Nespresso: gourmet coffee demand safe from crisis

MEXICO CITY Tue Nov 18, 2008 6:15pm EST

MEXICO CITY (Reuters) - Nespresso, the premium coffee-capsule division of food group Nestle (NESN.VX), is betting that demand for gourmet coffee will grow in Latin America despite a looming global recession that could crimp sales of luxury goods.

"We use the best coffees and people are willing to pay a certain price for that. Once people are used to a high-quality product, they don't want to downgrade," Jean-Marc Dragoli, the head of Nespresso in Mexico, told Reuters in an interview on Tuesday.

"We have not seen a direct impact yet from the crisis," he said at the opening of a new flagship store in Mexico City.

The company sells equipment to brew coffee one cup at a time using small capsules of ground beans. Machines shoot hot water through the capsules to brew standardized cups of espresso and coffee.

People buy the packaged coffee for their machines at home, in restaurants or hotels, from Nespresso boutique stores, online or by calling a toll-free number.

The premium quality coffee company expects to reach 2 billion Swiss francs ($1.9 billion) in sales in 2008, and Dragoli said next year the company will grow in Latin America and around the world even as economies are slowing.

"Globally, Nespresso is a brand that has grown more than 30 percent for the last seven years," Dragoli said. "I think we are going to keep growing next year, maybe not at the same rate, but definitely in the double digits," he said.

He said the Swiss company, already well established in Europe, plans to sell more equipment and boost brand recognition in Latin American markets like Mexico, Argentina and Brazil.

Latin American sales should reach $100 million by 2010 as coffee producing nations increase consumption faster then countries in Asia, which are more accustomed to drinking tea, Dragoli said.

Nespresso has a sustainable coffee verification program, which it developed with nonprofit organization Rainforest Alliance and other partners, to pay a premium to farmers for specialty, hand-picked beans.

The Swiss company wants to increase the amount of sustainable coffee it buys to 50 percent by 2010 and is looking to find new regions to certify in coming years.

(Editing by Jim Marshall)