Nestlé to build fresh factory for Nespresso

By Chris Mercer

- Last updated on GMT

Related tags: Coffee

Soaring demand for espresso coffee in Europe will see Nestlé spend
almost €95m to open a new production and distribution centre for
its Nespresso drink by 2008.

Nestlé announced it would build the factory in Switzerland and that the move would keep Nespresso on track to become a CHF2bn company (€1.3bn) by the end of 2010.

Sales of Nespresso, which is made from hermetically sealed aluminium capsules containing ground coffee, have risen more than 30 per cent annually for the last five years. Nestlé praised the division for driving the company's 7.8 per cent increase in beverage sales during the first half of 2006.

The decision to build a new production and distribution centre displays the firm's confidence in continued market growth.

Nespresso, dubbed coffee's answer to teabags, has latched on to the coffee culture already present in several European countries and growing rapidly in others, especially the UK.

Espresso is the most popular style of coffee across much of southern Europe, and its popularity has increased in Britain thanks to the arrival of several coffee chains, such as Starbucks, Café Nero and Costa Coffee.

These chains have also fostered a consumer shift in Britain towards freshly ground coffee, by making Italian-style espresso shots the base of their coffee drinks.

Ground coffee sales have driven a five-seven per cent annual increase in Britain's retail coffee sales over the last two years, according to recent figures from market research group Mintel​.

Nestlé says its Nespresso has captured this trend by enabling consumers to make fresh, ground coffee quickly and easily at home or in the office - providing greater competition to the big coffee houses in Britain and many cafés around Europe.

Nespresso capsules are placed in a specially designed Nespresso Smart Machine, which penetrates the capsule with a jet of heated water and then makes the coffee.

Nestlé claims the Nespresso capsule protects the coffee from air, light and moisture to preserve the aromas in the coffee and keep it fresh. This, it says, gives Nespresso an advantage over bags of freshly ground coffee, which will go stale much faster.

Market figures indicate that consumer demand for freshly ground coffee at home is on the rise.

Sales of coffee machines in the UK were expected to increase 16 per cent every year between 2003 and 2008, according to figures published by Euromonitor​ in January 2006. It said there was particular interest in so-called 'closed system' machines, because they minimised mess by acting as a teabag for coffee.

The home coffee market remains a small part of the whole, however. A survey of 969 consumers, commissioned by Mintel, found only six per cent said they used an espresso or cappuccino machine at home.

Related topics: Markets

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