Someone at Nestle once told me that a cup of coffee was the most profitable product in the world (all that water) and the world’s biggest food maker has profited mightily from the end product of the bean recently via its phenomenally successful Nespresso real coffee system.
Nespresso is estimated to bring in about $3bn to Nestle and the company has recently been mired in a series of legal actions to defend the 1700 or so patents its lawyers have taken out to protect the system.
Earlier this week the company won an action against Swiss discounter Denner which had produced Nespresso-friendly coffee capsules at half the price while the Financial Times reports that former Nespresso co-inventor and executive Eric Favre is planning to launch a ‘Tpresso’ tea-making product in China selling at an eye-watering $756.
Premium or what? Nestle’s own T machines cost about $129 in Europe.
Nestle. which is sitting on a $28bn cash pile following the sale of its stake in US eyecare company Alcon back in the summer, is well able to defend itself in court although, sooner or later, the dogs snapping at its heels will succeed in eroding its share of coffee systems and its stratospheric margins too.
It might take a bigger retailer than Denner, a Tesco or Walmart to do it.
One of the companies Nestle has so far battled successfully over Nespresso is Sara Lee, the US consumer products company whose owners have put it up for sale. Private equity giant KKR is the latest to show an interest in Sara Lee but Nestle may also be interested, as much as anything to protect Nespresso.