Richard Girardot, departing CEO of Nestlé Nespresso SA, reflects on the continued strong performance of Nespresso in 2012 and comments on what is shaping up to be a strong year of innovation and sustained success for the company.
How did Nespresso perform in 2012?
2012 was clearly the best year in the history of Nespresso. We performed strongly with double-digit growth. Our growth stems from our on-going innovation in our coffees, our machines and in the service offerings that we are delivering to our consumers. Our mastering of the value chain from the cherry to the cup is key. Our direct-to-consumer business model allows us to manage quality at every step, from coffee growing to distribution directly to our consumers. It also enables us to be in constant dialogue with our consumers, developing privileged relationships with them. This close relationship between Nespresso and the consumers is what makes our brand so unique, and also the preferred choice of coffee lovers worldwide.
In addition, our strategy of targeted geographic expansion is paying dividends. We are shaping the coffee culture in a number of new and expanding markets. 2012 was a year in which we continued to build on the strength of our mature European markets, consolidating our presence and influence, while at the same time undertaking a strategic expansion in the Asia-Pacific and Americas regions. It is extraordinary to consider that over the past five years Nespresso has tripled its sales coming from outside our historic European markets.
What were some of the key boutique openings in 2012?
Last year alone, we opened more than 50 new boutiques. We opened several flagship boutiques throughout the world. One in the heart of London’s West End, another on Düsseldorf’s premier shopping avenue and a third in Seoul, South Korea. We also opened our first flagship boutique in San Francisco, marking the expansion of Nespresso to the US West Coast. A second boutique on the West Coast shall follow in the fall 2013.
How do you continue to keep Club Members engaged and excited about Nespresso?
2012 was a year in which we demonstrated the strength of our innovation pipeline, part of our promise to our Nespresso Club Members to continue to provide them with highest quality coffees and new experiences. I am very pleased to say that we continued to forge new paths of innovation in the portioned coffee market and maintained our leading edge.
In 2012 we released the Limited Edition Grand Cru Naora, which was created using a pioneering “late harvest” expertise, as well as Crealto, a long-roast coffee, for which our coffee experts drew their inspiration from fine gastronomy. Our ability to bring extraordinary experiences to our Club Members and consumers was also demonstrated in our creation of the Hawaii Kona Special Reserve, a highly exclusive Grand Cru composed of one of the most precious and rare coffees in the world.
However, innovation at Nespresso is not only limited to our high quality Grands Crus, but also in our machines, which together make the unique Nespresso system that ensures the perfect cup of coffee for our Club Members, time and again. In 2012 we launched Maestria, a machine inspired by the meticulous ritual of professional coffee preparation, letting coffee lovers experience the art and sensations of a true barista. We also launched U, a very modular and highly technological machine, which brings even more simplicity and personalisation to the coffee ritual.
How is sustainability progressing at Nespresso?
We are extremely excited and looking forward to celebrating in 2013 the 10th year anniversary of our unique AAA Sustainable Quality™ Program, developed in collaboration the Rainforest Alliance. This program is a unique approach to securing the highest quality green coffee required to produce our Grand Cru coffees, while improving sustainable farming practices and enhancing farmer welfare. We are very proud of the evolution of the program over the years and the very positive outcomes it has had and continues to have in coffee producing communities. More than two thirds of our green coffee, 68% to be precise, was sourced from over 52’000 farmers taking part in the AAA Program in 2012. The AAA Program, with its unique focus on quality, sustainability and productivity, is a core part of securing our future business success, but also of creating shared value for farmers and for Nespresso consumers.
Beyond our coffee sourcing, 2012 was a significant year for Ecolaboration™, our approach to sustainability. We are delighted that we were able to exceed our target of 75% capsule recycling capacity one year ahead of schedule. We now have in place the capacity to recycle over 76% of used capsules globally. It is important that we recognise the scale of these advances. At the end of 2012, we had more than 20,000 collection points for used capsules in place across 21 countries in addition to the Green Dot system that is in place in Germany, Sweden and Finland. But just having the capacity in place is not enough. We are also investing heavily to make recycling as easy as possible for our consumers to encourage them to recycle. For example, we have introduced a doorstep collection service in six European markets, whereby used capsules are picked up when new capsules are delivered. This is just one of the ways in which we are tying in our commitment to sustainability and our focus on customer service.
We are also looking at how we can make a difference in the overall aluminium supply chain. This led us to partner with the International Union for Conservation of Nature in a unique initiative that will create the first standard for Responsible Aluminium. Even though Nespresso is a relatively small user of aluminium, we are committed to playing an active part in helping drive the responsible production of aluminium moving forward.
