•  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

INTRODUCTION

Coffee Market

FOCUS ON :

Coffee Pods market in the UK // global coffee market in the UK

INTRODUCTION

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

X2 in the past 6 years2

56M£ UK coffee pod Market value1

ECONOMICAL

1The rise of coffee pod machine, The Guardian, 10 April 2013 2 Hospitality and catering news.com

7,5% growth in the coffee market in 20122

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

22-28 April 2013 UK Coffee Week

500’000 participants in 4’000 coffee shops

3-6 April 2014

The London coffee festival

SOCIOCULTURAL

COFFEE, SO TRENDY! > Barista is the new job > Latte art trend > A cup in every hand

FROM A DRINK TO A PASSION/DEGUSTATION

SOCIOCULTURAL

CONSUME FRESHER

& MORE ARTISANAL

PRODUCTS

SOCIOCULTURAL

MORE TRANSPARENCY

& PROVIDE INFORMATION ON HEALTH ISSUES

+/-

SMALLER HOUSE Redesign smaller machines

SOCIOCULTURAL

COFFEE SHOP FEELS LIKE HOME

SOCIOCULTURAL

SOCIOCULTURAL

ALWAYS ON THE MOVE

LONGER WORKING DAY

+

SOCIOCULTURAL

CRM &

LOYALTY PROGRAMS MEAN

A LOT

•  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

TECHNOLOGIC

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

AGEING SOCIETY

DEMOGRAPHIC

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

PORTER ANALYSIS

RIVAL FIRMS

A VERY STRATEGICAL AND ATTRACTIVE MARKET

70 million # cups of coffee drunk

each day

74% of english people drink coffee and 48% drinks coffee pods

The market is set to grow to a £7bn turnover by 2015

Mintel Coffee UK April 2012 Report.

In 2011, consumer retails spend on coffee was 941M£.

RIVAL FIRMS

HIGHLY COMPETITIVE MARKET WITH APPROXIMATELY 50 RIVALS

•  Coffee Shops chain •  Independent coffee shops •  Traditional cafetieres •  Pods machines

Britons spent £56.1m on pods between February 2012 and 2013, up 45.1% year on year.

Nespresso is the best known brand.

Nespresso owns

34% of market shares

The rise of the Coffee Machines, the Guardian, April 10th 2013

The most sales are made by Nescafe Dolce Gusto and Tassimo

RIVAL FIRMS

NOT MUCH DIFFERENTIATION

Coffee, “du rififi dans nos capsules”, Arte, April 10th 2013

Senseo NESPRESSO Tassimo

Same global approach but Nespresso is the only brand to provide a 19 bars power

Filter pods Aluminium pods Plastic pods – T discs

Machines + pods

Different beverages

Only Coffee called

Grand Crus and Variations

Different beverages

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

•  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

HIGH CONCENTRATION &

A CERTAIN DEPENDENCY TO SUPPLIERS

NEW ENTRANTS

•  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

STRONG ENTRY BARRIERS

BUYERS

NUMEROUS CUSTOMERS &

NUMEROUS BRANDS

50 Rivals

In the global coffee market

70 million # cups of coffee drunk

each day

3 Major competitors in the pod market

Mintel Coffee UK April 2012 Report.

BUYERS

Different distribution solutions

Multiple retailers / Online More accessible to the customers

Also more dependency to the retailers

DIFFERENT RETAIL / DISTRIBUTON STRATEGY

300 Own stores, Online,

Appliances retailer stores

No other distribution channels

BUYERS

NESPRESSO = VENDOR LOCK-IN EFFECT

BUYER SWITCHING COSTS ARE HIGH

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

Machine: 61£-150£ 0,16£ per pods

Different ranges

BUYERS

•  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

EACH BRAND ITS STRATEGY

SUBSTITUTES

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

LARGE SUBSTITUTES CHOICE

•  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

NESPRESSO IN BRIEF

INTERNAL ANALYSIS

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

Nespresso employs 7,000 people across countries and has 270 boutiques (including premises on the Champs-Élysées and Beauchamp Place in London) selling 16 varieties of "grand cru" coffee. 28 billion capsule has been sold 7 millions of members

TANGIBLE 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

Nespresso employs 7,000 people across countries and has 270 boutiques (including premises on the Champs-Élysées and Beauchamp Place in London) selling 16 varieties of "grand cru" coffee. 28 billion capsule has been sold 7 millions of members

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

Nespresso employs 7,000 people across countries and has 270 boutiques (including premises on the Champs-Élysées and Beauchamp Place in London) selling 16 varieties of "grand cru" coffee. 28 billion capsule has been sold 7 millions of members

INTANGIBLE 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

Nespresso employs 7,000 people across countries and has 270 boutiques (including premises on the Champs-Élysées and Beauchamp Place in London) selling 16 varieties of "grand cru" coffee. 28 billion capsule has been sold 7 millions of members

HUMAN RESOURCES

STP RECOMMENDATION

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

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

STP

4P Product: Machine + Pods + Services Wide range 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

STP

STP

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

•  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

FOCUS DIFFERENTIATION THANKS TO

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