There aren’t many retail outlets that manage to attract crowds that line around the block unless, of course, it is sale season. But Nespresso, the single-portion coffee firm owned by Switzerland’s Nestlé, manages to do just that at its Champs-Elysees store in Paris on a regular basis.
The in-store tasting experience that attracts the tourists and locals shopping along one of Paris’ most famous streets has become synonymous with the brand and is in part why sales of single-portion coffee have skyrocketed in the last five years. Sales of coffee capsules make up eight percent of total worldwide coffee sales, a figure that Richard Girardot, CEO of Nespresso, believes could double in the next few years.
“We believe that portion coffee has many drivers, the percentage of portion coffee will double,” he tells CEO Middle East. “Nespresso is on the same [growth] trend [as 2011]; it will be 15 percent,” he adds.
Single-portion coffee, of which Nespresso is the current market leader, is one of the fastest-growing ways to drink one of the world’s favourite beverages. While worldwide coffee sales, including fresh and instant, increased 17.5 percent last year to reach $70.86bn, global sales for single-serve packs grow 31.1 percent to $5.75bn, according to market researcher Euromonitor. Although most popular in Western Europe and the US, market leaders are now eying up new growth opportunities further afield.
Nespresso, which currently has fifteen boutiques across the region, says the Middle East is becoming an increasingly important market for the firm. “[The Middle East]; it’s the future. Nespresso is still a Western European [company] because of the coffee culture in Italy and France, but clearly the brand has the potential to be worldwide. This region is one of the key [markets] for the future; we believe there is huge potential for this region,” says Girardot.
“Our strategy is [to expand in] cities where there are two habits; the habit to appreciate the coffee and the habit of shopping. Clearly this region has a habit of shopping, so here we have to develop,” he adds.
In addition to expanding its boutiques in the region — a figure Girardot declines to give — the Swiss-based firm will also introduce a website that will initially offer delivery services within the UAE before branching out to the wider GCC, says Jean Marc Dragoli, market director for Nespresso, Middle East, Africa and Caribbean.
“Our consumers will then have a third channel; the possibility to go in the boutique, call the call centre or to go through the internet. The UAE is a very important market for us [so we’ll start there],” he says.
Parent company Nestlé launched the Nespresso concept machine and capsules in 1986 in a bid to boost sales in the luxury home coffee market. The company’s growth story is unique in that unlike Nestlé’s other mass-market products, its single-serve coffee wasn’t available in retail outlets until 2002 and was instead sold via call centres before being launched online in the 1990s.
The brand’s sales strategy was transformed under former CEO Henk Kwakman. Kwakman switched the firm’s advertising focus from traditional print to television media (introducing brand ambassador George Clooney to television screens), introduced the coffee machine to more than twenty airlines and persuaded Galeries Lafayette to start serving its coffee in-store. Sales of Nespresso machines at the Parisian department store increased from 50 per year to 700.
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