C5 STEEPLE Analysis for Nespresso
Nespresso was founded in 1986 under parent company Nestle selling coffee machines that operated by inserting pre-packaged coffee pods. Until 2012, their process was protected by patent, giving them a first mover advantage. Nespresso sells 14bn coffee capsules each year in 84 countries.
This STEEPLE analysis explores the external environment of Nespresso in September 2022.
A social factor that may affect Nespresso is health trends. The global digestive health market is expected to grow by 7.9% by 2027 (Univar Solutions). Customers are showing an interest in coffee with additives that improve health such as vitamins, minerals and supplements (Joe’s Garage). As this trend is in its infancy, Nespresso could benefit from first move advantage if they were to launch coffees with supplements to promote gut health.
A technological factor that may affect Nespresso is the rising use of apps for connecting customers to businesses. In 2022, 35% of coffee purchases in the US were made through an app (MacDonnell). Nespresso has a mobile app where customers can order pods, machines and find boutiques. This strategy meets the current needs of consumers to save time and effort through convenient ordering. However, some reviews indicate difficulty in navigation which should be addressed (Google Play).
An economic factor that may affect Nespresso is inflation. In August 2022, inflation was recorded as the highest it has been in 40 (Csiszar). Inflation reduces the purchasing power of consumers due to the rise in prices of necessary items diminishing their disposable income. When consumers have lower disposable income, they will prioritise necessary items and reduce their spending on luxuries. As Nespresso is a premium brand with prices higher than competitors, they may experience a fall in sales as customers seek alternatives.
An environmental factor that may affect Nespresso is climate change. By 2050, it is estimated that areas where coffee is grown will be reduced by 50% (Gibbens). As coffee becomes limited in supply, prices may rise which will increase business costs. This will either reduce profit margins or force firms to pass on increased costs to consumers. Coffee companies have been advised to invest in developing crops that are resistant to climate changes (Weiner-Bronner).
A political factor affecting Nespresso is industry trade agreements. A large number of countries importing and exporting coffee are members of the International Coffee Organisation. This is a group of governments who work together to implement strategies to improve the prosperity of everybody in the supply chain for coffee, especially the farmers (ICO). This organisation release regular reports on the coffee industry including prices and trade statistics. This information can be helpful to Nespresso for benchmarking and decision making.
A legal factor that may affect Nespresso are the different data protection laws that exist in different countries. In the EU, businesses operating online must ask for consent when using cookies that are not strictly necessary (GDPR.EU). As Nespresso are increasingly engaging with their customers through their website and app, they must consider how they adapt them for data protection laws in different countries. It can be time consuming to stay on top of changing laws in multiple countries but the consequences would be legal action if they didn’t.
An ethical factor that may affect Nespresso are attitudes towards recycling. 89% of people surveyed in the UK recycle regularly with 56% recycling more in the past year (Wrap). Despite Nestle reporting 30% of their pods being recycled, a Guardian article reported only 5% were actually recycled leading to 12,600 tonnes of pods ending up in landfill. As consumers consciously make product choices where they will be able to recycle, pressure may be put on Nespresso to improve the ability to recycle their pods.
Reference list
Csiszar, John. Inflation 2022: 15 Industries That Were Hit the Hardest. https://www.gobankingrates.com/money/economy/inflation-industries-that-were-hit-hardest/
GDPR.EU. Cookies, the GDPR and the ePrivacy Directive. https://gdpr.eu/cookies/
Gibbens, Sarah. What Climate Change Means for Coffee and Other Popular Foods. https://www.nationalgeographic.com/environment/article/what-climate-change-means-for-future-of-coffee-cashew-avocado
Google Play. https://play.google.com/store/apps/details?hl=en&id=com.nespresso.activities
ICO. International Coffee Agreement 2007 - Benefits of Membership. https://www.ico.org/Benefits_ICA2007.asp
Joe’s Garage. Coffee Trends to Watch in 2022. https://joesgaragecoffee.com/blog/coffee-trends/
Light, Larry. Keep Nespresso’s Vision Alive. https://www.forbes.com/sites/larrylight/2020/07/31/keep-nespressos-vision-alive/?sh=7101fcd87b9a
MacDonnell, Kate. 12 Coffee Industry Trends to Watch in 2022: Where are we headed? https://coffeeaffection.com/coffee-industry-trends/
Univar Solutions. Digestive Health. https://discover.univarsolutions.com/blog/consumer-trends-and-opportunities-in-digestive-health/
Weiner-Bronner. Climate Change is Coming for our Coffee. https://edition.cnn.com/2022/01/26/business/coffee-climate-change/index.html#:~:text=The%20study%20examined%20how%20coffee,the%20impacts%20of%20climate%20change.
Wrap. Recycling Tracker Report. Behaviours, Attitudes and Awareness Around Recycling. https://wrap.org.uk/resources/report/recycling-tracker-report-2020-behaviours-attitudes-and-awareness-around-recycling#:~:text=Self%2Dreported%20recycling%20has%20increased,still%20opportunities%20to%20increase%20recycling.
