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the nespresso success model
1998
focus on
internet 2006
with web george
site redesign clooney 2000–2008
1976 1982 1986 1988 1991 1997 retained average
first patent focus on separate new ceo nespresso first ad as spokes- annual
filed for the office company overhauls is launched campaigns man for growth of
nespresso market created strategy interna- launched nespresso over 35%
system tionally

Another ambidextrous organization is Nespresso, part of Nestlé, the world’s largest department stores). The model proved successful, and over the past decade Nespresso
food company with 2008 sales of approximately U.S. $101 billion. has posted average annual growth rates exceeding of 35 percent.
Nespresso, which each year sells over U.S.$1.9 billion worth of single-serve Of particular interest is how Nespresso compares to Nescafé, Nestlé’s traditional
premium coffee for home consumption, offers a potent example of an ambidextrous coffee business. Nescafé focuses on instant coffee sold to consumers indirectly through
business model. In 1976, Eric Favre, a young researcher at a Nestlé research lab, fi led mass-market retailers, while Nespresso concentrates on direct sales to affl uent con-
his fi rst patent for the Nespresso system. At the time Nestlé dominated the huge sumers. Each approach requires completely different logistics, resources, and activi-
instant coffee market with its Nescafé brand, but was weak in the roast and ground ties. Thanks to the different focus there was no risk of direct cannibalization. Yet, this
coffee segments. The Nespresso system was designed to bridge that gap with a dedi- also meant little potential for synergy between the two businesses. The main confl ict
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cated espresso machine and pod system that could conveniently produce restaurant- between Nescafé and Nespresso arose from the considerable time and resource drain
quality espresso. imposed on Nestlé’s coffee business until Nespresso fi nally became successful. The
An internal unit headed by Favre was set up to eliminate technical problems and organizational separation likely kept the Nespresso project from being cancelled during
bring the system to market. After a short, unsuccessful attempt to enter the restaurant hard times.
market, in 1986 Nestlé created Nespresso SA, a wholly-owned subsidiary that would The story does not end there. In 2004 Nestlé aimed to introduce a new system,
start marketing the system to offi ces in support of another Nestlé joint venture with a complementary to the espresso-only Nespresso devices, that could also serve cap-
coffee machine manufacturer already active in the offi ce segment. Nespresso SA was puccino and lattes. The question, of course, was with which business model and under
completely independent of Nescafé, Nestlé’s established coffee business. But by 1987 which brand should the system be launched? Or should a new company be created, as
Nespresso’s sales had sagged far below expectations and it was kept alive only because with Nespresso? The technology was originally developed at Nespresso, but cappuc-
of its large remaining inventory of high-value coffee machines. cinos and lattes seemed more appropriate for the mid-tier mass market. Nestlé fi nally
In 1988 Nestlé installed Jean-Paul Gaillard as the new CEO of Nespresso. Gaillard decided to launch under a new brand, Nescafé Dolce Gusto, but with the product
completely overhauled the company’s business model with two drastic changes. First, completely integrated into Nescafé’s mass-market business model and organizational
Nespresso shifted its focus from offi ces to high-income households and started sell- structure. Dolce Gusto pods sell on retail shelves alongside Nescafé’s soluble coffee,
ing coffee capsules directly by mail. Such a strategy was unheard of at Nestlé, which but also via the Internet—a tribute to Nespresso’s online success.
traditionally focused on targeting mass markets through retail Channels (later on Nes-
presso would start selling online and build high-end retail stores at premium locations
such as the Champs-Élysées, as well as launch its own in-store boutiques in high-end

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