Its posh positioning is reinforced by adverts featuring movie star George Clooney and branded boutiques where stylish coffee machines are the stars of the show. In fact, Nespresso recently announced it will build another factory to keep up with worldwide demand.
The single-serve coffee market has attracted a lot of competitors in recent years, however, and Nespresso is now busy defending its market share while launching new products to maintain revenue momentum.
Currently, Nespresso is introducing upmarket machines that brew one top-quality cup of tea at a time, for example. But competition may grow even more intense in the tea segment as Unilever thinks about opening a chain of trendy tea-machine boutiques.
In the core coffee market, Nespresso recently lost a legal battle in Germany to prevent competitors from selling capsules that fit Nespresso machines (but cost less than Nespresso's replacement capsules). Its patents were upheld by the European Patent Office, on the other hand. Meanwhile, Starbucks is launching its own single-serve coffeemaker and already makes replacement capsules to fit the Keurig machines that are popular in North America. What innovations will the market see next?
