The market for coffee capsules is changing and the market italian leader is driving this change: Lavazza. At the end of the first quarter of 2018, the newest addition to the category was the market launch of Lavazza’s Nespresso-compatible capsules.
The market leader decided that the time had come to recover the huge turnover associated with the world of compatible products, even to the detriment of the same (A Modo Mio), and to promote this new offer in the best way possible, it committed itself to including exhibitors in all formats, including Discount, such as Lidl.
Why is a category that up until yesterday was exempted from the war of promotions, now classified with the leaders in the King of Discount? And even more: what has Lavazza been driving to produce compatible capsules for its biggest competitor?
Perhaps because it was realized that the double-digit growth of a market segment without any particular marketing strategy has come to a standstill. Lavazza is a brand that thrives on uniqueness, a characteristic that must be part of a brand whose reputation is the result of an established quality that determines the absolute singularity of its offer; yet the leader, in order to shut the door to an out of control turnover, that of compatible capsules, decides to give up some of the characteristics that formulate the base of its marketing principles, in order to regain that market share in which too many brands and too many unknown companies have entered.
What, then, will be the new direction in which the retail market will move?
The coffee category is one of those where promotional pressure is very violent, Lavazza (leader) and Cafè do Brasil, Kimbo (main follower), generate sales mainly through promotions (cut price). It’s hard to see a promotional flyer from a coffee retailer on offer. Even in the wafer market, which has now been overtaken by capsules at triple speed, there are strong promotional activities, especially with the player Cafè do Brasil (branded Kimbo).
The capsule, recently considered a commodity, was still as an oasis, an area of turnover with a capacity for huge growth, and therefore protected from the promotion wars.
Now that it is no longer the case, the leader has moved, and its movement will cause countless other movements. The domino effect will start from the supermarket chains, which will be obliged to promote capsules more frequently on flyers; today there are already various followers who take advantage of the prices of Nestlé and Lavazza and put compatible capsules on the market at very good prices for end consumers. But if Lavazza decides to attack the market, it will be painful because of the multitude of small coffeemakers that have recently entered the market.
Another quality industry, Covim Caffè, is investing more than any other in television advertising and has decided to invest in the only direction in which it can be distinguished: innovation.
It has introduced an Organic and compostable capsule in to the market and intends to further innovate its offer: the world of compatible capsules is still too little evolved to make selections, with little promotional pressure and little “green” innovation.
It was the novelty of the new millennium that in a few years has gained a market share in Italy that is close to 30% of the entire category.
Now the time has come to make a choice: Lavazza has understood the moment and has reorganized itself by lowering prices, Covim Caffè takes a leap forward in terms of technology and quality and puts in place a strategy, that together with major advertising investments, creates a definitive gap between the mass of small roasters in Italy and the Olympus of leaders.