Sir: In response to your article, ‘A Mondelez cuckoo lays its pods in Nespresso’s nest’, The Grocer, 8 February, the entry of Mondelez into the market does not necessarily mark a threat to Nestlé so much as an opportunity for growth.
An increase in the market for pods represents an opportunity to raise acceptability of the product as an option. Competition will of course push down some of the prices making the pods affordable, but this opens the possibility of “super-premium” pods to keep tradition Nespresso customers.
As the article suggests, the solution may well be to separate the machine from the pod and to focus on innovation, licensing and sales of the machine whilst welcoming competition in the pods. It is ironic that the comparison is with Apple – the success of the iPod is in no small part due to the Apple Music Store, which relied upon the availability of content to make the investment in the hardware worthwhile.
An explosion of branded coffee pods makes the Nespresso machine a more attractive proposition for purchasers, and so Nestlé may yet find that Mondelez’s move into the category provides a very interesting uplift in sales of the machine.
Far from hurting Nestlé, Mondelez’s profits on the pods drive Nestlé’s profits on the machines.
Aaron Wood, trade mark attorney, Swindell & Pearson Ltd