
Nutricafs with Nicola, and Grupo JMV with Torri. Combined, these companies make up for
30% market share.
The most recent observable trend lies on the investment several companies are making in
producing coffee pods compatible to other brands machines, namely Nespresso and Delta Q.
Small player Kaffa invested in Delta-compatible pods, whereas Bicaf heavily invested in
Nespresso-compatible pods. These small players represent a real threat, considering their
lower prices and easier accessibility.
As a matter of fact, Portugal is the only market in Western Europe where Nespresso struggles
against local coffee players. Over 2008-2013, Nespresso lost almost half of its volume share
of the pod coffee machine market to Portuguese company Delta Cafs SGPS, as well as to
private label and other players. (Euromonitor, 2014)
The vast popularity of Portuguese coffee brands, along with the rise of cheaper coffee
capsules, may further affect Nespressos performance, that has been presenting a constant
decline, whereas competitor Delta Q has been witnessing equivalent growth. (Exhibits 1 and
2)


NESPRESSO POSITIONING STRATEGY


PRIMARY RESEARCH ANALYSIS
An online questionnaire addressed to Portuguese coffee consumers was applied. The
questionnaire was answered by a total of 44 people. One of the goals was to get insights of
the coffee consumption habits of Portuguese coffee drinkers. Furthermore, questions were
asked with the aim of exploring their relationship with Nespresso (e.g. Do you own a
Nespresso machine?, Where do you buy Nespresso?), but also their familiarity with the
Capsuled-coffeee system, now amplified by other coffee brands. Due to the rise of coffee
brands that recently started providing coffee capsules that are compatible with the original
Nespresso machines and that sell at a lower value, it was also relevant to understand the
impact these new brands had on coffee consumption, and Nespresso specifically. Moreover,
those who were regular Nespresso buyers were asked to evaluate the brands offers, whether
in terms of customer service, price of products, accessibility and variety.
To all respondents, it was asked for them to mark the three adjectives/nouns they associated
the most to the brand, in order to conclude how the brand was perceived by the general
public. Although the sample of 44 respondents is not particularly representative, I believe it
is still possible to take some valuable points regarding consumption and purchasing habits, as
well as the perception of Nespresso by its consumers.
Main results/conclusions:
There is no significant difference on the motives for drinking coffee (either to feel
awake, because of its taste, to have a break), but the sense of personal pleasure and
reward does stand out (29% drink coffee to treat themselves).
40% answered that coffee makes the feel energized and more than half of the inquired
(53%) state to consume more than 10 cups of coffee per week (certainly more than
1,42 coffees per day).
Consumers mainly consume coffee during Work/School Hours. Breakfast and Lunch
are also preferred occasions.
Home, Work and Cafs are preferred places for coffee consumption.
75% of the inquired consumers own a Capsuled-Coffee machine, and within that
number, 64% own a Nespresso machine.
Nespresso is the most mentioned brand consumed, but other brands that provide
coffee capsules compatible with the Nespresso system are also frequently mentioned.
Delta Q is the preferred brand of machine of the non-Nespresso users.

NESPRESSO POSITIONING STRATEGY


Consumers justify the use of other capsule brands mainly with Price (37,7%) and
Convenience/Store Location (29,5%).
Only 30% of the Nespresso clients use its Online shop, and only 14% use it exclusively,
being that most of the Nespresso purchases are made in-store only (64%).
Nespresso buyers are very satisifed with Customer Service and Product Variety, but
Store Location and Price tend to be of neutral appreciation (majority ranked both
categories 3 out of 5).
The words that are most associated to Nespresso are: Expensive, Taste, Exclusivity and
Quality.
NESPRESSOS POSITIONING STATEMENT
To cosmopolitan men and women who seek exclusivity and want a special moment to fulfill
their day, Nespresso is the brand of coffee for all settings which offers and exclusive, superior
and premium coffee experience that goes beyond the typical, because it embodies elegance,
quality and superior taste.
NESPRESSOS POSITIONING STRATEGY
Nespresso has embranced a differentiating strategy through an image of exclusivity. It is
based on high product quality, a commitment to customer relationships and service, and a
premium pricing.
Nespresso is able to emphasize its exclusivity approach through its route to market. Whereas
machines are easily available through retailers (over 300 in Portugal), its coffee pods are
harder to access (17 boutiques or Online Store).
The brand intends to convey a lifestyle with its products. Nespresso consumers believe to be
connoiseurs of coffee, a restricted group attracted to exclusivity. Hence, Nespresso positions
itself as a high-premium brand and creates a tight knit among clients which the brand likes
to call The Nespresso Club. Through this superior positioning, the brand is able to charge a
premium price, especially compared to other local brands in Portugal.
Besides the undeniable product quality, for Nespresso, it is all about the experience.
Accordingly, a tremendous effort is put towards customer relationship management, mainly
fostered through The Nespresso Club. This club is provided with a wide variety of customer
services, that go from ordering, company news and expert advice on coffee. Every consumer
that purchases a Nespresso machine automatically joins the club (since they need to be
members to then purchase capsules) and therefore receive the personalized one-on-one
treatment, either in the Nespresso boutiques or through online support. Thus, right at the

