Report

submitted in partial fulfilment of the requirements for the degree of Executive Master of Business Administration

Global Brand Building The Nespresso Case – “A lifestyle choice”
Report on questions 6 to 10

Authors Class Submitted

Andreas Bernhard, Jan Bietenholz, Roberto Maugeri, Stefan Müller MFM 11/10 International Marketing Zurich, March 6, 2011

© Kalaidos University of Applied Sciences

............................................................................................................................................4 Findings ..................................1 2..............3 Abbreviations....................................................................................................2 2........................6 Conclusion ..8 © Kalaidos University of Applied Sciences 2/8 ......................................................................................................................................................................................................................................5 Entering the Chinese Market .......................................................................Table of Contents List of Tables .................................................................4 Nespresso’s Global Marketing.3 1 2 2...................4 Cross Fertilization between Business to Business (B2B) and Business to Customer (B2C)........................................................................................................................................................3 3 Introduction..........3 List of Figures .........................................................................................................................................................................................

................ 6 List of Figures Figure 1 Local Translation of Advertisement in China ...................................................... 7 Abbreviations B2B B2C CEO Business to business Business to customer Chief Executive Officer © Kalaidos University of Applied Sciences 3/8 ...List of Tables Table 1 Evaluation of Factors ..........................................................................................................

Nespresso is calling the club members as the brand’s strongest ambassadors. allows Nespresso to place its product in the premium segment. 2 2. online and by telephone which means that Nespresso controls its own distribution. 7 in the Americas. By the end of 2010 Nespresso operated 223 stores which are called boutiques in more than 40 countries (20 in Europe. The coffee capsules are exclusively available at boutiques. In Munich Nespresso has introduced its new boutique concept in October 2010. says Richard Girardot. All boutiques are located in fashionable cities including Miami. The company’s high profile advertising campaign with Hollywood star George Clooney has given the brand a suave and sophisticated face.1 Introduction The purpose of this report is to investigate the Nespresso case regarding the organization of its global marketing. The first Nespresso boutique opened in Paris in 2000. CEO of Nestlé Nespresso SA. The company is working to position Nespresso as more than just a cup of the world’s best coffee. Brussels. © Kalaidos University of Applied Sciences 4/8 . a conclusion will be drawn. Singapore and Cape Town. “Our boutiques are embassies of our brand”. New York. the Chinese market is compared to mature markets. A lifestyle choice. coffee has become a luxury brand.” The boutiques and the fact that only Nespresso Club members are able to buy Nespresso coffee. the different entry modes to China are outlined as well as to what extent standardized or adapted marketing programs are appropriate for China. “They enable consumers new to Nespresso to meet the brand and explore its deep coffee expertise – which is so important as Nespresso builds its presence in new markets. It is a premium experience. Furthermore. whereas the Exclusive Room is designed for Club Members who are familiar with the brand and just want to purchase the Grand Crus of their choice. In addition. the 200th boutique is located in Shanghai which is also referred to as ‘Paris of the East’. and 6 in Asia and Australia).1 Findings Nespresso’s Global Marketing Nespresso has done much to establish itself in the marketplace since first releasing its coffee capsule technology. 9 in Africa and the Arabic World. With Nespresso. Finally. Munich. The boutique was divided into specific areas which have been designed to satisfy different consumer needs and preferences. In the Discovery Room visitors can discover all aspects of the brand and its products. Nespresso sells 30 percent of its capsules through the boutiques while online sales amount to 50 percent. It is for people who recognize quality and want the best of the best. its cross fertilizations between business to business (B2B) and business to customer (B2C). Making the consumers club members Nespresso is creating a strong involvement of the buyer with the brand and the products.

g. will think about offering it to their business partners and employees. French Open Tennis and Cannes Film Festival. are limited to four Espresso Grand Crus and three Lungo Grand Crus. jewellery. Nespresso typically introduces two extraordinary and rare Grand Crus for a limited period each year. and three Espresso Pure Origins. Siemens and works with Harrods. Miele. Magimix who distribute and sell them internationally through selected household appliance retailers. business owners. catering businesses.More than 50 percent of all new Nespresso Club Members first experience the brand through existing members. airlines and so on to serve them Nespresso as well. Consumers who already enjoy Nespresso at home will eventually ask their favourite fashion boutiques. drinking Nespresso at home. In order to acquire new consumers and to strengthen its image as a premium brand Nespresso is sponsoring first class events e. Alessi. Having the same design for years. which is selling all of its other products through wholesalers. America’s Cup. In addition to the permanent collections. thus fertilizing the B2B market. 2. hotels. they licence the production to manufacturers such as Krups. Magimix. For example. However. B2B consumer however. SAS Radisson and Hyatt and high-scale airlines such as British Airways. Cathay Pacific. The ability to enjoy Nespresso in high-end restaurants. The unique Nespresso business model allows the brand to maintain direct relationships with its customers. Business to business partners include hotels such as The Ritz-Carlton. The office supplies company also takes care of the maintenance of the machines. Nespresso has two different international strategies: one for the capsules and one for the machines. capsules for B2B are now flat to work specifically with the Nespresso B2B line of coffee machines. Furthermore. Jura. fashion boutiques and airlines fertilizes the B2C market. Nespresso’s direct marketing marks the first of its kind for Nestlé. Emirates and Qatar Airways. B2C consumers can choose from nine different Espresso Grand Cru Blends. Kempinski. In Switzerland the distribution of Nespresso capsules and machines in the B2B environment is exclusively handled by Lyreco. The demand for B2C consumers is triggered. four Lungo Grand Crus. Nespresso is not a mass market consumer good like the vast majority of Nestlé’s product portfolio.2 Cross Fertilization between Business to Business (B2B) and Business to Customer (B2C) Nespresso decided to offer a different range of coffee to B2B and to B2C. © Kalaidos University of Applied Sciences 5/8 . Nestlé and Nespresso hold all the patents for the Nespresso machines. Having tasted Nespresso in their favourite places. in the United Kingdom Nespresso licence its production to Krups. consumers would like to have the same experience at home. and cosmetics. but rather a luxury item that needs to follow marketing rules similar to those in the industries of fashion.

