Nestle replaces Nespresso head as one-cup rivals loom

ZURICH Wed Nov 21, 2012 7:35am EST

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ZURICH Nov 21 (Reuters) - Nestle SA has named a new head at its Nespresso unit which faces rising competition from cheaper upstarts seeking to muscle in on the $8 billion single-serve coffee market.

The Swiss-based foods group said on Wednesday Jean-Marc Duvoisin will from March lead Nestle's fastest-growing big brand, replacing Richard Girardot who becomes head of the group's French activities from April.

Duvoisin is a 26-year veteran of Nestle who currently serves in a human resources role, having previously been market head of Colombia, Venezuela, Ecuador and Mexico.

The change was set into motion by the retirement next April of Marc Caira as head of Nestle's professional unit, which sells food to restaurants and canteens. Nestle France head Martial Rolland will succeed Caira at the professional unit.

One-cup coffee makers and the coffee-filled cups, discs or pods they use to make barista-worthy individual drinks account for just 8 percent of total worldwide coffee sales, but that share is quickly rising.

Nespresso's George Clooney-marketed system has proved a hit with espresso coffee lovers across Europe with underlying sales growth of between 20 and 40 percent a year and sales of 3.5 billion Swiss francs in 2011.

The group is building a third factory in Switzerland to meet growing demand.

But Nestle is coming under threat from a raft of competitors including Starbucks Corp, which recently announced competitive prices for its Verismo coffee and espresso makers.

"One year ago I would've said Nespresso can run itself, but in the meantime it's grown very competitive with the whole capsule wars," Kepler Capital Markets analyst Jon Cox said.

Green Mountain's Keurig one-cup coffee brewers control more than three-quarters of the U.S. market. Nespresso espresso makers hold a 35 percent share globally a n d has been trying to make a U.S. push.

Douwe Egberts (part of D.E. Master Blenders ) manufactures L'Or espresso capsules which can be used in Nespresso machines, although it faces legal challenges from Nestle.

Incoming Nespresso head Duvoisin's experience in Latin America markets may be a sign Nestle will seek new markets for Nespresso, Cox said.

"Westen Europe is seen as tough, so they may be saying 'we need to expand Nespresso in developing markets in the sort of cities where the standard of living is much higher than in emerging markets,'" said Cox, who rates the stock at "hold" with a 60 franc target price.

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