Wednesday, March 10, 2010

Nespresso To Face A New Challenge In The French Market

Casino, one of the largest retailer in France, has announced it will sell a private label version of the famous Nespresso capsules. Hence, Nespresso owned an exclusivity contract which allowed it to be the only producer of those capsules.

Now the exclusivity contract has come to an end, and therefore some new competitors can reach in the market. Nespresso has based its success on its exclusive mindset. Hence, you could not find any of their capsules in traditional retails. You needed to order it to Nespresso, either over the phone, on the Internet, or by catalog.

What makes Nespresso’s coffee unique was especially the high pressure the machines could provide, and hence astract the most of coffees’ flavors.

Now Nespresso has to compete on its “own market”. Customers won’t have to buy their products in order to use their machines.

What does that implies?
Nespresso had a huge competitive advantage: They owned a comprehensive data base about customers usage. As customers needed to create a profile and then order through their services the coffee, they had a clear view of custmers. This is the dream of any customer relationship manager: Have comprehensive data on which you could settle your strategy. Now this will not be possible anymore. Is it hence still worth it to keep a direct sales approach? I believe there are some chances we’ll see some capsules on sales in retails like Carrefour, Casino or Auchan.

It also implies to strengthen the image of the products quality. Because if private labels gets into the market, we should not wait for long until other competitors gets in it too. And it will be a hassle to keep a clear position in the market.

For many years Nespresso has worked on its CRM program in order to create a real club, and hence, they have a clear advantage, as the customer relationship is already legitimate.

But for how long? How will the market turn in couple of years? It will be interesting to see the strategical adjustments Nespresso will make.

What do you think about it?