FACULTY OF BUSINESS AND ECONOMICS

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Mihelakis

Andrew Anthony

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22619364

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0415 147 717

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Marketing Issues in packaging Design

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MKF 2401

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Assignment 1 Case Study

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Ms Narelle Pittard

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Wednesday 10am
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19/08/2015

19/08/2015

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Nescafe Instant Coffee Case Study

Andrew Mihelakis (22619364): Wednesday 10am Tutorial

(Nescafe)

Strengths
S1 Organisational innovation
First Instant Coffee to hit the market
(Nestle, 2013)
Quality Coffee Vending Machines (Oh &
Rhee, 2010)
S2 Strong parent company Nestle
USD $15.7 billion net profit for Nestle in
2014 (Nestle, 2014)
Strong distribution channels (Sotto,
1991)

Opportunities
O1 Financial crisis
Low impact on coffee consumption
(International Coffee Organisation,
2009)
O2 Fairtrade agreements
Consumer Fairtrade segment (Murphy
& Jenner-Leuthart, 2011)

Weaknesses
W1 Not appealing to younger consumers
77 year old brand needs revitalising
(Revill, 2014)
W2 Potentially confusing range of coffee
10 different instant coffee products and
their packaging (Nestle, 2008)

Threats
T1 Declining coffee consumption in youths
Caf Culture/Energy drinks (Lewis,
2002)

SWOT Analysis
With origins dating back to the year 1930, when their existed a surplus of coffee in Brazil, the need
arose to preserve coffee and simplify its consumption. Stemming from these needs, Nescafe was
born and the world was introduced to instant coffee (Nestle, 2013). Since then, coffee has become
one of the worlds most popular beverages, being consumed by nearly half of the Australian
population (Australian Bureau of Statistics, 2014). Nescafes development of instant coffee
demonstrates its organisational strength of innovation [S1], and the creation of the new
instantaneous coffee market, saw Nescafe achieve a first mover advantage, which has paid off in
terms of a 47% market share (Revill, 2014). This strong market position is reflected on Nescafes
supermarket shelf positioning [see Appendix A], where the Nescafe branded products not only take
center eye-level positioning, but across four shelfs. The Nescafe brand is easily distinguished
amongst competitors through the use of a bold logo and primary packaging design. The package
outlines pride in Nescafes product, through use of transparent glass container. However the
different products in the Nescafe range can be confusing [W2], which will be addressed further into
this case study.
Further tying in with the organisations strength of innovation, is its ability to think outside the box
for coffee consumption. The introduction of Nescafe vending machines is a prime example of this.
Parent company Nestle formed an alliance with the Coca-Cola Company, in order to leverage on
Coca-Colas vending machine developmental strength (Oh & Rhee, 2010). The result was a vending
machine which dispensed freshly made Nescafe coffee for the busy consumer segment. This placed
Nescafe coffee in locations where consumers would go to seek beverages, but there wouldnt have
otherwise been either any hot coffee beverages or any of Nescafes direct competitors. Vending
machines could also provide advertisement in the form of signage which stood out for Nescafe.
The final strength for Nescafe lies in its parent company Nestle [S2], which sees annual sales of
almost $100 billion USD and annual profits of $15.7 billion (Nestle, 2014). With a portfolio of many
different brands under its belt, learning effects of packaging design, marketing and distribution can
be maximised and applied to any the brands in its portfolio. What this means for Nescafe is that it
has the financial and managerial backing to accomplish any of its set objectives. The strength of
Nestle as a parent company also directly benefits Nescafes distribution network. As one of the
largest global distributors, Nestle allows the Nescafe product range to appear in retailers all around
the globe, from massive 700,000 square foot distribution centres to supply the US market, to the
supply of coffee to rural India (Sotto, 1991).
As the Nescafe brand turns 77 years old, it outlines a weakness that Nescafe needs to address. Over
its lifespan, many new trends and new ways for consumers to consume their coffee has been
created [W1]. This is only amplified with the fact that the 180 countries where Nescafe is sold are
vastly different geographical markets, which each view instant coffee very differently. An example of
this is instant coffee still being a luxury in developing countries. Nescafe has slipped behind the eight
ball due to the rise of new and younger competitors, coffee shop chains and new methods of
consumption such as coffee pods. This has caused Nescafe to drop its share to 44.3% of the instant
coffee market, from its peak in 2004 (Revill, 2014).

