Bloomberg News

Nespresso to Face Competition on Machines From Ethical Coffee

December 03, 2012

Ethical Coffee Co., a Swiss maker of Nespresso-compatible coffee capsules, plans to introduce its first coffee machine as Chief Executive Officer Jean-Paul Gaillard steps up competition against his former employer.

The machine will work with any single-serve capsules that fit into Nestle SA (NESN)’s Nespresso system and will go on sale in France in February, Gaillard said in a phone interview. Ethical Coffee expects to ship between 150,000 and 250,000 units next year, he said.

“It’s an open system,” Gaillard said, adding it will work with capsules from Ethical Coffee, D.E Master Blenders 1753 NV (DE), or any other Nespresso-compatible coffee. Ethical Coffee will sell the machine under license with retailers, and the response has been “extremely positive,” Gaillard said.

The CEO aims to carve out more revenue for Fribourg, Switzerland-based Ethical Coffee as he competes with Nespresso, a brand he ran between 1988 and 1997. Nespresso, which generated 3.5 billion Swiss francs ($3.8 billion) in revenue in 2011, or about 4 percent of Nestle’s sales, has been one of the company’s fastest-growing major brands over the past decade.

Ethical Coffee has fought a legal battle with Nestle since it began selling Nespresso-compatible capsules in 2010. Retailers such as Casino Guichard-Perrachon SA (CO) sell the coffee under their own brands.

The Ethical Coffee machine will be capable of making both espresso and milk-based coffee drinks, Gaillard said. The price probably won’t exceed 150 euros ($195) on average, he said. Nespresso currently offers rebates of as much as 60 euros on its line of U machines, which cost 139 euros in France.

Ethical Coffee’s capsules are sold in more than 10 countries, including Germany and Austria. The company plans to produce about 500 million capsules in 2013, up from 280 million this year, Gaillard said.

Nestle sold more than 6.5 billion Nespresso capsules in 2010. The company doesn’t regularly publish its annual production.

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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