Nespresso’s “Luxury Ecology” is hard to beat…


7 April 2010 was a big day for Nespresso. It lost the rights to the “capsule” technology it invented, opening up the market for capsule coffee competition.

I recently run out of Nespresso capsules for my machine, so bought one of the “new” equivalents at Super U “L’Or Espresso.”

L’Or Espresso comes in 4 varieties from Very Strong to normal and a decaffeinated version.

Firstly, the price – when they first launched in the market last year they were 2.99 euros against Nespresso’s 3.30 euros, but now a pack of 10 is 3.57 more expensive than Nespresso. Obviously a “price skimming” approach, but is that a good strategy for a coffee of mediocre quality.

Looking at the packaging in more detail. The Chief Executive of Sara Lee, the producer, claimed “Our innovative L’OR Espresso capsules will provide consumers with delicious espresso coffee of the highest quality, conveniently available at major retail stores.”

Well, I would say the latter part is true, it is “conveniently available”. However, I have to disagree with the “delicious” part. The coffee is very watery and the taste is powdery – not a patch on Nespresso.  But to its favour, as the capsule is already perforated, when you open the capsule’s individual packaging you do smell the aroma of coffee, that’s a plus point on the Nespresso’s unperforated version.

The L’or Espresso capsule is smaller and see-through – not particularly tempting in its approach But my biggest bugbear is the packaging.

L'or Espresso - the new competitor to Nespresso.

So, yes, L’or  Espresso looks good. It looks “more luxurious” than its other general coffee competitors in the supermarket , but if it had to compete on one thing against Nespresso, it would be on the value of “a more ecological approach”.

Unfortunately it loses, hands down. The capsules are in plastic. Then there is a wrapper in addition individually packaged for each capsule, then the box.

The coffee is UTZ certified – what does that mean? Perhaps it’s Fairtrade Coffee? Perhaps this could give it the advantage over Nespresso? But no, upon taking a closer look it relates more to traceability. You can find out more about UTZ here  http://www.utzcertified.org/index.php?pageID=107

The real problem Nespresso has is its ecological approach. We have to collect the capsules, put them in one of Nespresso’s chic recycling capsule containers (see below), then empty that into the Nespresso recycling bags and then take them back to the shop. Find out more here… http://www.treehugger.com/files/2009/12/nespresso-recycles-in-spain.php

But can we be bothered with that approach?

Nespresso's recycling programme

This is where perhaps NexPod has an advantage?

Nexpod is another Nespresso alternative. It’s slogan “Freedom of Espresso”. The difference? We open the capsule, put our own coffee in the capsule, when finished, we can open the capsules, clean them of coffee grounds and then put them in the recycling bin. Now that is a better thought-out system but is that what we really want from a capsule coffee? Where is the speed? Convenience? Quality aspects?

Nexpod totally recyclable

It seems that “luxury” comes with a price. I buy Nespresso due to the quality of the coffee, first and foremost. It also looks good, is practical, I like the customer service, I like being part of the “Club”, I appreciate the store design and the whole “360 degree brand” approach.

Whilst others try to compete, it seems that they cannot compete on quality, price, or ecological considerations. There is a real opportunity for a new competitor, but they have to realise that it’s not a quick-fix. It’s not a market-skimming approach that’s going to work, it’s a “Nespresso” approach that is needed. Hard work on the quality of the product, the way it’s communicated, marketed and its approach to superb customer service. Nespresso has approached recycling in a “luxury” way… take a look…

That takes time and I think that’s what makes a “Luxury” brand. That’s why there are very few luxury brands looking at ecology. It’s not one of their drivers. But it should be, Nespresso realise that ecology is going to be the next “Luxury”, they know that their customers are worried about these issues, they have been shrewd enough to act on it. Why aren’t more luxury brands doing the same thing?

More on this aspect later.

Any thoughts?

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6 Comments

  1. Hello créativéconsultants, thanks for the insightful and thorough article.
    You’re critique on L’or Espresso is warranted, and it is unusual for a second mover in a new market to take a skimming approach. It sounds like their market mix is in flux. It will be interesting to watch the company and see where their position evolves to.

    I like the “new to the world product” that Nexpod offers. It is innovative, and it sounds like their marketing mix is aligned with their driving objectives. I agree that product features do not cater as strongly to the desire for convenience in the pod consumer, but maybe there is a strong market for consumers who want coffee-pod machines but remain tremendously loyal to a coffee brand not available in pod form?

    I agree that environmental concerns are a driving force in many luxury markets, especially those catering to the LOHAS crowd, which certainly has overlap in the high-end caffeinated & convenient beverages market. However, I am not entirely convinced that it is soon to be the driving point of differentiation that turns a product trial into brand loyalty for the target market.

  2. Hi Marketini, thanks for your response to this post. I agree with you about Nexpod and you are right it does appeal to a different type of user.

    Perhaps I was not clear in my conclusion. I feel that Luxury Ecology will be the new point of differentiation in “luxury branding”, and I think that Nespresso’s approach, whilst laborious, is making efforts to move in the right direction… at least it is listening to it’s customers concerns about packaging and recycling at least. I agree with you, the driving force with luxury products, is just that. Luxury!

  3. Does anyone know what happens when the pods are returned to Nespresso? I’ve seen some comments (unproven) that suggest it’s purely a marketing ploy rather than an effort on their part to recycle. The Nexpod seems like an effort to test that avenue, presumably because they’re still getting criticism over recycling.

      1. Whilst not taking anything away from Nestle, the comments left under that recycling article is quite interesting and would seemingly highlight a somewhat misleading article header through the omission of the word ‘capacity’.

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