In the Nescafe product range, there exists 10 different instant coffee products (Nestle, 2008). There
also exists the weakness where potentially consumers will not be able to distinguish between the
different products during the decision-making/purchase process. By looking at a typical store shelf
showcasing Nescafe products [Appendix A], it is easy to distinguish the Nescafe brand as well as the
different products in the range (separated mostly by colour). However it is not possible to obtain
more information by simply glancing over the product range. This complicates the decision making
process for consumers, potentially driving consumers away from Nescafe and to other brands.
In 2009 we observed the global economy follow the US and plummet into a state of economic crisis.
This affected the way consumers spent their money, ultimately having to be more careful during the
decision making process and watching what they spent their hard earned money on. While the
Australian market performed well during the original crisis (Perlich, 2009), there also was the other
179 geographic markets where Nescafe didnt necessarily perform as well. However despite this,
while global coffee prices initially fell, they were quick to recover as food and beverage sales fared
well compared to non-food and beverage products during the crisis (International Coffee
Organisation, 2009). The report by the International Coffee Organisations (2009) also looked at
different geographical markets, noting that the decrease of coffee prices in some countries
stimulated its consumption to levels greater than before the crisis. This presents a unique
opportunity for Nescafe, as it has not only the potential to be GFC proof, but gain new customers
[O1].
The second opportunity to present itself from the external environment to Nescafe, is the Fairtrade
certified movement of coffee. Fairtrade refers to the coffee beans being sourced ethically, such as in
environmentally sustainable farms, where workers are paid a minimum wage (Murphy & JennerLeuthart, 2011). Fairtrade certified coffee is a niche category, gaining in popularity. Research
performed by Murphy & Jenner-Leuthart (2011) concluded that cafes where Fairtrade coffee was
sold and promoted had higher levels of customer satisfaction. These finding could be applied to
instant coffee, as Nescafe has no notable Fairtrade promoted and labelled product [O2].
Whilst opportunities exists in the external environment, there too also exist threats for instant
coffee companies. The largest threat stemming from the decline in the average consumer
consumption of cups of instant coffee, from 1.5 cups a day to 1.3 cups (Lewis, 2002). This is also tied
in with the caf culture trend of consuming coffee at coffee bars such as Starbucks, who have more
than 19,767 stores globally (Starbucks, 2013). The youth of today simply are drinking other
caffeinated beverages such as energy drinks and consuming coffee in Cafes rather than at home [T1]
(Lewis, 2002). This is also tied closely with Nescafes [W1], older brand that needs revitalising to
appeal to youths.

Recommendations
The first recommendation I can provide to Nescafe, is to address the opportunity that Fairtrade
certification has on consumers [O2]. This can be achieved by leveraging Nescafes parent company
Nestle, to back a new product line and associated marketing and promotional activities for a
Fairtrade certified blend of instant coffee, directed towards the consumer segments who are
younger [W1] yet passionate about global ethical issues. The packaging of this new product will
ultimately reflect first and foremost its dedication to Fairtrade and being ethically sourced, and
stand out from the existing product range from Nescafe [W2]. This new product should stand out
using a different container with light green tint to the glass and bright green lid, whilst maintain the
traditional look of a Nescafe package to maintain common branding between products in the
Nescafe range.
Whilst this new product will need to be priced higher than current Nescafe offerings to supplement
the cost of being Fairtrade, Nescafe is currently not the most expensive instant coffee brand on the
shelf [Appendix A], meaning that it can justify a more expensive product. Distribution channels of
Nestle [S2] are able to ensure that this product hits the markets where it is most likely to sell, such as
developed nations, whilst avoiding releasing the product into developing markets as the premium is
less likely to turnover.
The second, and last recommendation that I can provide for Nescafe, stems from the need to appeal
to the youths of today [W1]. Whilst the brand is old, the need to appeal to the younger customer
segment is undeniably important for the company. The threat of the caf culture and rise of energy
drinks [T1] can be combatted in several different ways. Firstly leveraging the strength of parent
company Nestle [S2] to help promote Nescafe directly to younger generations. But Nescafe should
also consider either expanding outside the instant coffee category to a Nescafe branded cold coffee
based energy drink, or by forming an alliance with a caf chain and providing a Nescafe branded
coffee product which can be ordered and consumed in store. By aiming at the consumption methods
of youths, an emotional connection to the Nescafe brand can be formed, later allowing for the
potential to more easily move them onto a Nescafe instant coffee product.

Appendix
Appendix A Photo of product on supermarket shelf with competitors

Photo by Andrew Mihelakis No reference required.

References
Australian Bureau of Statistics. (2014, July 2). Non-alcoholic Beverages. Retrieved August 14, 2015,
from Australian Health Survey: Nutrition First Results - Foods and Nutrients, 2011-12:
http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4364.0.55.007~201112~Main%20Features~Non-alcoholic%20beverages~701
International Coffee Organisation. (2009). The world economic crisis and the coffee sector. London:
International Coffee Organisation.
Lewis, E. (2002). Grinding profits from beans. Brand Stratergy(166), 18-21.
Murphy, A., & Jenner-Leuthart, B. (2011). Fairly sold? Adding value with fair trade coffee in cafes.
Journal of Consumer, 28(7), 508-515.
Nescafe. (n.d.). Photograph of Nescafe Classic product. Retrieved August 14, 2015, from
http://www.nescafe.com/product_details_en_com.axcms?Id=72
Nestle. (2008). Nescafe. Retrieved August 14, 2015, from Coffee Products:
https://www.nescafe.com/products_flash_en_com.axcms
Nestle. (2013). Coffee History. Retrieved August 13, 2015, from Nescafe:
http://www.nescafe.com/coffee_history_en_com.axcms
Nestle. (2014). Nestle Publications. Retrieved from Nestl Annual Report 2014:
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Oh, J., & Rhee, S.-K. (2010). Influences of supplier capabilities and collaboration in new car
development on competitive advantage of carmakers. Management Decision, 48(5), 756774.
Perlich, H. (2009). The impact of the GFC on Australia as a 'dual economy'. Journal of Australian
Political Economy, 64, 65.
Revill, J. (2014, June 16). The Wall Street Journal. Retrieved from Nestl Seeks to Revitalize Nescaf
Brand: http://www.wsj.com/articles/nestle-seeks-to-revitalize-nescafe-brand-1402932845
Sotto, C. M. (1991). Nestle building big complex here. Atlanta Business Chronicle, 14(26).
Starbucks. (2013). Annual Report 2013. Retrieved August 14, 2015, from Starbucks News:
https://news.starbucks.com/uploads/documents/Starbucks_Fiscal_2013_Annual_Report__FINAL.PDF