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Nestlé loses latest skirmish in Nespresso coffee capsule wars

By Ben Bouckley+

22-Feb-2013
Last updated the 25-Feb-2013 at 13:42 GMT

Picture Copyright: Nespresso/Nestlé
Picture Copyright: Nespresso/Nestlé

Nestlé says it is disappointed that a German appeal court has not granted it an injunction to stop sales of Nespresso compatible pods made by a smaller Swiss rival.

But the Ethical Coffee Company (ECC) – led by CEO and former Nespresso MD Jean-Paul Gaillard – hailed a “major victory in the ‘coffee capsules war, but one that will not necessarily put an end to Nestlé’s desperate attempts to ban the marketing of ECC’s coffee pods in Germany”.

Nestlé had appealed against an earlier decision by Dusseldorf District Court, which in 2012 ruled in ECC’s favor that Nespresso patents were not breached when consumer used capsules offered by other manufacturers.

The Dusseldorf Court stated this week that Nestlé’s pods – coffee capsule sales are expected to top $8bn by 2014, according to Gaillard – did not constitute the key element of Nespresso machine, and did not have the distinctive features of an invention.

ECC launched its pods in France in 2010 and in nine other EU states in 2011, and Nestlé subsequently launched lawsuits in several countries in a bid to protect Nespresso capsule sales (worth circa. $3.2bn in 2011).

Battle is over, but war begins…

Nespresso associate corporate PR manager, Diane Duperret told BeverageDaily.com that the brand was disappointed by the appellate court’s not to grant the preliminary injunction to protect Nestlé’s intellectual property rights.

But she added: “It is important to note that this preliminary decision is not a ruling on the merits of the case. Yesterday’s decision does not affect any future decisions by the court in this matter. The case will now proceed to trial.”

We asked what impact such decisions – leading to third party companies being able to market pods for use in Nespresso machines – could have on Nespresso’s top and bottom line.

“The protection of our intellectual property is an important component of our business strategy,” Duperret said. “However, our success will continue to be driven by our ability to exceed consumer expectations by delivering products and services of exceptional quality.”

Competition nothing new – Nespresso

Duperret added that competition was nothing new for Nespresso. “In fact, we are today competing against approximately 100 portioned coffee offerings in the market globally,” she said.

Gaillard said the ruling showed that the owner of patent for a capsule extraction system could not realistically oppose the distribution of third-party capsules.

“Nestlé is struggling to keep fighting these battles that they keep on losing,” he said. “The important thing is the public’s right to consume what they want in a market that is clearly open to free competition.”

Expressing his hope that the German decision could be echoed in Switzerland (where Nestle is also appealing a July court decision) Gaillard said the Dusseldorf ruling would allow consumers to continue using ECC’s capsules, which he claims are 30% cheaper than Nestlé’s.