Posts Tagged ‘power of the brand’

Nespresso: Brand, Convenience, and the Effect on Price

Saturday, May 31st, 2014

It is widely known that Nestlé has created an impressive success story with Nespresso. Today, we’ll take a look at the impact of a strong brand—plus convenience—on price and (in-this-case-inevitable) profits.

OK, calculator at the ready.

  • After a pronounced rise in prices on the coffee market since the beginning of 2014, the cost per kilogram of coffee beans on the commodities market stands today (3/14/2014) at about $4.41.
  • Today (3/14/2014) on its home page, Tchibo is advertising a sale on its “fine-mild” blend: $10.38 per kilogram.
  • The “New York” coffee blend that we at Mandat purchase: about $42.00 per kilogram.

Now to Nespresso.

  • A single pod costs some where between 51 cents and 54 cents.
  • In each pod, there are about five grams of coffee. So, a kilogram would fill 200 pods.
  • According to Adam Riese, that comes to between $102 and $108 per kilogram. That’s a factor of ten compared to the Tchibo offer and still a factor of 2.5 against the “New York” blend.
  • In other words, for the price of a box of ten Nespresso pods, you can buy more than a kilogram of green coffee in South America.

Not bad.

We discuss with many of our clients the power of a brand on price and the advantages of convenience for price. The next time you find yourself in an executive meeting, bring up the subject of how you use the power of your brand and which convenience-advantages you can create for your customers—to the profit of both parties. You will encounter open doors to your customers. Whether this is also true of your team depends on their readiness to grow.

© 2014, Prof. Dr. Guido Quelle, Mandat Consulting Group, Dortmund, London, New York. All rights reserved.