Thursday, 11 September 2014

7 Ps in a pod. #Nespresso and the #VertuoLine marketing Case Study for the Essential Enablers

POP display at a Nespresso boutique Chicago
I love coffee, I love tea

I love the java jive and it loves me

Coffee and tea and the jiving and me

A cup, a cup, a cup, a cup, a cup!
- Milton Drake "Java Jive "– Ink Spots

Like a horse and carriage, there has been a long partnership between Coffee and Business. They have 'lived together' if not been actually married for a long time.

The Coffee houses of England in the eighteenth century were places to do business. The famous insurance house for example  Lloyds of London was based on a coffee house. The market began in Lloyd's Coffee House, opened by Edward Lloyd in around 1688 on Tower Street in the  City of London.

In 2014 ‘’drink in ‘customers as opposed to the ‘to go’ customers, are seen networking and doing business in a coffee shop not so differently from the predecessors of eighteenth century England.

Many coffee drinkers have wanted to bring the coffee shop experience into their home. 

Clearly the full-scale  Gaggia machine coffee shop would be impracticable in most homes but  domestic filter machines, percolators , espresso  and cappuccino machines are ever more popular in our kitchens.

I have recently returned from facilitating a corporate graduate session on Marketing with the  talented folk from the Essentra Graduate scheme in Chicago, Illinois. Essentra are the international 'essential enablers' company with operations in production of filter products, porous technologies , component and protection solutions, and Packaging and Securing Solutions.

Q:What's new at Nespresso ?
A: The 13 pt intensity,
 limited edition, Cubania
 "..a moment of pure indulgence,
a gourmet dessert with syrupy texture,
caramel and roasted notes."
One of the case studies we worked  on was Nestlé Nespresso . 

The single delivery coffee pod sector has been dominated by Nestlé in Europe and the Grads looked into the launch of a new product especially designed for Canada and the USA markets - VertuoLine .

Time Line :
 1976, an employee of Nestlé , Eric Favre, , invented, patented and introduced the Nespresso system to the business market in Switzerland with little significant success.
 1988,  Jean-Paul Gaillard — the founder inventor of «Le Club» community — the product became a market success.
  1990, the firm signed a contract with Turmix, which started to sell Nespresso machines in Switzerland. Thereafter, other contracts were signed with Krups, Magimix, Alessi, Philips, Siemens and De'Longhi.
1996 The first patent application for Nespresso's process of brewing espresso from capsules containing ground coffee was filed.
In 2000, Nespresso began distributing machines bearing the "Nespresso" brand.

VertuoLine product on a shelf at Macy's, Chicago
In February 2014, Nespresso launched a new Vertuoline system.The VertuoLine  machines and capsules sold in the United States and Canada  are designed to appeal to the demand by North Americans in these countries for larger cups of coffee.

 The system produces both 230-millilitre (8.1 imp fl oz; 7.8 US fl oz) cups of coffee and smaller 40-millilitre (1.4 imp fl oz; 1.4 US fl oz) espressos, both with the crema that characterizes espresso coffees and the original line of Nespresso coffees. 

Nespresso simultaneously introduced eight coffee blends and four espresso blends in specially-designed VertuoLine capsules.

 The VertuoLine capsules cannot be used in the original line of Nespresso machines (now called the "OriginalLine"), which continue to be sold in North America.

The VertuoLine capsules are as follows:
Stormio (intensity: 8) Odacio (intensity: 7) Melozio (intensity: 6) Elvazio (intensity: 4)
Hazelino (intensity: 6) Vanizio (intensity: 6) Decaffeinato (intensity: 6) Half Caffeinato (intensity: 6) Espresso Diavolitto (intensity: 11)Altissio (intensity: 9) Voltesso (intensity: 4)
Decaffeinato Intenso (intensity: 7)

Notice the larger sized  hemispherical
 shaped pods on the right hand size for VertuoLine
The VertuoLine system uses two technologies not found in the OriginalLine.

1.       The system uses "centrifusion" (a term created by Nespresso, being a portmanteau of 'centrifugal force' and 'infusion'), whereby it spins the capsule around in the machine at up to 7,000 rpms to blend the ground coffee and hot water.

2.        Each capsule has a bar code embedded on the rim, and the bar code laser scanning system reads 5 different parameters: cup size (coffee or espresso), temperature, rotational speed, flow rate and time the water is in contact with the ground coffee.

