Clooney s Nespresso steams ahead with 35.5% sales growth in UK

David Teather guardian.co.uk, Friday 9 April 2010 14.18 

George Clooney advertises Nespresso outside the US in a smooth-talking
campaign that has helped the Nestlé-owned company to net 7 million regular
customers

It is a busy lunchtime in the basement of Selfridges, and a sales assistant
is waxing lyrical about the crema on top of a shot glass of espresso, the tan
coloured layer of froth that traps the flavour.

The thickness of the foam is evidence, he says, of a good cup of coffee, and
increasing numbers of consumers in Britain would appear to be convinced.

Nespresso machines are fast becoming familiar sights on the kitchen counter
tops of the chattering classes. While most of the economy has been struggling
under the weight of recession, sales of Nespresso coffee machines have continued
to grow at a rapid pace. Figures released by parent company Nestlé last week
showed the business growing 22% globally and by an even steeper 35.5% in Britain
during 2009. It is Nestle\’s fastest-growing business.

You will doubtless have seen the advertising. George Clooney, as smooth as
the coffee he is selling, is outwitted by a beautiful woman who flatters to
deceive and manages to take the last cup from under his nose. Filmed in Italy,
by a Paris-based agency, the campaign is screened across Europe, but not in the
US, a common ploy for a Hollywood actor looking to make a bit of extra cash
without compromising his or her credentials at home.

The company has one stand-alone store in Britain, behind Harrods, as well as
concessions in Harrods and three branches of Selfridges, projecting an upmarket
image, the small capsules of coffee presented in boxes like expensive
chocolates. Across the world though, the company claims to have 7 million \”club
members\”, people who take regular deliveries of the individual aluminium
capsules to make an espresso, latte or cappuccino at home, described by one
critic as \”consumerism gone mad\”. The capsule is placed in the coffee maker, a
button pressed, and the hot water forced through, making an espresso. The ease
of use is one reason that industry experts suggest Nespresso has been so
successful. The machines cost anywhere from £119 to £449.

The strong growth in sales of the brand reflect the changing tastes in
Britain that began with the arrival of the first branded coffee shops on the
high street and which started to wean consumers off the traditional cuppa.

According to Mintel, the in-home coffee market has grown by 17% in value over
the past five years, in large part as consumers trade up from the jars of
instant to more expensive options. The market is set to grow a further 25% by
2014, the research firm says, and will be worth around £976m.

But Brema Drohan, managing director for Nespresso in the UK and Ireland, says
habits are changing at an \”imperceptible pace\” and the company still serves a
very niche market. The rapid growth, she concedes, is from a low base, although
the company will not say how many of the machines have been sold in Britain.

\”Thirty years ago, in restaurants, your choice of wine was white or red,\”
she says. \”Today, any half decent pub will have a choice of six or 10 whites
and reds. The coffee market is a bit like that. But we are still at the sweet
white wine stage in coffee. People still like long milky drinks with a shot of
espresso. People have very ingrained behaviour when it comes to food and drinks,
and changing habits is a long, long process.\”

The brand was developed by Nestlé in 1986 and this year is heading toward
SFr3bn (£1.8bn) in sales. It was launched in Britain in 1996, but Nestlé began
investing in earnest in 2000.

Capsule market

The company licenses its brand to manufacturers including Krug and Magimix,
which make the machines, and makes the bulk of its revenue from the sale of the
coffee capsules. The coffee is not Fairtrade, but Nespresso says it works
alongside the Rainforest Alliance. Nestlé, no stranger to controversy, has been
criticised for the wasteful packaging but claims that it is testing means in
which the capsules can be collected for recycling. If Clooney, meanwhile, sought
to escape the public eye in the US by making the commercials for Europe, he has
faced criticism at home for his links to a company that still has problems
shaking off a troublesome reputation.

Drohan stutters at the suggestion that Nespresso is a purely middle class
brand, and says the price of the coffee makers has made them a \”treat\”
purchase at a time when consumers are having to forgo other, more expensive
investments. The company is looking to open a stand-alone shop in the West End –
it has 190 around the world.

Ben Perkins, head of food and drink research at Mintel, suggests the market
is moving in Nespresso\’s favour. \”Economic turbulence has contributed to a
shift in the way that consumers drink their coffee, which has largely been to
the benefit of the in-home coffee market. As coffee shops have felt the effects
of consumer belt-tightening, the in-home market has witnessed a good deal of
trading up, as consumers endeavour to replicate the coffee shop experience at an
in-home price.\”

The business is akin to the printer market, where the kit is relatively
inexpensive, but the consumer is hooked on the ink for life. Nespresso machines
only work with Nespresso capsules. But there have been reports that a former
Nestlé employee has set up a rival business and intends to start selling cheaper
coffee capsules that can be used in the machines, in much the same way that big
pharmaceutical firms come under assault from generic drug makers.

Drohan says that no one at Nestlé has yet seen the product, but not
surprisingly expresses certainty that the business will be able to see it off.
\”Any new competitor is a challenge, but ultimately we\’re very
confident.\”