Business Irish

Tuesday 21 November 2017

Smooth operator - Nespresso winning coffee wars

Ailish O’Hora meets the woman turning Ireland into a nation of Nespresso coffee drinkers

Brema Drohan in Dublin this week. Photo: Frank McGrath
Brema Drohan in Dublin this week. Photo: Frank McGrath

You can forget your multi-million euro, high-profile brand ambassadors like George Clooney and Matt Damon. In fact it was an Irish mammy who predicted that the Nespresso brand would take off in Ireland.

The woman in question is Waterford’s Gertie Drohan – the mother of Brema Drohan, current managing director of Nespresso UK and Ireland.

Now in her 80s, Gertie was introduced to Nespresso products by Brema over a decade ago – and she was quite taken by the posh stuff, according to her daughter.

A few Vollutos and a recession later and the company, a subsidiary of the world’s biggest food firm Nestle, is about to open a flagship boutique store on Dublin’s Duke Street.

And the opening is on Drohan’s  watch. She believes the move is a vote of confidence in the Irish economy.

“I would say that that is definitely the case,” she says, sipping, yes, a Nespresso, at Kevin Thorton’s eaterie on St Stephen’s Green.

“Nespresso is voting positively in terms of Ireland. But the company has always believed in the Irish market and the product as an affordable luxury here.”

The figures certainly back this up.

Last year, the Nespresso outlet at Brown Thomas had revenues of €6m with three deliveries a week to keep up with demand.

While Drohan would not comment on any Irish figures for the business, she said Nespresso experienced growth throughout the recession.

“We have experienced excellent growth in the past four or five years. For us it wasn’t a question of waiting for green shoots [to open the flagship store], although they are there, which means the Irish market has even more to give now.

“Nespresso is positioned as an affordable luxury and if you go back to pre-2008 – probably everywhere but more so here  –  there was a lot of eating out, a lot of cars and moving houses.

“Then those things stopped. But people still needed treats and there is still discernment and an interest in quality. And people wanted these treats, so they brought them home.”

Despite us being a nation of tea drinkers, we have developed a taste for coffee.

“Yes we are, in our minds, a nation of tea drinkers but we are also a nation of quality coffee drinkers,” she says.

“As a people we are very close to the land. And provenance of food and food quality is also important to us. There are different qualities of coffee and a good cup is very much enjoyed by the Irish consumer.

“The world has become a much smaller place and as a nation of travellers we have become more interested in lots of things, including coffee,” she adds.

The Irish market, though, is obviously just a small part in Swiss giant Nestle/Nespresso’s jigsaw.

Nestle announced a €6.6bn  share buyback earlier this month and revealed stronger sales growth in emerging markets in contrast to other big consumer products companies.

The share buyback follows Nestle’s sale of an 8pc stake in French cosmetics company L’Oreal earlier this year and the repurchase plan was bigger than originally expected by the market.

The world’s biggest food group by sales is still grappling with weak demand in China, but achieved growth in many smaller markets in Asia, Africa and Latin America.

Nestle’s rivals, including Unilever, Beiersdorf, Mondelez International and Diageo , have all blamed emerging market weakness for disappointing results this year.

Analysts estimate that Nespresso accounts for about 15pc of Nestle’s growth although the company does not strip out figures for it.

And pods are also big business.

Sales of coffee capsules, or pods, in Western Europe almost doubled over the past four years to more than €4bn, according to recent figures from Euromonitor. Worldwide that figure is about €10bn.

In addition, the sale of pod machines outpaced those of drip coffee makers in this part of the world for the first time last year.

And while Nespresso may be the pioneer of the technology (it has about one third of the European capsule market), the growing popularity of these products has meant more competition.

In October of last year, the Swiss food giant said it was “disappointed” by a decision by the European Patent Office (EPO) to revoke a patent related to its coffee-making machine.

The patent concerned the way the Nespresso coffee capsules fit in the machines.

At around the same time, US-based Mondelez, the world’s second biggest coffeemaker after Nestle, launched a range of capsules that can fit into Nespresso machines.

In addition, cheaper capsules from big supermarket chains have also come on the market but Drohan said this competition has made the company focus more on what it does best – sourcing good quality coffee and delivering it to discerning customers.

Nespresso also tore up the traditional marketing textbook when it launched its products by selling the capsules online or over the phone instead of installing them in supermarkets.

“Competition is always around and we believe what it has done for us is focus us more on our existing strategy, which is to deliver the best possible quality coffees to the consumer with the best possible service.  The boutique is part of that service,” she says, adding that innovation and service means Nespresso will continue to stand out heads above the rivals.“We actually have people on the ground sourcing the best products.”

While Nespresso is a relatively young company, founded in 1986, Drohan is already a lifer.

She joined in the 1990s after she finished her degree in international languages and marketing at the then-NIHE in Dublin.

While her home is now Germany, she is using the business trip home as an opportunity to visit Gertie in Waterford.

One thing’s for sure – they won’t be drinking tea.

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