June 10, 2013 / 10:01 PM / 4 years ago

Mondelez to take on Nespresso with own-brand coffee pods

* Mondelez looking to tap premium coffee market

* Nestle global leader in coffee, Mondelez No.2

* Mondelez forecasts $1 bln sales for Tassimo machine

By Silke Koltrowitz and Emma Thomasson

ZURICH, June 11 (Reuters) - Mondelez International, the world’s second-biggest coffee producer, is going head to head with Nestle by launching capsules compatible with its rival’s Nespresso system to steal a share of the premium coffee market.

The capsules will be sold under the Jacobs and Carte Noire brands in Germany, France, Austria and Switzerland in the second half of the year - the biggest challenge yet for the $4.4 billion Nespresso brand that has sued many copycat rivals.

“We see a very healthy coffee market where people like to pay more for a cup of coffee and are becoming increasingly demanding on the quality and variety of their coffee,” Roland Weening, Mondelez vice president for coffee marketing, told Reuters. “We’ll see very strong growth coming out of this particular launch.”

Weening said that sales of portioned coffee pods have been growing by close to 20 percent in western Europe in recent years and could represent a third of the coffee market by 2016.

Global sales of coffee pods were worth $8 billion in 2012, with $5.1 billion in western Europe, Euromonitor research shows.

The snacks powerhouse carved out of Kraft Foods Inc last year makes Cadbury’s chocolate and Oreo cookies, but 17 percent of its turnover comes from coffee and powdered drinks.

Nespresso has been Nestle’s fastest-growing brand in recent years, with its recipe for success based on relatively cheap machines and costly coffee capsules, available only online or in exclusive boutiques, prompting rivals to launch cheaper copycat pods through traditional retailers.

LEGAL CHALLENGES

Weening said that he expects the new capsules to be competitively priced, without giving details, and that they could be launched in other markets at a later stage.

Nestle has sued rivals including Ethical Coffee Co and Swiss supermarket chain Denner, but so far it has failed to obtain a definite sales ban on their products.

Mondelez appears unfazed by the possibility of a legal challenge. It has done its homework on the legal implications of the launch and is ready to face any queries, Weening said.

The new operation should not compromise the company’s ambitions for its own Tassimo beverage system, Weening said. Tassimo, which brews brew tea, hot chocolate and milky coffees, is expected to join the group’s billion-dollar brands soon.

“Tassimo is doing very well ... it’s a profitable business,” Weening said, adding that it is the fastest-growing single-serve system in Europe, with sales up 30 percent in the first quarter.

The Tassimo machine completes with Nestle’s Dolce Gusto drinks maker, D.E. Master Blenders’ Senseo and the Keurig brewer made by Green Mountain Coffee Roasters Inc .

Nor does Weening see economic weakness throughout Europe as an obstacle to success, saying that it has pushed people to drink more coffee at home.

“Greece has been one of our most successful markets in Tassimo and we continue to see good growth in single-serve in Spain - and that is actually the effect of recession,” he said.

Nestle said in March that its Dolce Gusto brand, launched in 2006, was about to break even and sales would soon hit 1 billion Swiss francs ($1.06 billion).

Our Standards:The Thomson Reuters Trust Principles.
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