Nestlé targets $5bn coffee market with Nespresso ‘game changer’

By Ben BOUCKLEY contact

- Last updated on GMT

Nespresso capsules (Photo: SG Harrison/Flickr)
Nespresso capsules (Photo: SG Harrison/Flickr)

Related tags: North america, Espresso

Nestlé claims its new ‘large cup’ Nespresso coffee system is unique and hopes it will corner a major segment of a $5bn portioned coffee market in the US.

The company claims its new VertuoLine system (pictured) stems from almost a decade of research and is designed to meet the tastes and preferences of the North American consumer.

Frederic Levy, president of Nespresso USA said that capsule-based coffee sales have tripled in North America in less than three years and the segment is now one of the fastest-growing among consumer goods in the region.

Nestlé says this region alone will likely account for half the predicted global growth in the segment.

The machine – on sale via Nespresso shops, online and in selected US retailers – creates American-style large-cup coffee and European-style espressos that have underpinned brand growth up to now.

Nespresso machine

‘Unlike any other machine on the market’

Coffees produced for the machine will include flavored coffees (vanilla and hazelnut) and a half caffeinated variety among eight large-cup varieties and four espresso blends.

“Unlike any other machine on the market, the Nespresso VertuoLine also creates large-cup coffees with ‘crema’, a naturally formed foam of coffee and air that has, until now, been the signature of a quality espresso coffee,"​ Nespresso said.

Levy added: "Despite a number of in-home offerings in this market, there is no system that delivers the quality and taste in a large-cup offering for which Nespresso is known, and we see this as an incredible opportunity to pioneer an entirely new segment."

Nespresso says the machine ($299 in red, black and chrome colors) recognizes different Grand Cru capsules using barcode technology and adjusts its extraction levels accordingly to brew each large-cup coffee (8oz) or espresso.

Jean-Marc Duvoisin, CEO of Nestle Nespresso described VertuoLine as a “game changer”​ that would revolutionize the most successful segment of the North American coffee market and change home brewing.

“We believe we are poised to reshape the entire industry in North America. We are entering a highly competitive market with a premium offering, and VertuoLine will win on quality and technology, for which we have long been the leader,”​ he added.

Nespresso faces fierce competition

Nielsen data for October 2013 (expanded all-outlet combined channel, XAOC, so all channels bar c-stores) showed that pods now account for more than one third of dollar sales of retail packaged coffee in the US.

Nestlé’s Nespresso launch comes at a time when the US capsule coffee wars are hotting up, with market leader Keurig rolling-out its 2.0 single-cup brewing system – with technology that will stop unlicensed competitors supplying pods – in 2014/15.

Keurig owner Green Mountain controls around 89% of the market for single-serve brewers in the US and around 73% of the market for portion packs used in such systems.

Nestlé does not break out the performance of its individual business units including Nespresso, but reporting its full year 2013 results on February 14, said the brand grew double digit.

The multinational said that Nespresso grew in its core European markets and “accelerated in the Americas”​ supported by the launch of five Grands Crus coffees.

Click here to read a companion article​ with answers to questions we posed Nespresso on its new system.

Related topics: Beverage, Manufacturers

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