NESPRESSO POSITIONING STRATEGY


first moments of interaction, Nespresso is already able to collect valuable consumer data like
contact details or machine characteristics to then adapt their communication with the
consumer. Additionally, by keeping track of purchasing habits, specific services can be
directed to specific segments, and customized offers can be provided. Nespresso believes
their club members to be the best brand ambassadors.
Complementarily to this strategy, Nespressos brand promotion proves alignment between
its positioning and social media strategies. Its stylish yet traditional advertisings are fully
displayed around social media platforms. Along with that, the collaboration with George
Clooney in Nespressos commercials not only increase visibility but also further highlight the
brands core values.
POSSIBLE PROBLEMS
Bearing in mind both the Primary and Secondary researches conducted, it was possible to
identify potential and real problems faced by the brand.
Despite its strong positioning as an exclusive and premium coffee brand, the fact is that local
Portuguese players are gradually enhancing their position in the coffee market. Although it
could be argued that Nespresso and other local brands are not direct competitors due to the
latters lack of premium status, the fact is that recent developments in the ground coffee pods
category are likely to affect Nespressos performance in the market in the long run.
Ever since Nespressos capsule patents began to expire in February 2012, that companys
started developing Nespresso-compatible pods that sell at a substantially lower price than
Nespresso, not to mention their much wider availability. Similarly, Delta Q gained
considerable advantage with their lower-priced own machine and capsules. As a matter of
fact, between 2008 and 2013, during a severe economic recession, while out-of-home coffee
consumption decreased, the category of coffee ground pods boomed. That was when Delta
took the opportunity to launch its own system, and during that period Deltas sales volume
doubled, while Nespressos declined by 16% (Exhibit 1). This comes to show that despite
Nespressos distinctive positioning, other more affordable alternatives dont go unnoticed
among consumers, even if they may mean inferior quality.
All in all, Nespressos Points of Difference (Customized Relationship, Exclusivity, Premium,
Quality, Status) may not be sufficiently distinctive for consumers. It seems that convenience,
accessibility and affordability are becoming more and more attractive, even for Nespresso
clients, that at least are more likely to try other brands.

NESPRESSO POSITIONING STRATEGY


RECOMMENDATIONS
Nespresso must find a way of leveraging its position and remain strong in the Portuguese
market. More so, due to Portuguese consumers acceptance towards local brands that now
offer the same system as Nespresso, at a lower price, with facilitated accessibility, and still
high quality perception.
Despite its costly but successful approach to customer relationship management, it does
seem to have created a strong bond with customers, leading to loyal clients and customer
retention, only recently being threatened by changes in the competitive landscape.
Nespresso needs to take advantage of this already implemented system to further enhance
Nespressos shopping experience and further legitimize its position.
Through digital and social media, Nespresso can strengthen its bond with consumers, given
that the exclusivity of store locations may undermine the personalized interaction.
Furthermore, it is a more affordable way of engaging customers with the brand, since short
powerful videos can be produced at a low cost and still having impact of social media
platforms (Instagram, Facebook, Twitter). It can be especially useful in order to foment brand
awareness among young consumers that are, or are likely to become, coffee lovers.
Nevertheless, because of the increased competition, those efforts may not be enough.
Therefore, and based on consumers feedback, Nespresso should perhaps directly tackle the
categories in which consumers are not so presently satisfied (Store Location, Price). Hence,
Nespresso could work towards becoming more easily available, yet without losing its
exclusive character (controlled expansion). Although product variety does not seem a
customer concern, Nespresso could further enhance customer experience by allowing for a
greater mix of blends when purchasing. Not only that would be different from competitors,
but it would also emphasize Nespressos exclusivity status without needing to lower the price
premium that, at the end of the day, is also part of Nespressos identity.
CONCLUSION
All in all, and despite being difficult to predict the impact of new brands in Nespressos long-
lasting performance, they still need to be addressed as real threats. Although there is a
reasonable chance that consumers will be quickly fazed by Nespresso-compatible capsule and
not be willing to give up premium quality, the threat of other big players like Delta Q or Dolce
Gusto are more plausible. Despite having the investment on a Nespresso machine a
considerable switching cost for current clients, that factor does not apply for potential
customers, and that is where Nespressos biggest challenge lies.