Nespresso has always put a premium on service and consumer experience. What does Nespresso do that sets it apart from other brands?
We make a point of focusing on quality, innovation, but also on driving convenience and best-in-class service, to deepen our relationships with our Club Members. Our direct-to-consumer model is one of our great strengths. Our coffee specialists in our Customer Relationship Centres and boutiques play an important role in building and nurturing the relationships with our Club Members and consumers, bringing our brand closer to them. The unique Nespresso experience, combining quality, innovation and privileged relationships with consumers, explain the incredible response to our brand. Consumers continue to choose Nespresso, in spite of more than 100 competitors in the portioned coffee segment worldwide.
Nespresso has continued to expand the reach and scope of its tailor-made services, introducing more convenience to Club Members. Many of our boutiques now include dedicated zones which are designed to increase the level of choice and personalisation of coffee lovers’ retail experience. For example, consumers can taste coffees prepared by a coffee specialist in the Coffee Room. The Exclusive Room, which allows a shopping experience at one’s own pace through self-selection of Grands Crus sleeves with automatic check out thanks to RFID technology, is now present in more than 10 boutiques worldwide, including the first standalone Exclusive Room boutique in Lyon, France.
For those Nespresso Club Members who are in a hurry, our “Pick Up Zones” allow them to place their orders online or through our Customer Relationship Centres and pick up them up at a dedicated area in our boutiques, without waiting. We have also developed the Nespresso Your Time concept in more than 20 cities worldwide, which is our promise to deliver within a two-hour period chosen by our Club Members, seven days a week.
How does Nespresso contribute to the consumer experience in the hospitality business?
The growing number of consumers used to Nespresso quality at home is creating demand for Nespresso wherever they go. Today, premium hotels, restaurants and even retailers are working hard to stand out by creating an exceptional experience for their guests and customers. In this context, Nespresso is well-placed in the business-to-business sector to provide the right finish to a meal or a moment of indulgence in the stay of hotel guests.
Nespresso has built strong partnerships with the world’s leading gastronomy establishments, such as Relais & Châteaux and Jeunes Restaurateurs d’Europe, as well as with leading international hotel chains to give consumers unique sensory experiences.
As part of our commitment to fine dining and exceptional tasting experiences, we have created the Nespresso Coffee Codex, a complete methodology for professional sommeliers for tasting our Grands Crus and harmonising them with a variety of flavours and culinary products. We also established the Nespresso Coffee Sommelier™ Program through which we train leading sommeliers of the world in the art of coffee tasting and harmonisation so that they can provide their guests with a complete dining experience.
Can you give us some insights into what consumers can expect from Nespresso in 2013?
Innovation will give rhythm to the Nespresso year ahead. Our coffee experts have pushed the bar higher in their pursuit of new coffee experiences for consumers. We will make new coffee introductions, which will continue to shape the category and deliver the exceptional sensory experiences that our Club Members love and expect from us.
As you will be leaving Nespresso to take responsibility for the Nestlé business in France, how do you see the future for Nespresso?
These are indeed my last few days as CEO of Nespresso. It has been more than a pleasure to hold this position, it has been a fantastic adventure and I am thankful to our over 8,000 employees worldwide and their dedication. The passion and professionalism of the Nespresso employees across every market and in every production centre is extraordinary. It is thanks to their "panache" that Nespresso has been able to shape the global coffee culture and continues to do so.
Jean-Marc Duvoisin, Executive Vice President Human Resources at Nestlé SA, will assume the CEO role at Nespresso from March 1, 2013. He is perfectly positioned to manage the continued growth of the Nespresso business. The coffee culture is developing universally and yet the penetration of the portioned coffee market is still low overall. Nespresso is in good hands and I trust our people to develop our brand and business model in every market to take advantage of the opportunity to capitalise on our strong position in the portioned coffee category.
The strongest indication of our confidence in the future of the Nespresso business is the investments that we are making to increase our manufacturing capacity to ensure that we can meet the increasing consumer demand for our highest quality coffees. Last fall, we completed the extension of the Avenches Production & Distribution Centre. We also announced that we will invest CHF 300 million in building a new production centre in Romont, Switzerland, whose construction is set to start in the coming weeks.
I believe Nespresso is strongly positioned to build on its in-house expertise, product offering and privileged relationships with consumers to deliver strong growth into the future.
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