Nespresso eyes N. America growth via stores

Tue Sep 7, 2010 5:50pm EDT

* Nespresso USA exec sees max of 25-30 N. American stores

* Sees annual sales growth of 35 pct for next 5 yrs

* Has no plans to raise coffee prices

(Adds detail on ad spending, regional information)

By Martinne Geller

NEW YORK, Sept 7 (Reuters) - The North American arm of Nestle's (NESN.VX) Nespresso coffee business hopes to boost sales of its espresso machines and capsules by opening slick boutiques with coffee bars where customers can taste the product.

Frederic Levy, president of Nespresso USA Inc, told Reuters on Tuesday that the goal of the Nespresso boutiques that are opening around the world is to introduce customers to the Nespresso brand in hopes they will purchase a machine and the premium coffee that goes with it.

"The point of the Nespresso boutique bar is really to introduce the customer to the brand and turn them into a Nespresso customer for their home," Levy said in an interview at a Nespresso boutique in New York's Soho neighborhood, which opened quietly in August.

The company is planning a grand opening on Sept. 22 for the boutique, whose cafe menu features 16 kinds of espresso that can be made into various drinks.

Nespresso is planning its first North American ad campaign for later this year, which Levy said would include print and outdoor components. The company declined to say how much it was spending on the campaign.

Nespresso machines for making single-serve espresso drinks cost from $149 to $2,500 and are only compatible with Nespresso coffee capsules.

Nespresso competes with other single-cup coffee brewers such as the Senseo system from Philips (PHG.AS) and Sara Lee SLE.N, Mars Inc's Flavia systems, Kraft Foods Inc's KFT.N Tassimo brewers and Keurig brewers from Green Mountain Coffee Roasters (GMCR.O).

Levy, who runs the Nespresso business in the United States and Canada, said he expects the company to open no more than 25 to 30 boutiques in the region, up from 13 at present, including mini-boutiques inside stores such as Bloomingdale's (M.N) and kitchen goods store Sur la Table.

Nespresso's sales in the United States and Canada increased by 45 percent in the first half of 2010, and Levy said he was targeting annual growth of 35 percent in the region for the next five years, as more consumers demand better coffee.

Levy declined to give a specific sales target for the region, except to say it was one of the brand's fastest-growing markets.

Nespresso had worldwide sales of about 2.7 billion Swiss francs ($2.67 billion) in 2009, a fraction of Nestle's total sales of 107.62 billion Swiss francs ($106.6 billion).

He said the company had no plans to raise prices of its coffee capsules in the United States or Canada this year, even though the cost of coffee has been rising. Arabica coffee futures rallied on Tuesday to their highest level in 13 years. [ID:nN07241099]

($1 = 1.01 Swiss Francs)

(Reporting by Martinne Geller, editing by Matthew Lewis)

((Reuters Messaging: martinne.geller.reuters.com@reuters.net;

(646) 223-6023)) Keywords: NESPRESSO/

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