Alexander von MaillotMarketing ManagementPrague – 5th May 2010

From exploring consumer trends

to establishing a new category

Objective for today:Success based on the right trends and understanding consumer needs works in any economic situation

• Coffee consumption / Trends

• THE Innovation

• Launch Execution

• Results

• Conclusion

Like a Like SexMachine man...

Coffee consumption without mega changes

Can we create a hype

?

Long-term trends:– More soluble coffee– More white cups– Fast growing coffee

shops / coffee on the go– Modern drinks like Latte

Macchiato and Cappuccino

– More Coffee Connoisseurs

50% Roast & Ground Coffee

– Mostly prepared as Turkish Moccha style

– HH penetration of coffee machines very low (20% vs. >80% in WE)

– Most of cups consumed black

CZ&SK Coffeecharacteristics:

50% Soluble Coffee

>70% of cups are consumed

with milk

From trends to understanding consumer needs

Consumer insight:“I’m not able to prepare Latte Macchiato at home”

Strong demand for white cups and especially Latte Macchiato and Cappuccino in line with growth of coffee shops

Further research:strong interest in coffee system

Launch of mega Innovation in Western Europe but Eastern Europe out of scope …

Closed portioned coffee system:

• Closed = only NDG capsules can be used

• Black and white cups without any mess

• Easy, clean, fast and fool proof preparation

• Coffee shop quality coffee & coffee specialties

• coffee machine family beverages system

NESCAFÉ Dolce Gusto Your home coffee shop

14 beverages 12 machines

“Never give up mentality” enabled us to get green light for launch evaluation

• First East European Market to launch NDG

• First mover situation, no competition on market

• Speed was needed

– From NDG research results to launch within 4 months

– Joint Business Plan with machine partner within 2 days

Business Plan required entrepreneurial spirit

Very strong investment needed

– Decision for “traditional approach”

– Mass media to generate quick awareness

– Strong PR “NDG – the gift of Xmass”

– Very strong focus on tastings

– Launch in Oct –> support Nov + Dec

– Weighted distribution of 90% in 3 weeks

– Distribution of Capsules in all electro shops

• 0 awareness for coffee solutions / capsule systems• 0 experience on retailer side• 0 experience on Nestlé side to deal with Electro shops

40 Mio. CZK

TV advertising

High quality execution of PR

Close cooperation with machine partner and clear channel strategy were crucial

Flagship stores Home & Cook

Close cooperation with machine partner and clear channel strategy were crucial

Best sales per sqm

High attractiveness of new coffee innovation also for other manufacturers

Launch season 2007 and full year 2008 with excellent results

• Best selling SDA (Small Domestic Appliances) in 2008 and 2009

Outstanding consumer feedback:

– 94% of consumers are fully happy with NDG

– 61% stated „best coffee

I ever had”

Machine sales 40% above

plan

Crisis arrived

Decision for further increase of budget

there is always a need for excellent quality

During crisis we reached new record sales2009 double sales vs. original Plan

• NESCAFÉ became market leader

in total coffee

3rd highest HH penetration

in EUROPE

DESPITE double costs in ratio to GDP vs.

Europe (1% vs. 0,5%)

Nestlé become a significant player on the R&G market thus strengthen it's position on the total coffee market

YTD in GLOBUS = 30,1%

No.1YTD in GLOBUS = 30,1%

No.1

YTD in HM R&G = 19,5%

No.2YTD in HM R&G = 19,5%

No.2

YTD on R&G market = 12,8%

No.3YTD on R&G market = 12,8%

No.3

30,1%

29%

18,6%

14,5%

7,8%

23,8% 30,0% (Nr. 1)Share on Total coffee

Nestlé shares 2007

Nestlé sharesYTD

Coffee Market 2009

R&G

Soluble

Slovakia beats US in machine sales

1:85 Machines/capita

1:85 Machines/capita

Machine sell–out 2009:

USA13.300USA

13.300Slovakia18.400

Slovakia18.400

vs.

Invest and harvest …

Key success factors:

• Dedicated resources• Be first • Make it big or don’t do it• Speed to market • Fast distribution• sales motivation• Strong PR (Internal + External)• Employees the best Ambassadors

- 2,940 machines sold to employees- 2,400 at HQ = 3,3 pcs/employee

Thank you 4 your attention!