In a colossal investment, Nescafé has bought a large percentage of one of their indirect competitors – Starbucks. While this purchase is probably a few years too late, it’s also very wise when you dig below the surface.
Nespresso, Nescafé’s premium offering has struggled for a long time now with duplicate coffee pod offerings that significantly reduce the companies opportunity to sell original Nespresso pods. While the company is famously flush with cash, massive expenditure such as the money invested in global television campaigns, celebrity endorsements, and flagship stores in iconic locations such as the Champs-Élysées in Paris, haven’t yielded the returns that the business hope for. In addition, any inroads into the American market have been slow at best, with cheaper competitors and traditional foes stifling growth.
With Starbucks, Nespresso and Nescafé immediately kill two birds with one stone. Firstly, they stop one of their major competitors in their tracks – Starbucks has a pod offering that is compatible with the Nespresso machines. Secondly, they gain immediate traction in the US market and get access to a plethora of high-value locations from which they can sell their machines, pods and other offerings. In other words, Nespresso can become the Starbucks of pod machines in America, quite literally.
This will also mean an expansion of the Starbucks offering. This is an interesting concept for the chain, because unlike other traditional barista cafés, Starbucks uses a far more generic machine to maintain consistency. This means that Starbucks coffee is likely to be far better suited to pod machines than other, ground coffee offerings.
The details are still being ironed out, but with two major corporations who are more astute when it comes to marketing than anyone else in the industry, it’s likely that we will see more Starbucks in your Nespresso machine, and a new acceptance for pod machines from fussy coffee drinkers.