International management: french capsule market

Résumé du document

In its early years, coffee was considered a luxury product reserved for the rich. Then in the 80s, this changed and coffee became a common beverage that the everyone could afford. Because of this changed image, sales plummeted and coffee companies had to work hard to restore coffee's luxury image. In order to do this they had to rethink their marketing strategies. They launched their best product – the espresso. In today's world of of globalization, cut-throat competition exists between companies coming up with varied flavors of coffee and the market is not the same anymore.

The consumption of traditional coffee has witnessed a lull for many years. At home, the French generally drink espressos made from coffee Arabica. Coffee lovers also look for other varieties such as the Moka made of coffee beans from Ethiopia or Supremo made of Columbian coffee beans. This year France recorded sales of 700,000 espresso machines, which is an increase of 9 or 10% (3.8 million in Europe). The sales figures of coffee rises about 40% every year. Espressos are only 10% of the coffee sold in supermarkets but have a turnover of 20%. These figures do not include sales in the parallel circuits.

Some important features of the coffee market are:

- In the early 90s, coffee was not only a common beverage but also a luxury product. “Carte Noire, un café nommé désir” which means ‘Carte Noire, a coffee called desire' and “L'or, de Maison du café”, which means ‘Gold, from the house of coffee' were two popular brands that sold coffee as a luxury product.

- The number of French coffee bars decreased significantly, from 200,000 in the 60s to 50,000 in the 90s.

- The sales of small electric coffee appliances rose during Christmas.

- After 7 years of testing in Switzerland, the first coffee machine was marketed in 1991 in France by Nespresso.

- Carte Noire, Maison du cafe and Nescafe noted an increase in the sales of coffee dispenser machines.

Extraits

[...] Regarding it strategy and the big threat that is just above its head (the end of the patent in few years), it is possible that Nespresso neglects it to create maybe a surprise in the market preparing a new strategy to survive in a fully globalised market. [...]

[...] It was the case with the iPod when it Apple was required to create a version that could be used on Windows to satisfy its customers. To fulfil completely the demand, the companies will have to work on such a business model before any one try the first: the first one is the better one generally in the heads of customers. This is the future of the market. - Peace: There is no economical or political conflict between the countries USA, Switzerland and France regarding any point concerning this business. [...]

[...] This is a state of the art factory which is protected by a true army because of the production secrets that it contains. One of the big advantages is the fact there is no need to construct any other factory and so save money. However, it would not be too much difficult for Nespresso with the budgets of Nestlé. The transportation costs could be very expansive in revenge but France is just near to Switzerland so it is not a problem. It is about the same for the Americans that use one or two different factories and export. [...]

[...] The Senseo capsules could be found in supermarkets and Internet. The quality of the coffee is lower but the final product is cheaper and could be used in some other espresso machines. Thanks to that, the offer is more affordable than the lock-in Nespresso's one. Kraft Foods from the United States: The Tassimo offer has a true competitive advantage because it allows getting different hot beverages: coffee, chocolate, tea This allows to the brand to be differentiated and gets a different position on the market proposing more products. [...]

[...] Nespresso is the leader for individuals and now tries to get Lavazza out of the pole position in offices: 210 million of capsules per year in France. Sara Lee from the United States: The coffee and the machines created by Sara Lee under the name Senseo are cheaper than Nespresso. We might add the fact that the coffee of this company is sold under the name espresso but this is not truly one because the pressure in the machine is not powerful enough. [...]