The business model of Nespresso is based on three pillars that are reflected throughout the whole value creation. The first pillar describes the objective of “perfectly portioned highest quality Grand Cru coffee”, followed by “smart, stylish coffee machines” and accomplished by “exclusive, personalized customer service – The Nespresso Club”

Following I gonna explained the value position of Nespresso, which are its coffee, capsules and machines.

Products

Because of the fact that Nespresso uses only 1-2% of the coffee supply worldwide, which corresponds the quality of gourmet coffee, the company was forced to introduce a network which guarantees “abundant supply of high quality coffee”.

The Nespresso AAA Sustainable Quality Coffee Program was launched in 2003 accompanied by a strategic partnership with the Rainforest Alliance. Both partners strive to benefit the quality demand of Nespresso and the living standards of famers in economically, socially and environmentally neglected parts of the world.

By tracking the objectives of long-term supply with premium coffee, advancement of the farmers’ living conditions Nespresso and the Rainforest Alliance implemented the Tool for the Assessment of Sustainable Quality, TASQ. A self-assessment guidebook comprises quality claims, e. g. soil type, harvesting practices, use of fertilizers, water conservation, but also education, housing or productivity. Afterwards the farmers participate in certain workshops to improve their knowledge about farming in terms of coffee cultivation. Only if farmers can manage to meet the quality standards, they will be received in the program and afterwards distinguished according to four different performance levels: “underperforming, basic, emerging and high performing”.

By 2013 Nespresso will increase the sourcing from the Nespresso AAA Sustainable Quality Coffee Program from 51% in 2010 to about 80%. Around 80,000 farmers will then belong to the Coffee Quality Program of Nespresso coming from new countries such as Nicaragua, Kenya, Ethiopia or India. This strategic partnership is further enhanced by a supplemental certification of the Rainforest Alliance to ease the farmers’ access to premium markets and introduce farm management structures.

Capsules

The next step within the value chain is the production of the capsules which helps among others to differentiate Nespresso from its competitors. At the moment more than 1,700 patents are registered for the Nespresso brand and its espresso system – “dozens on the capsule alone”.

  • The material of the capsules: the capsules are made of aluminium. Referring to Nespresso “aluminium is the best material for protecting the delicate aromas and taste” of their espresso. Within the capsules the high quality coffee is hermetically sealed and therefore the influence of air, light and humidity can be limited up to twelve months whereas normal coffee starts to oxidise after 48 hours.
  • The content of the capsules: the aluminum mantle of the capsules is filled by 16 different coffee sorts, named Grand Crus, supplemented by about two limited editions each year. One capsule contains between five and six gram coffee. The customer can choose between “pure, single origin coffee” or “exceptional blends” – Lungo Grand Crus or Grand Cru Blends, each one represented by a different color.

Machines

Also the production of Nespresso’s coffee machines has to meet the commitments of the Ecolaboration Program. Therefore Nespresso has established the VerTech-Network to develop environmentally friendly machines with reduced CO2 emissions and improve
energy consumption. The network consists of different experts from the internal R&D department of Nespresso, from machine suppliers, product and machine designers as well as sustainability experts. Their aim is to reduce emissions of the machines by 20% until 2013. The VerTech-Network approaches this challenge by both improving the current energy consumption and CO2 emissions and research on the field of “Bluesky” technologies for future machine generations.

The new machines called “Citiz” are equipped with an automatic standby function.  This complies with the requests for European Energy Using Products of electronic home and office appliances. After 2010 all machines will be provided either with an automatic standby or with a switch-off function after 30 minutes.

Due to the fact that Nespresso does not produce and distribute its machines itself, but
cooperates with machine suppliers the Ecolaboration plays also at this stage of the value chain an important role. Thus machine producers such as DeLonghi, Miele or Krups have to work closely together with Nespresso to fulfil requirements in terms of energy consumption or CO2 emissions, but also concerning Corporate Social Responsibility, use of materials and life cycle assessment of machines. For example, about 60% of the machine weight of the model “Essenza” can be recycled and Nespresso strives to increase this proportion with its next model “Citiz”.