Nespresso is an operating unit of the Nestlé group based in Switzerland. Since the 90’s Nespresso sell machines, which have a market success. Packaged portions of espresso coffee are one of the fastest growing segments of the coffee market. It has between 20 and 40% of the value of ground coffee sales in the European coffee market, which totals USD 17 billion.
Nespresso sales have been growing at an average of 30% per year over the past 10 years and more than 20 billion capsules have been sold since 2000 at a current selling price equivalent to about USD 0.43 to USD 0.62 per capsule. Furthermore, Nespresso reported annual sales of USD 3,22 billion in 2011, growing by 20% during the fiscal year.
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The following graph of the five forces is made from a personal opinion and analysis about what is written above.
3. COMPETITORS AND FUTURE
The single-portion coffee market, makes up around 8% of worldwide coffee sales, with half coming from "brewed" coffee systems such as Keurig, Senseo, Tassimo, and Dolce Gusto, and the other half from espresso which is largely dominated by Nespresso. Nestle is by far the world's biggest coffee maker with a 22% share helped by its half share of the instant market. 30% of the overall group's underlying sales growth in future will come from its coffee business, but Nespresso will face a bigger challenge in the United States than in Europe for three reasons. First, the dominant position of Keurig in the single-serve market and potentially more competition from Starbucks; second espresso is not a common form of coffee in the United States; and finally Nespresso pods are priced as a mid-market brand and do not have the premium image as in Europe.
Besides, Swiss Ethical Coffee Company (ECC) sells coffee capsules compatible with Nespresso machines since last few month in Europe. And, the American Starbucks, manufacture its own Nespresso machine and its own pods. Starbucks is a significant competitor,