Nespresso Pricing Strategy

Nestle is the world's largest food and nutrition company. Nestle has a wide range of products across a number of markets including coffee. One of them is Nespresso. Nestlé's vision is to be the leading food and beverage company in the world, providing customers with healthy food at affordable prices. Their logo is Good Food for Good Life.

Nespresso was launched 30 years ago; it is a subsidiary of Nestle and one of the worldwide leaders of coffee maker based on capsules. Nespresso is considered to be more than a simple coffee.

Coffee industry is a thriving one; it has a huge market with great opportunities. Coffee is the most popular drink in the world and consumers started to pay more and more attention to quality of coffee and some are ready to pay higher for a more up market coffee.

Even though Nestle is a company that provides qualitative products at an affordable price, we cannot say that this is the case for Nespresso as well. The reason for that is because Nespresso is a luxury brand and its clients are people with a high income. The target aimed by Nespresso is the consumer who typifies in between 28 and 49 years old, he is urban, likes pleasing and he is an art lover.

We will take as an example the coffee machines. The price of Nespresso's coffee machines is higher than for a Senseo machine; the difference is between 50 and 200 euros. But Nespresso try to keep its luxury image not only through its coffee or machines but also through the positioning of its shops or through its commercials. Nespresso shops are usually situated in the rich streets of a city and its association with stars like George Clooney increase the demand of its products.

There are four different channels of distribution: electrical goods shops (just for the coffee machines), Nespresso shops, Internet or by phone (these 2 only if you are a Club member). The prices are the same at every distribution channel.

Nespresso shops are designed so that customers make themselves comfortable. The potential customers can taste different flavours of coffee, try the espresso machines or listen to the advices of specialised salesmen. These shops are meant to show the customer the "Nespresso's drinker way of living".

The capsule's coffee proposed by Nespresso is a luxury product. So, the price of the capsule is very high (0, 31 Euros). We can notice that the price of the product is the highest of the market, three times higher than the retailer's brands that are invading the coffee's market. But Nespresso is also widely more expensive than some famous brands, like Jacques Vabre for example, whose capsules are sold at 0, 13 Euros.

Nespresso offers the most expensive capsules on the market: from 0.31€ to 0.37€ for special products. The fact that the brand deposited the numerous patents, it is really hard for their competitors to reproduce capsules which fit the machine. So Nespresso