my project work for my business strategy class of november 2013

2. GENERAL OVERVIEW
• Founded in 1986
• Autonomous globally managed business of the Nestlé ® Group
• Reference in the portioned coffee sector and one of the fastest
growing global food and beverage brands
• NESPRESSO® is present in 60 countries
• 8300 employees and 300 boutiques worldwide

3. • Enable anyone to create the perfect cup of espresso coffee
• Delivering highest quality coffees
• Ultimate coffee experiences to our consumers

4. NESPRESSO® PRODUCTS
• Coffee machines
• 30 models designed and manufactured in
collaboration with 6 machine partners.
(KRUPS & DeLonghi)
• In house R&D
• Capsules
• Wide range of flavours
• Accessories
– Mugs, coffee cup, pots

5. VALUE CHAIN ANALYSIS: PRIMARY ACTIVITIES
Inbound Logistics:
• Suppliers from many different countries
deliver coffee to production centers
• Data warehouse
• Reverse logistics for recycling Operations:
• The production is based in Orbe and
Avenches:
ü coffee roasting up to capsule
packaging stage
• 300,000 to 1,400,000 capsules per day
Outbound Logistics:
• Trucks leave from the production
centers to Boutiques and customers
home
• Logistics Partner: DPD, BRT…

6. PRIMARY ACTIVITIES
Marketing & Sales:
• Very strong marketing campaign
• Provide all the info through their
website
• More than 300 boutiques in the
best locations allover the world
• Online retail
Services:
• Nespresso club
• Nespresso app
• Technical assistance

7. SUPPORT ACTIVITIES
Firm Infrastructure:
• Headquarter in Lausanne
• Production centers in Switzerland
• 300 boutiques in unique location
HR Management:
• High qualification required
• 70% of employees in direct contact
with customer
Technology Development:
• R&D department in Lausanne
• Balance between the right water
temperature, quantity and speed, along
with 19 bars of pressure
Procurement:
• Long lasting relationships with suppliers

8. ECOLABORATION
• Coffee: source 80% of our coffee from the
Nespresso AAA Sustainable Quality™ Coffee
Program, including Rainforest Alliance
certification by 2013.
• Capsules: put collection systems in place to
triple our capacity to recycle used capsules to
75% by 2013.
• Carbon: between 2009 and 2013, reduce the
carbon footprint of each cup of coffee by
20%.

9. NESPRESSO RESOURCES

10. RESOURCES CHARACTERISTICS
Nespresso’s resources embed these 3 characteristics:
• Appropriability: High appropriability due to the
large amount of patents and the strenght of the
brand;
• Imitability: Capsules can be imitated but not the
brand value and the experience nespresso
provided;
• Durability: Capsule durability due to stability of
coffee demand and strong customer relationships.

11. NESPRESSO CAPABILITIES
Corporate functions:
• Strategic innovation: Capsules
• International management
R&D:
• Innovative new product development
• Ability to exploit and research new gran
cru tastes
• Led to the invention of unique technology
that delivers a balance between right
water temperature, quantity and speed
for the best result

12. NESPRESSO CAPABILITIES
Operations:
• Efficiency in capsules manufactures
Product design:
• Ability to balance good design and
practicality
Marketing:
• Luxury brand management
• Building reputation for high quality
coffee
Ecolaboration:
• skills to conduct a profitable business in
an environmentally friendly manner

13. COMPETITIVE ADVANTAGES
Drivers of Cost advantage:
• Economies of scale: up to 1.4 mln capsules produced per day
• Economies of learning: more than 15 years from the first
capsules production
• Standard Product design:
many flavors, one capsule
design

14. COMPETITIVE ADVANTAGES
Drivers of Differentiation Advantage:
• Highest quality coffee within the
market
• Nespresso’s patents
• Outstanding customer service
• Exclusive Boutique Location
• Unique brand image
• Creative marketing approach

15. COFFEE INDUSTRY
• After crude oil, COFFEE is the most sought commodity in the world
• Brazil is the largest coffee exporting nation
• Over 2.25 billion cups of coffee are
consumed in the world every day
• There are 3 main types of in home coffee:
• Filtered Coffee
• Espresso Coffee
• Instant Coffee
• NESPRESSO® is about in-home
espresso coffee

16. COFFEE MARKET SHARE

17. COFFEE INDUSTRY LIFE CYCLE

18.
Evolution of Industry Structure over the Life Cycle
!
GROWTH:!IN+
HOME!ESPRESSO!
MATURE:!FILTERED! DECLINE:!INSTANT!
DEMAND!
Increasing, sector is
growing up by 24%
a year
Stable, mass
market, price
sensitive customer,
+4% year
Decreasing,
Obsolescence
TECHNOLOGY!
Standardization of
capsules to be
compatible on every
coffee machine
Diffused know how Lack of innovation
PRODUCTS!
Design & quality
improve; emerging
of capsule design
Trend to
commoditization
Low differentiation
COMPETITION!
First movers:
Nespresso and
Lavazza stable on
top of the market
Market leader is
Lavazza, high
competition tough
High competition
between, Nescafé
(leader), Folgers,
Maxwell House
KEY!SUCCESS!
FACTOR!
Fast
High quality
Practicality
It’s a commodity
producing on a large
scale taking
advantage on EOS
Speed of preparation
Low shipping weight
Long shelf life
!

19. KEY SUCCESS FACTOR
• High quality coffee
• Strong marketing campaign
• Technology development
• Economies of scale
• Economies of learning
• Distribution channels

20. FIVE FORCES MODEL: IN HOME ESPRESSO COFFEE
- Wide network of suppliers
- Low bargaining power
- Mostly price takers
- Outside home
coffee
- Instant & filter
coffee
- High price for high quality
- Excellent reputation
- Club services
- Luxury Marketing
- Difficult entrance
(due to EOL & EOS)
- High capital
requirements
• Nespresso market
leader (45%)
• High Concentration
(Illy,Lavazza)
POTENTIAL ENTRANTS SUBSTITUTES
BUYERS
SUPPLIERS
COMPETITORS

21. NESPRESSO GROWTH FACTS
• Revenue: $ 3.1 bln, +20% (2012)
• Net income: $ 800 mln
• Substitutes average growth in 2012: - 6%
• Market Share: 45%

22. STRATEGIC SUGGESTION
Offering home-like comfort in non
residential locations:
• Goal: Increase our Demand
Reach introducing a new
Nespresso machine in which
you can either pay or use your
own capsules
• Where: exclusive frequented
places (VIP lounges, country
clubs, private universities)
• Catch: Nespresso Electronic
Card

23. STRATEGIC SUGGESTION
Why:
• Outside home coffee market
takes the 50% of the total
coffee market
• Increase our market share
• Increase sales expectations
• Reach outside home coffe
channels
But…
Keeping niche target and luxury
brand prestige