In the case of a high value of a factor being an indication to choose an export mode the value was considered a negative score.3 Entering the Chinese Market To determine the appropriate entry mode for China various factors were taken into consideration. a score of minus 30 would stand for a clear sign to choose an export mode whereas a score of plus 96 would imply to choose a hierarchical mode. Evaluation of Factors Factor Internal factors Firm size International experience Product External factors Sociocultral distance between home country and host country Country risk/demand uncertainty Market size and growth Direct and indirect trade barriers Intensity of competition Small number of relevant intermediaries available Desired mode characteristics Risk-averse Control Flexibility Transaction-specific factors Tacit nature of know-how Opportunistic behaviour Transaction costs Total Score 1 6 6 1 6 6 43 5 10 6 -5 10 -6 10 7 10 6 3 10 -10 -7 10 6 -3 10 10 10 5 10 10 5 Value Score Scale -30 13 55 12 54 96 Export modes Intermediate modes Hierarchical modes Source: Hollensen. These factors can be categorized into internal factors. The evaluation made for Nespresso. Svend (2011): Global marketing: a decision-oriented approach. In the case of a high value of a factor being an indication to choose a hierarchical mode (investment mode) the value was considered a positive score. Hence. as shown in table 1. desired mode characteristics and transaction specific factors. focusing on control. Based on the specifics of Nespresso the factors were given a value from 1 to 10.2. however. external factors. suggests that an intermediate mode would be best for entering the Chinese market. chose a hierarchical mode which suggests that Nespresso valued the factors differently. Nespresso. Evaluation and scale: own contribution © Kalaidos University of Applied Sciences 6/8 .

The Chinese as well as the South Korean and Southeast Asian market is served from the regional headquarter in Singapore. Nestlé Purina Pet Care and Nestlé Waters based there.T machines. When the company decided to set up a regional headquarter for Nespresso in Asia.” says Richard Tirardow. making it Nespressos 200th boutique worldwide. By today. With Mövenpick Ice Creams. Nestlé has had a long history in Singapore since the early 1900s.Nespresso uses a standardized marketing program worldwide. Singapore was a natural choice. Now the Chinese consumers make up to 50 percent. Special. CEO of Nestlé Nespresso S. “Shanghai is China’s gateway to the world and the world’s gateway to China. introduced his tea making machine Tpresso at an event in Beijing. With the growth of the coffee market in key Asian cities such as Singapore. Figure 1 Local Translation of Advertisement in China © Kalaidos University of Applied Sciences 7/8 .T. With Special. The upper class tends to drink more coffee and doing so the consumers will not settle with filtered coffee.A. Nespresso is keen to capture an even larger segment of the market in the region. Eric Favre. It did not abandon this strategy for entering the Chinese market. Tokyo and Shanghai rising to well over 25 percent in recent years. At first 70 percent of the consumers in China’s Nespresso boutiques were foreigners. It uses the same approach to serve B2B and B2C consumers on two different channels. Nestlé Nutrition. China. at the opening. The growth expectation in China is immense. In September 2010 Nestlé launched Special.T is only available in France and Switzerland. Nestlé will consider entering the Chinese market with Special. it made sense to locate its Asian regional operations in Singapore to make use of the synergies with these other Nestlé operations. Nespresso opened its new boutique in Shanghai in August 2010. which uses the same business model as Nespresso but with single-serving capsules of tea instead of coffee.T since the founder of Nespresso. The Tpresso machine is selling currently for EUR 635 which is about five times more than Nestlé charges for its Special.T Nestlé is able to target the consumers who are reluctant to start drinking coffee.

Nespresso counted 32 competitors by the end of 2009. Nespresso is meeting these challenges by making an effort to become the only global player in the upscale single-served coffee capsules market. strengthening innovation capabilities in core areas and enhancing their competitive advantage to higher standards while building on their core competences to deliver double digit growth rates.3 Conclusion Despite its success Nespresso faces some challenges today. The patents for the Nespresso capsule will expire by 2012. Nestlé tries to achieve this goal by conquering new geographies through a targeted urban expansion strategy. The market attractiveness triggers an increasing number of competitors. © Kalaidos University of Applied Sciences 8/8 .

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