single-serve coffee

Mondelez serves Nestlé a single-serve coffee challenge in Europe

Mondelez International is upping its investment in Europe’s premium, single-serve coffee sector and even stepping onto big Nestlé turf, announcing this week that it’s launching a new range of Nespresso-compatible espresso capsules, while continuing to boost investment in its own Tassimo multi-beverage product.

The new capsules will launch with the Jacobs and Carte Noire brands in Austria, France, Germany, and Switzerland in the second half of 2013. Mondelez will also launch Carte Noire and Jacobs capsules for its own Tassimo coffee system, hailing the move as a significant investment in Europe’s $2.8bn single-serve category.

TassimoRoland Weening, Global Vice President, Strategy, Marketing and Innovation, Coffee, said: “Our new range of compatible capsules represents increased competition in the fast-growing single-serve coffee sector and is a significant commercial opportunity for Mondelez International. With the launch of these capsules and our stepped-up activities and investment in Tassimo, we will cement our position as the fastest-growing, single-serve business and the world’s second largest coffee company.”

Weening added: “We will continue to give consumers great-tasting and sustainably-sourced products across Europe at a price that is competitive. Jacobs and Carte Noire are among Europe’s favorite coffees and our capsules will provide consumers with the freedom to prepare the coffee they love in the manner they like.” asked Nestlé whether it considered the Mondelez move legal – given that it has launched legal action in various European countries to try and halt sales of rival pods from the Ethical Coffee Company (ECC) – and how confident it was that it could compete in terms of quality and price?

Diane Duperret, Corporate PR Manager, Nestlé Nespresso, said: “As you know, competition is nothing new for Nespresso and today we compete against approximately 100 competitors worldwide, including 50 that claim compatibility with the Nespresso system.”

She added: “While we are not going to comment on the plans or actions of specific competitors, we have found that despite the entry of competitor capsules that claim compatibility, consumers continue to choose Nespresso for the quality of our coffee and service.”

Nestlé does not break down financial results for its $4bn+ Nespresso business in detail, but in FY2012 the company claimed double-digit growth in its Nespresso business worldwide, and said in its FY results announcement that it “continued to reinforce its position in Europe”.

For Nestlé, the Mondelez move means it faces the double indignity of not simply having a powerful multinational competitor produce pods for its machines, but also the fact that these carry rival brand names such as Carte Noire and Jacobs, which carry significant heft with consumers.

Jonny Forsyth, Mintel global drinks market analyst, told “My view is that, this is very bad news for Nespresso and will eat into its European profits substantially.

“Despite many attempts Nestle has so far been notoriously unsuccessful in mounting a legal challenge to stop these imitators. While the Nespresso machine itself has real kudos in Europe, cash-strapped consumers will welcome cheaper compatible pod options – especially those from a brand they already trust,” he added.

“The only way I can see it not working is if consumers notice a big difference in taste, and this is really unlikely,” Forsyth said.

In mid-February the Dusseldorf District Court ruled against granting Nestlé an injunction to stop sales of ECC capsules in Germany, stating that latter was not in breach of patent.

The court said that capsules made by third-party manufacturers do not form the key element of Espresso machines, or have the distinctive features of an invention.