Monodor Case Study

MONODOR

In early 2008, Eric Favre, chairman of Monodor SA, was thinking over how to improve his position forward in the highly competitive coffee market. Favre founded Monodor, a coffee packaging and distribution company which competed in the home espresso capsule market. The coffee market comprised the largest share in the hot beverage market by value, worth US $ 47 Billion (2010). It is separated into two sections: Roast&Ground (R&G) and the water soluble (instant) coffee market.

In 2006, Nestle was the market leader with 21%. Kraft took the second place with 15% of market value. On the podium too, was Sara Lee with 6 %. Since 2000 the worlds coffee consumption had been growing at an average rate of 1.5% annually. According to analysts this sluggish rate is attributed to decreasing demand among young adults and an increase in demand for alternatives like bottled water. Especially Western Europe is one of the strongest and largest coffee markets. It also is the most sophisticated and saturated in the world. In 2006, coffee sales reached $13.66 billion, accounting for nearly three quarters of the regional hot beverage sales of Western Europe.

At the end of the eighties the world wide coffee market was revolutionized by Nestle with Nespresso machine. A machine developed by Eric Favre prepared espresso using pre filled coffee capsules. Espresso (coffee of the highest strength) is prepared using roast and ground coffee beans, water and steam, topped by a thin layer of foam called "creama".

Favre's career at Nestle started in the 70's. He discovered the importance of injecting air into the coffee machine to get the well tasty aroma of a traditionally made espresso. Subsequently he invented a system comprised of a coffee filled capsule and a specially designed coffee machine to create espresso. He immediately received prizes for his invention. Despite the initial enthusiasm of the nestle board, it turned out to be difficult to support his invention because nestles bulk of its revenue was water soluble, not roast and ground, coffee. After years and several efforts to push the system within Nestle, Nestle Nespresso was created and Favre became its founder and first CEO. The nespresso machine consists of five parts: A handle, a water container, an electric heater, an electric supply core and an electric pump. The aluminium sealed capsules contained 5 grams of R&G coffee. Although launching an advanced and user friendly espresso system, Nespresso had difficulties contending on the market. One reason was the high cost of the machines ($389). Being forced to renew the strategy which concentrated on companies, which were interested in providing a reasonably, priced "per" to their employees, he developed a new one. This strategy focused on the segment of upscale consumers. At the end of the 80's Favre launched the Nespresso Club, where consumers could place orders. By 1990 Favre was asked to resign. The main reason for this decision was that Nespresso had not yet reached breakeven and Nestle's board put the product's viability into question.

Favre was disheartened, however he found his way back to business, again inspired by a trip to Italy. After his trip he was animated to model a polypropylene capsule using an arch shaped bottom as seen on the Roman bridge, which he discovered on his trip. Everyone used aluminium filters in their capsules which where strong but environmentally unfriendly. Therefore Favre patented the capsule and filter plate named the Monodor Concept.

In 1991, Favre hired board members for his new company and founded Monodor SA with the goal to develop and produce a line of specialty coffee capsules.

Favre instantly contacted Nespressos new CEO to find out if they might be interested in renewing their aluminium pods with Favre's innovation. After being turned down, he joined forces with Chicco d'Oro, a small Swiss roaster, in order to make and sell his own coffee capsules through his shop in Switzerland and through the traditional retail trade. Ensuring that the Monodor-Chicco d'oro capsules would be compatible with other systems, Favre