Here we continue the post on why I think Nespresso is the best brand in the world.
5. Unique business model: Nespresso is a system brand, selling a machine and then getting a revenue stream from the capsules that people buy to put in this. As long as they keep customers happy, this means they don't have to fight week in week out to win business. They aren't the only coffee system brand, with Senseo, Tassimo and Nestle's own Dolce Gusto also competing for a share of the market. But Nespresso are the leader in the premium segment.
And there is another unique aspect to the business model that we'll come on to next.
6. Route to consumer: Unlike other sellers of "pod" coffee like Senseo, Nespresso is not in a death-match with retailers. It sells coffee through 3 routes to consumer:
- Online: via a very efficient website, which remembers what you ordered last time, allowing you to quickly re-order.
- Boutiques: for people who like personal service, and want to check out new launches
- Telephone: for people who want to order from home, but want to talk to someone
All of these routes to consumer are 100% controlled by the brand. This means 100% distribution of EVERY sku. Perfect display. Guaranteed and controlled launch of new products. Total control over promotions. Brand heaven, compared to the daily dogfight most brands have to endure.
And hard to copy. Nespresso have been at this for 24 years, building up expertise, systems and highly trained staff.
7. 2-way customer dialogue: most brands sell product via retailers to anonymous consumers. Some may manage to sign up people to a newsletter. innocent smoothies are an example, and have managed to get c200,000 people. But Nespresso is in a whole different universe.
It has several million "members" of the Nespresso club. This means the brand can have a dialogue with its members, proposing them new ideas, tracking what they buy and asking for feedback. It can also measure performance in real time, rather than having to pay the retailer to get this data.
8. "BSR" = brand social responsibility: Nespresso has made significant progress on sourcing, working for 6 years with the Rainforest Alliance on "AAA" coffee, which is of the highest quality but also environmentally sustainable and beneficial to farmers. This is a hell of a task, as the brand can't compromise on quality.
Already 50% of all the coffee sold is AAA. And the brand is on track to have achieved 80% by 2013, which is pretty damn good.
The area where Nespresso does get some stick is on the environmental impact of the capsules. But even here the brand is not sitting back. The good news is that the aluminium the pods are made of is infinitely recyclable. And the brand has now developed capsule retrieval systems in France, Switzerland, Portugal and Austria. And by 2013 it will have tripled this network so that it has a capacity to recycle 75% of all the capsules sold.
9. Premium priced: All of the points above allow Nespresso to charge a significant price premium versus other capsule brands, such as Tassimo and Senseo. This creates a virtuous circle that most brands would die for: higher price = more money to invest in brand = build the brand = support the price.... what a contrast to many brands who are locked in price battles, leading to lower marketing investment and even less differentiation.
10. Growth: all of the above count for nothing if the brand has not delivered consistent and significant growth. My criteria was growth of 5-10" for at least 3 years, if not 5 or more.
Well, I've saved the best for last.
First, this is, amazingly, a $2.5 BILLION brand. This makes it one of the biggest consumer good brands in the world.
But what is more eye-popping is the growth rate. Now, 2009 was a recession, remember? And Nespresso is a premium brand. The brand delivered growth of 22%. And it blows the target of 3-5 years of sustained growth out of the water.
In the 9 years from 2000 to 2009 the brand grew at an average of 30% a year.
So, there you have it. The best brand in the world. A combination of superb sauasge and sizzle commanding a premium price, with excellence of execution across the mix. A unique business model, with a direct route to the consumer and a 2-way relationship with its customers. A commitment to progress on sustainability. And all of this delivering almost a decade of 30% annual growth.
If you have other brands you think deserve the title of best brand in the world based on the 10 criteria, then please do leave a comment!