The Machine Revolution
Long are the times when a mixer and a toaster were the only gadgets in our kitchens! Then came the coffee machine, the steamer, the microwave, even the bread machine and many others.
However it has been Nespresso who has brought a substantial difference in the business model of “kitchen appliances”. Just like we had seen with cartridges for printers, the Nespresso capsules have helped placing an additional machine in our kitchens all over the world.
Afterwards came Dolce Gusto, similar to Nespresso but with a distribution focused on retail, and last year it was the turn for Special-T, a Nespresso-like machine for tea, with capsules only available through the internet.
Finally, last may Nestlé announced the launch of BabyNess, another closed capsule system for baby-food. Certainly not what you would have expected, but it looks like the business model has potential.
Already on its 4th venture, Nestlé has proved a great ability to develop its products and categories (coffee, tea or baby food) into business platforms and services. Even if these business become a mere shadow of what Nespresso is today, the investments are more than justified.
2 questions arise:
- Why are other food manufacturers not jumping into the “machine” wagon?
- What are the limits to developing machines? or put it in another way, how much more space do we have in our kitchens?
In my opinion, food manufacturers are still not seeing the full potential of the machine business, and still hesitate to engage in relationships with machine manufacturers. Their developments are limited to a “me too” strategy once the markets become mature. Most of the times therefore competitors are needing an additional alliance with a retailer to counteract the lost “first mover advantage” (penetration). This gives Nestle a mid-term competitive advantage. I say mid-term because it is still early to see whether the strong penetration and brand loyalty built by Nespresso over the last years, will be able to counteract the copy-cat capsules that are appearing all over Europe.Continued on the next page