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The company is used to competition from private label on its traditional FMCG products, but might have been expecting to be less troubled with a unique concept such as Nespresso. Recently, however, it was announced that Switzerland's most powerful retailer, Migros, was to launch an 'own label' rival to Nespresso (click here to see that story on this page).

How will Nestlé react? How does it see the new competition? Well, its Swiss head Marc-Alain Dubois give his opinion to the newspaper Tribune de Genève (TdG).

Nespresso: Soon to face competition

Nestlé was already aware that the competitive landscape would change in 2011, given that the patent it holds on the capsule technology employed in Nespresso runs out that year. Migros' announcement that it would be competing much sooner, however, has upped the stakes.

TdG: Do you consider Switzerland to be an important market for the coffee portions sector?

MA Dubois: More than important, its essential. We expect to sell 1.5 billion capsules here this year. More generally speaking, Switzerland and France, out two main markets, represent more than 50% of our sales and two-thirds of Nespresso's global market share is achieved in its home country. Naturally, we intend to retain our leadership position here.

TdG: Nevertheless, you are going to have to face up to serious competition, from Migros, which is going to launch its own coffee capsule system by the end  of the year.

MA Dubois: Switzerland has always been a very competitive market in terms of coffee machines. 65% of the Swiss own such a machine, 12% have a Nespresso. Other companies have been present on the market, with capsule systems, for a long time now, so we've had to battle it out for some time already.

TdG: Yes, but Migros could sell its capsules at 30 centimes per unit, that is 15 cents less than yours. Could that kind of competition lead you to cut your prices?.

MA Dubois: As I said, we will always fight the competition. Clearly, we are going to be watching their project very closely, but we will not be changing our price policy. Our strategy has always centred on product quality. That quality has a price, a price our clients will accept as long as it guarantees satisfaction. We are convinced that our pricing is correct for the product we sell, and we want to continue to offer top-of-the-range coffee and service.

TdG: The quality of your Nespresso coffee is principally due to the technology you developed to produce the capsules. But your patent on that technique runs out in 2011. Aren't you a little afraid?

MA Dubois: Of course, we are expecting the competition to react. But we are actively preparing for that eventuality. What's more, we have a clear advantage: our know-how. Over the past 15 years we have considerably improved our technology and we are in control of each parameter that affects the taste of the coffee. We will be ready to face up to the competition in 2011. What more can I say.

TdG: How do you see things developing over the coming years?

MA Dubois: At international level, our turnover should be 850 million Swiss francs this year. we expect to grow by 25% each year. As regards our strategy, we plan to strengthen our up-market positioning and focus on customer service. The key to our success is maintaining a loyal customer base.

TdG: And your plans?

MA Dubois: We are going to be more active in terms of fair trade and reinforce our control of the conditions in which the coffee we use across our Nespresso range is produced, that is 12 varieties in all. That means ensuring good working conditions and salaries, but also environmental issues. It also means we must achieve complete traceability of our coffees, from the plantation to the capsule.