Nespresso was the first company to sell a single-dose coffee espresso machine. At present, the number of French households with single-dose espresso machines covering all brands on the market is more than 25%. Nespresso is the market leader. In 2010, two competitors entered the market with capsules compatible the Nespresso machines. These two competitors on the market of compatible capsules, namely the company Ethical Coffee Company (founded by a former director of Nespresso, Jean-Paul Gaillard) the proprietor of Espresso brand and other own-name brands and the U.S. giant Sara Lee which has since been taken over by DE Masters Blenders (DEMB) owner of L’Or Espresso trademark, both complained to the Autorité de la concurrence (French competition authority).
In 2012, the French market represented 25% of the Nespresso global sales. On this national market, Nespresso enjoyed a market share of 73% on single-dose espresso machines sold. It represented 85% of the Nespresso compatible capsule market. In 2013, the group Mondelez enters this market with its brand Carte Noire.
Nespresso changed its single-dose coffee machines technically several times in order to make competitor espresso capsules incompatible with its product. Legally, Nespresso uses the warranty and the wording on its packaging machinery and instructions to dissuade consumers from using other capsules than its brand. This strategy was reinforced by the B to C media campaign launched by Nespresso.
On the April 17, 2014, Nespresso proposed to the French competition authority three types of commitment over a period of seven years.
- Communicate to all producers of competitive capsules which ask for a technical update of any and all modifications that may have an impact on the interaction between the capsule and Nespresso machine, at least three months beforehand.
- Change Nespresso warranty conditions. Currently we find the following statement: “this machine only operates with Nespresso capsules sold exclusively through the Nespresso Club.” Nespresso proposes to specify that this garanty applies “even and the case Nespresso brand capsules have not been used unless the damage or the malfunction is found to have been caused by the said-capsule”. In the event of litigation, Nespresso will be under the obligation of proof that the damage or malfunction was caused by use of the said capsules.
- No comments are to be made or communicated concerning the competitors’ capsules, regardless of the media support, including Club Nespresso. A compliance program will be put into place by Nespresso in order to implement this commitment effectively and efficiently.
The French Competition Authority carried out a consultation plan with stakeholders. This market sample test which ran between April 17 to May 19, 2014 via internet is presently being analyzed by the Competition Authority. We are waiting for the feedback and decisions of the French authority. We expect the results by the end of July.