Not too Merry Christmas for Nespresso?

by chee Leng (on coffee makers)
(Singapore)

We all know that there are compatible capsules out there that are draining the very lucrative profit off from Nespresso.

They have some success blocking companies (Denner in Switzerland) from selling, but it seems that the expansions are faster than what the legal system can assist them.

Spar in Austria announced that they would be selling compatible capsules for Nespresso in the country. This series is being produced by Casa Del Caffe Vergnano.

At the same time, starting next week 7 November, Rewe would be offering 5 varities of coffee produced by ECC (Ethical Coffee COmpany) at its Billa and Merkur chains.

The pricing is at 2.99 europe and is about 25% cheaper than Nespresso capsules.

My $0.02.

Why are there more companies selling compatible capsules?

1. It is lucrative

Sara Lee announced last year that one of their most profitable coffee SKUs was the L'OR espresso which is capsules compatible with Nespresso.

With a sluggish economy, folks that already owned a Nespresso system would welcome any discounts that they can get -thus making this a very lucrative business.

2. It is safe

Sure, there are legal issues, and companies are being sued. But, the process is slowed. And seriously, how many companies can Nespresso go around suing?

So far, only Nexpod in Denner was facing some problems. Even though ECC and Sara Lee faces legal action, currently they are still enjoying good sales.

Thus, as more companies sells compatible products, Nespresso might find it overwhelming to take legal action against everyone.

Another important point is the expiry of its patents. It might not have a case to sue in a while time.

3. Is Christmas!

This is by far the best time to launch products (Why, Starbucks just launched its k-cups too!), people are buying gifts.

And if you know that some folks have Nespresso system, and if you could buy for them capsules that are compatible that is lower in cost -why not right?

Thus, don't think this is good news for Nespresso. Then again, this probably is small amount compared to their billion dollars sales...