Wind is up ahead for the Nespresso brand of Nestlé. That is because the monopolistic market situation which Nespresso had artificially created due to their patenting drift, will soon have a number of issues to deal with. It all started when the former CEO, Jean-Pierre Gaillard, left the company. Because of his important position he had a lot of knowhow when it came to Nestlé patents and products. Nestlé has a large number of patents for its products. Now, patents don't last eternally. In 2012, the patents of the first generation of Nespresso products will expire as it will be easy for other market players to compete with that generation.
It probably won't take that long before products are being optimised by The Ethical Coffee Company which is led by Nestlé's former CEO, J.-P. Gaillard. This will be possible because he claims to have found possibilities in outrunning these patents. Therefore, he now has the possibility to make Nespresso products, and even make them ecologically better and less expensive. The price of one Nespresso capsule in Belgium is 31 cents, now according to Gaillard ECC can make the same capsules for about 25 cents and even make them less environment damaging. The capsules of Nespresso are made of recycled aluminium, because it maintains the good flavours of the coffee according to Nespresso. Well, the ECC capsules made of natural fibres and therefore biodegradable in a period of a half year.
Nespresso hasn't reacted on the news yet, because they don't want to give reactions on an uncertain situation. Although The Ethical Coffee Company says it already has orders for producing two billion capsules, there has not been any official product launch whatsoever. In the future Nespresso will continuously innovate and patent its products to keep competitors at a distance.
In my opinion, Nespresso should have taken measures to prevent such thing from happening. Gaillard, who has been CEO from 1988 to 1997, was probably in the possession of endangering material and knowhow. They could have prevented such thing by putting a clausule in his contract. That clausule could then be used to prevent him from using its knowhow for the benefit of other companies in the same market. Ofcourse, Gaillard is well-educated and he has what it takes to build successes in the business. Let's not forget that Nespresso is the market leader in many countries, this can clearly drasticly change the coffee market. For example in Belgium, Nespresso has a market share of more than 50%.
I really don't think Gaillard is taking it over the edge. We must realize that companies are operating in capitalistic markets. Ofcourse, patents secure research & development and therefore products but when you have the possibilities to break a monopoly this way, that's okay with me. I really think Nespresso made a mistake not to foresee this vital issue. According to what I think, Nespresso now has to bear the consequences for this mistake. The importance of good corporate governance is often underestimated, Gaillard is doing a great job finding new challenges and new possibilities for The Ethical Coffee Company.
The first thing I want to say is that the world of business is not meant for weaklings. If you want to become a prominent business person, you should be tricky and make use of the possibilities you get.
BeantwoordenVerwijderenI fully agree on Dries’ statement, namely if Gaillard hasn’t crossed the rules of the monopolistic company Nespresso, there is no reason for anger. It’s true that Nespresso should have taken the necessary precautions. For instance, they could have spread the know how over several independent persons within the company. In that way they could certainly have limited the risk and the present situation probably wouldn’t have taken place.
On the other hand people don’t inconsiderably choose for the cheapest brand on the market. There is still something like customer satisfaction, customer relations and service preferences. People choose for a certain brand because they already use it for years and it satisfies to their requirements. It is not because a cheaper product is suddenly put on the market that personal preferences automatically change.
Finally, don’t forget to think about the fact that we live in a world of growing importance for green products. Personally, I believe that The Ethical Coffee Company will gradually beat Nespresso because of that reason.