NESPRESSO POSITIONING STRATEGY



APPENDIX

Exhibit 1













Source: Euromonitor Local Players Take Share from Nespresso in


Portugal , April 2014


Exhibit 2

NESPRESSO POSITIONING STRATEGY




PRIMARY RESEARCH Main Overview

WHY DO YOU DRINK


COFFEE?
29%

27%

24%

HOW DOES COFFEE MAKE


YOU FEEL?
40%

20%

T O W A K E U P

I T T A S T E S
GOOD

T O H A V E A
BREAK

T O T R E A T
MYSELF

ENERGIZED

31%

29%

H A P P Y

RELAXED

WHEN DO YOU DRINK


COFFEE?

HOW MANY CUPS OF COFFEE DO


YOU DRINK PER WEEK?
1 - 3
3 - 5
3%
10%

84%

5 - 7
9%

64%

57%
41%

30%

10+ cups
53%
7 - 10
25%

BREAKFAST

L E I S U R E
A N D B R E A K
TIMES

W O R K
HOURS

LUNCH

DINNER

DO YOU OWN A COFEE CAPSULE


MACHINE?

52%

No
25%

RESTAURANTS/CA
FETERIAS

C O F F E E
CHAINS/CAFS

A T
WORK/SCHOOL/U
NIVERSITY

A T H O M E

64%

68%

77%

WHERE D O YOU MOSTLY


DRINK COFFEE?

Yes
75%

10

NESPRESSO POSITIONING STRATEGY


DO YOU OWN A NESPRESSO


MACHINE?

No
36%

Yes
64%

WHICH COFFEE C APSULE B RANDS D O


YOU USE?
OTHERS

09%

D O L C E G U S T O

09%
11%

P I N G O D O C E
09%

BICAF
NICOLA

07%
06%

TORRIE

13%

D E L T A Q
11%

KAFFA

24%

NESPRESSO

WHY DO YOU USE OTHER CAPSULE


BRANDS? 38%
30%

18%
15%

C O N V E N I E N C E / S T O R E
LOCATION

T A S T E

PRICE


11

VARIETY

NESPRESSO POSITIONING STRATEGY

WHERE DO YOU BUY


NESPRESSO?

DO YOU BUY NESPRESSO


ONLINE?

Both
22%

Yes
30%

Online
14%

Nespresso
Stores
64%

No
70%



Are you satisfied with your shopping experience for Nespresso?
(1 Very Dissatisfied; 2 Very Satisfied)


PRODUCT VARIETY

STORE LOCATION

56%
70%
44%

16%
8%

6%

0%
0%

0%

0%

CUSTOMER S ERVICE

PRICE
68%

50%
38%

17%

12%
0%

0%

12

6%

7%

2%
3

NESPRESSO POSITIONING STRATEGY

WHAT WORDS DO YOU ASSOCIATE


WITH NESPRESSO?
Inaccessible
Ordinary
Overestimated
Design
Status
Premium
Expensive
Taste
Exclusivity
Quality
0%

AGE
40+
20%

10%

20%

30%

40%

50%

60%

70%

80%

GENDER

18-20
11%

Male
36%
21-29
31%

Female
64%

30-40
38%


REFERENCES
Coffe in Portugal
Hot Drinks in Portugal
Local Players take Share from Nespresso
Novadelta
Nutricafs
All from Euromonitor.
Companys website (www.nespresso.com)
http://nespresso-whatelse.blogspot.pt/p/personalidad-el-consumidor.html
http://www.superbrands.com/pt/pdfs/vol5_case_studies/NESPRESSO.pdf

90%

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NESPRESSO POSITIONING STRATEGY









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