Decoding a Sustainable and Experiential Coffee Success Story

Almost 30 years ago the world witnessed the execution of a simple yet unique idea to enable anyone and everyone to create a perfect cup of espresso from the comfort of their homes. Nespresso is responsible for redefining and revolutionising the way the entire world enjoys their espresso and have shaped the worldwide coffee culture beautifully.  Bult along the invention of the espresso machine in 190’s by Luiggi Bezzera, the brand created a new system allowing everyone to craft and enjoy the perfect Italian espresso which is also known to be the world’s first portioned coffee. In their most pivotal years, they indulged in radical experimentation and finally 1986 marked their biggest breakthrough with the birth of Nespresso, their first coffee machine C-100 along with four portioned coffee blends namely Capriccio, Cosi, Decaffeinato and Bolero which is now called Volluto. They have reached a global presence of over 84 countries and with just a button people in homes, hotels, offices, cafes and restaurants have access to a premium quality and sustainable cup of coffee. The whole brand revolves around relentless delivery of sustainable quality throughout their value chain while simultaneously maintaining a direct privileged relationship with their customers.

The Evolving Business Model

Until the year 2010, right from the concept, machine, capsule to the service Nespresso was subject to ownership of about 1700 patents which lead to comparisons with printer manufactures blocking the sale of generic ink for achieving a vendor lock-in effect which contrasted with several other pre-packaged coffee preparation solutions.  By 2012, their patents started to expire which eventually lead to competitors offering capsules and machines aligned with the brand’s system. While working out ways to prevent competitors from barging in they focused on the service part of their business model- the Nespresso Club as well as stores and cafes aimed at being long term defences for the brand itself, its image as well as accelerated pricing. They have been able to keep their exclusivity and suave connoisseur-ship intact courtesy their absolutely attentive customer service and also being the only destination for customers to replenish their pods. George Clooney became the face of the brand which they claimed was chosen by the club members themselves thereby emphasising the brand’s status over that of the star endorsing it.

The Sustainability Promise

Every coffee capsule unless recycled is subject to production of 1 gram of aluminium waste and recycling the same uses hardly 5% of the energy required to product it from its ore. Initially the brand didn’t employ and programs for recycling outside a few areas of Switzerland leading to huge amount of wastage and criticism by users. Thus, as a remedy to this "écolaboration" program was launched for setting targets around recycling and sustainability. As soon as the required targets were met in 2014, another initiative called “The Positive Cup” was introduced for sustainable sourcing of coffee as part of the Nespresso AAA Sustainable Quality Program™ launched in 2003 in association with the Rainforest Alliance for helping farmers who grow and supply their coffee by educating them in terms of best business as well as cultivating practices while farmers are not forced to sell to Nespresso, most of them choose the brand only as they offer a fair price and contribute in helping every aspect of their business. Nespresso provides as much as 40% premium on the beans and approximately 110,000 farmers from over 14 countries are benefitted from the AAA program by becoming resilient towards climate change as well as preserving natural resources required for thriving. Through regenerative coffee cultivation, farmers, as part of the program have been focusing on quality and productivity improvement of their coffee trees thus protecting communities against wider social and economic challenges. The AAA program also supports coffee cultivation transitioning into agroforestry supported models as well as converting coffee milling to water-efficient mills. They are also in the process of generating biochar from parchment of coffee, which is a by-product of processing coffee and could prove to be n unrivalled natural fertiliser as well as atmospheric carb eliminator. Their collaboration with International Union for the Conservation of Nature helped establish Aluminium Stewardship Initiative in the year 2012 for sourcing virgin aluminium from suppliers who respect the strictest environmental standards. Their production units in Switzerland utilise electricity from purely renewable resources through heat generated from roasters, utilising gravity for channelising beans via production system, producing electricity using solar photovoltaic panels on the roof as well as collection of rainwater for on-site washrooms. With an intention to indulge in organic coffee farming they launched Limited Edition Peru Secreto in 2015 after realising Peru’s unique heritage and potential for organic coffee cultivation. Among their some incredible collaborations includes one with Vélosophy which led to creation of a commercial bicycle from recycled Nespresso pods in 2019. They also partnered with Caran Dache for creating a ball point pen from recycled pods. Currently, Nespresso claims have about 100,000 collection points in over 50 countries globally. Besides sustainability the brand has made sure to focus on reducing poverty by integrating local producers in their supply chains via public-private collaborations with Vodafone and USAID for developing mobile applications that provide technical assistance, market information, data managing and systems for payment for agribusinesses working along with farmers.

Nespresso’s Relevance in Today’s Scenario

Even as Nespresso popularity was at it’s peak, after they started losing their key patents in the year 2011 competitors manage to take away their limelight with lower prices as well as wider distribution. In 2015 it was reported that Nespresso’s share in the market for coffee pods in Western Europe fell from 41% to 31%. After 30 years of attaining success the brand has scale, experience as well as buying power that none of the premium coffee companies can match. But it has been constantly subjected to a major competition from rivals with cheaper capsules as well as way more fussier coffee enthusiasts. Nespresso has also stopped releasing its sales and revenue figures. The author of the ‘World Atlas of Coffee’, James Hoffman has described Nespresso as ‘a black box of a company. Over the years it has faced massive criticism with respect to its environmental impact. There is no data as to how many of its aluminium pods actually are recycled and don’t end up in landfills despite claiming it to be committed to zero landfills. Reports suggest that only 24.6% of their capsules globally are recycled while the company boasts of recycling 100% through their programme. There is no verification as to the proportion of the recycled aluminium in the capsules. A generic perception in the industry stands that the golden years for the company have passed. Considering the amount of competition, it might not be wrong to say that Nespresso has reached its saturation point for now which even the former CEO admits to. It was a pioneer in branding itself as a representation of an elite lifestyle as you could be associated to the brand from any part of the world just like Nike. Since the lifestyle seems to have become bankrupt, it appears to be just another coffee company. It revolutionised the coffee world but the world seems to have moved ahead. The brand still argues that their coffee has never been better but what we realise is that Nespresso was way more than just their coffee.