Nespresso, a dedicated espresso machine and coffee pod system, is now an important part of the Nestlé Empire, with sales around US$ 1.7 billion.
It was not always so, and indeed Nespresso's history is one of sustained and often unsuccessful marketing over a long period of time.
Eric Favre at the Nestlé research lab filed the first patent in 1976, when Nestlé dominated the instant coffee market with Nescafé but was weak in the roast and ground coffee sectors. Favre overcame various technical problems, but attempts to enter the restaurant and office market were unsuccessful.
In 1986, Nestlé set up Nespresso SA, an independent company, but sales were still disappointing until Jean-Paul Gaillard was appointed CEO and changed the business model.
A. Focus was shifted from offices to affluent households.
B. Coffee was sold by direct mail as 'pods', capsules that could be inserted into the coffee machines with a minimum of fuss and coffee wastage. When that proved successful, Nespresso:
1. Started selling online.
2. Built coffee dispensing stores at prime locations.
3. launched its own 'boutiques' in up-market departmental stores.
4. Established a Nespresso community through an Internet club and then started targeting customers on Facebook, Myspace, and, Twitter.
Finally, in 2004, Nestlé created a second product, Nescafé Dolce Gusto, for the mid-tier mass market. Nespresso was for long a considerable drain on Nestlé resources, and would have probably been closed down if not separate from its parent.
The milestones were:
1976: Nespresso system patent filed.
1982: Focus on restaurant and office market.
1986: Separate Nespresso SA Company formed.
1988: New CEO overhauls marketing strategy.
1991: Nespresso launched internationally.
1997: First advertising campaigns started.
1998: Focus on ecommerce with web site redesign.
2006: George Clooney retained as spokesperson.
2008: Sales 2000-8 average 35% yearly increase and attain $1.9 billion.
By 2014, Nespresso had been involved in legal disputes about pods with competitors in the UK, Germany France, Belgium, and the Netherlands, and as summarized in one media report, "Nestlé has lost in just about every one of those conflicts”.
In France - Nespresso's largest market which made a quarter of its global sales at the time - the antitrust watchdog Autorité de la concurrence stated that "it appears that Nespresso may have abused its dominant position by tying the purchase of its capsules to that of its coffee machines, with no fair justification, de facto ousting rival capsule makers".
The company agreed to no longer limit the guarantee on its single-serving coffee machines by imposing the condition that customers only use its own Nespresso pods, and to remove warnings against the use of third-party pods.