The VertuoLine system is intended to expand Nespresso's product line to offer coffee closer to the American style of filtered coffee, and thus expand Nespresso's market share in North America. In the United States, Nespresso had only a 3% share of the single-serve coffee market in 2013 (compared with 72% for Green Mountain’s Keurig system), while in Canada Nespresso had 4 to 5% of the single-serve market in 2013 (compared to approximately 53% for Keurig and 40% for Tassimo). In comparison.

Through their concession in Stores and malls, Nespresson Boutiques allow a direct line engagement of Club members with Nespresso. A place to bring their used capsules for recycling and find out 'what’s new?' in Coffee.

 Nearby to the Loyola University premises the Essentra graduates and I were working ,there was such a Nespresso boutique in a nearby Shopping Mall. The boutique was within the Sur La Table store - a Mecca for kitchen gadgets and all things kitchen.

Nespresso boutique within
 a Sur la Table store in Chicago 

Visiting the boutique and...

Demonstration at the Nespresso Boutique in
Sur La Table store in Chicago

... seeing the demonstrations and tasting the coffee made the case study all the  more real.

This VertuoLine system was designed to meet the tastes of the North American consumers, brewing the highest-quality American-style large-cup coffee and authentic espresso. Nespresso’s website state. 

For the first time ever, coffee lovers can experience large-cup coffee with crema. Silky, generous crema is a naturally formed foam of coffee and air. Representing unprecedented quality, it seals aromas in coffee and enhances the tasting pleasure.”

With VertuoLine, Nespresso want to accelerate their growth and become a leading player in North America’s fast-growing portioned coffee market. The business potential is strong. The US portioned coffee market is estimated to be worth USD 4.9 billion with around 40% growth last year.
 It is also estimated to contribute to half of the portioned coffee segment’s growth worldwide. Coffee is also the fastest growing category in Canada’s hot drinks market.

Nespresso’s Centrifusion™  technology produces large-cup coffee and espresso with the same, high-quality in-cup result. Centrifusion™ is their word for combining centrifugal and infusion, indicating that the capsule spins inside the machine, and water is injected into the capsule and “infused” with the ground coffee inside the capsule.

This technology provides an extremely high level of precision with each extraction parameter individually controlled.

Notice on the outer rim there are the bars
 of the bar-code that the VertuoLine machine's laser reads
One key difference I noticed is the size and shape of the capsules for VertuoLine  are different. The VertuoLine capsules are a hemisphere of a larger dimension compared to the conventional pod. These are a specially patented design which includes a barcode which is read by the laser in the machine.

The Nespresso concept (machine, capsule, service) is subject to 1,700 patents which protect Nespresso's ownership of the concept until the patents expire.

Nespresso has been often compared with printer manufacturers that tried to hinder the sale of generic ink cartridges, to achieve a 'vendor lock-in effect'.

Nespresso's patents began to expire in 2012 gradually allowing competitors to offer capsules and machines compatible with the Nespresso system.

A former CEO at Nespresso has started a rival firm, Ethical Coffee Company SA (ECC), to make compatible biodegradable capsules for the Nespresso machine.

Nespresso’s success is driven by their ability to deliver the highest quality coffees, continuous innovation, exclusive personalized services and a unique brand experience.

On our course we had used the Chartered Institute of Marketing’s ( CIM-UK ) definition of marketing-

“ The management process for identifying, anticipating and satisfying customer needs profitably”.

 Interestingly a spokesperson for Nespresso used similar language when questioned at the launch of VertuoLine :

“The privileged relationships and dialogue that we nurture with our Club Members and consumers allow us to anticipate their needs and exceed their expectations. Our unique direct-to-consumer business model, with our extensive retail network, 24/7 phone line and e-commerce platform, and our rigorous quality management from farmer to consumer are key factors in our continuous success.”

One of the Essentra grads' teams debating  the similarities
 and differences between Nespresso
and marketing of B2B  Porous product
type businesses they work in
The Essentra Grads. enjoyed studying the Nespresso story so far, using techniques such as the Marketing model , the  7 Ps , TOWS grids , Boston Consulting matrices ,Ansoff Grids and the like. They came up with some great thoughts on how things will look in the next years.

Because of Nespresso’s Bellwether notoriety in the media, the case study will be an ongoing reminder of the marketing techniques we learned and thought about in Chicago at the course

"Ah, how sweet coffee tastes — lovelier than a thousand kisses, sweeter far than muscatel."

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