Anirban Bhowmick - 1901129

Monika Meshram - 1901026

Barry C K - 1901009
Soundarya Abirami S - 1901054
Ananya Verma - 1901184

NESPRESSO CRISIS
INDIAN INSTITUTE OF MANAGEMENT
TIRUCHIRAPPALLI
PGPM-2019-21 | TERM VI | BCM COURSE REPORT
 IIM TRICHY|PGPM 2019-21|TERM VI|BCM|GROUP-1|Page |1

Just like printer and its cartridge, Nespresso earned its revenue from the Capsule. The Capsule
technology was discovered in Geneva’s Battelle research institute. Later in 1974, Nestle
acquired the rights to commercialize it, looking at the growth opportunity in the market.
Nespresso entered in Restaurant market in 1980s, but this turned out as unsuccessful project.
With new CEO, the company changed the target segment to high end household with priced
between CHF350 and CHF900 through departmental stores and appliance retailers. And with
this company started making profit through Coffee capsules.
Company then adopted the direct marketing strategy and launched the Nespresso Club. Also,
they created the Loyalty program. Now, Nespresso owned more than 400 boutiques in 55
countries. And George Clooney became Global Nespresso Brand Ambassador.
Now coming to the AAA Sustainability program. This is a coffee sourcing program designed
to ensure continued supply of high quality coffee while improving livelihood of the coffee
farmers. Company committed to achieve 80% of green coffee through AAA, Increase use of
recycled capsule to 75%, Reduce carbon footprint by 20% by 2013. Many companies and NGO
recognized this program but consumer awareness was low.
Now, coming to the value chain activities of Nespresso, we see that in inbound logistics, the
activities include the sourcing of raw materials under their broad ecolaboration program. The
AAA Sustainable Program deals with the sourcing of coffee beans with the aim to improve
productivity and quality while promoting the adoption of socio-environmental practices and
approaches.
Their ecolaboration also involves the sourcing of mostly recycled aluminium for the capsules.
Next, in operations, the activities include the roasting, grounding and storing of coffee beans
in the capsules, while the machines are manufactured by 3rd party firms.
The finished products are delivered from the factories in Switzerland to customers and
boutiques.
In Sales & Marketing, Nespresso adopted a direct approach, which also led to the creation of
the Nespresso Club. This approach strengthened the brand’s premium positioning and helped
the brand grow through word of mouth.
They also roped in Hollywood actor, George Clooney as their brand ambassador, and he has
starred in many of their promotions and ads.
With regards to customer service, the Nespresso Club handled the service calls and
requirements of customers, including order taking, prompt delivery of capsules and
personalized advice by trained coffee professionals.
In support activities, we see that the firm focused its production in Switzerland and had
opened over 400 boutiques in 55 countries. We can also surmise that R&D and innovation
played an important role for the brand as it strives to achieve its sustainability targets. In
procurement they had a specific criteria with regards to physical quality, aroma and taste of
the coffee beans.
About Solidar
 IIM TRICHY|PGPM 2019-21|TERM VI|BCM|GROUP-1|Page |2

Solidar Switzerland is a non-profit NGO founded in 1936 by the Swiss Federation of Trade unions and
the Social Democratic Party of Switzerland. Their goal is to achieve socially, politically and
economically equitable society. In this context the NGO encountered unfair working conditions with
coffee farmers in El Salvador and Nicargua and decided to address these issues with one of the major
players – Nespresso.

The Social Media Attack by Solidar

On September 3rd, 2011, A video entitled “The Secret Clooney Commercial, Nespresso wants to
forbid…” was unexpectedly launched n YouTube by the NGO. The parody featuring a Clooney lookalike
was aimed at getting Nescafe to commit to using only fairly traded coffee throughout its Nespresso
and other product ranges.

The narrator in the video explains that Nespresso is one of the most expensive coffees but sadly not
fairly traded. He then goes on to say that George Clooney can change this and encourages viewers to
post messages to Clooney through Solidar’s Facebook page.

This resulted in 1.2 million messages as against less than 0.01 million followers on Solidar’s Facebook
page. Supporters were also asked to post messages on Nespresso’s Facebook page.

On September 8th, Solidar had collected more than 26,000 complaints to be sent to George Clooney.

The Solutions

Ecolaboration- Nespresso has launched Ecolaboration™, a consolidation of all of its sustainability

efforts in coffee, capsules, and machines and across its entire operation into one concerted
programme. Within the Ecolaboration™ framework Nespresso has made the following three
commitments by 2013:

• To source 80% of its coffee from the Nespresso AAA Sustainable Quality™ Coffee Program,
including Rainforest Alliance certification of the farms;

• Nespresso will put systems in place to triple its capacity to recycle used capsules to 75%

• To reduce the carbon footprint of a cup of Nespresso by 20% taking into account the whole
operation from the farm to cup Nespresso pioneered the concept of portioned coffee with
the goal of providing the very highest quality coffees with maximum convenience.

Cup of Excellence- Another Initiative that can help the company to prevent such type of crisis in the
future is Cup of Excellence. The Program is hosted at the Local NISQ, to promote the local regional
products, and to make the farmers more recognizable. This events are focused to help the farmers to
get more inclined towards producing high quality products and to supply high quality raw materials.
The Grand Cru Coop- Along with that The Grand Cru Coop, which follows the same kind initiative in a
bigger platform. This programs motto is to produce better quality of Coffee to get more revenue from
the same. Along with that this initiative to make sure the supply is more accurate and we can assure
long term of the best quality coffee. This program also to make sure that the community gets profit
from the coffee business, to reinvestment and involvement of the community, to make a better
lifestyle for the Coffee Farmer Community.

The Positive Cup- The Positive Cup reinforces the way the Nespresso model creates shared value. It
ensures our activities deliver economic value for the company, preserving the environment for future
generations while supporting social progress for all stakeholders
 IIM TRICHY|PGPM 2019-21|TERM VI|BCM|GROUP-1|Page |3

• Ensure sustainable coffee sourcing, contributing to improve the livelihoods of farmers and the
resilience of their communities

• Unlock solutions for the circular use of aluminum with a focus on sourcing and recycling

• Take actions on climate change mitigation and adaptation, improving our environmental
performance

• Engage everyone in our company, our partners and our consumers, in the benefits of
sustainable production and consumption

Application of Story Crafting Framework (Possible Solution)

• Timing-Address the video immediately after the meeting with Solidar on Nespresso’s official
Facebook Page could have given a competitive advantage against the one sided reactions of
the customers and stakeholders. Timing can make a difference in the whole story, because
right timing gives a brand enough credibility over the allegations or problems

• Storyteller-A well thought plan must be there to take preventive measures in a crisis. In this
type of crisis a person with credibility will make a difference while telling the brand’s side of
the story.

• Platform & Packaging-A platform matters while managing a crisis. The first response should
be on Facebook as the video was shared via that platform as it will be a debate rather than a
one sided story.

• Content-As mentioned earlier, a well-planned measure must be there to prevent such

initiative. This kind of crisis can highlight and focus on the sustainability initiatives, to counter
the main allegation of the crisis.

• Social Brand Voice-Nespresso should create their brand personality as a Sustainable Brand
and connect with customers to prevent this type of crisis. More than this, this will create a
sustainable and brand recognition among the stakeholders.

• Censorship-Responding to the comments of the stakeholders need to be measured. With a

cool mind and more strategically, so that this doesn’t create another crisis for the brand.

(Thank You)