Osem Investments Ltd. (controlled by Nestlé SA (SWX:NESN)) (TASE: OSEM) is entering the coffee capsule machine market and will launch a line of products under the Nestlé brand Dolce Gusto. This line will enter the market alongside Nespresso, the machine and capsule company also owned by Nestlé, which is operated independently by Nespresso in Israel.
Sources inform “Globes” that in the coming months, Osem will begin marketing its coffee machines and the capsules to go with them, but, unlike Nespresso, which is a luxury, lifestyle brand (which has ads featuring George Clooney and Penelope Cruz), the new machines will target a more humble market, and will compete with Espresso Club, Lavazza machine (which are marketed in Paz's Yellow convenience stores) and others.
The Dolce Gusto capsules are already sold around the world, and include various coffee flavors, such as espresso drinks, cappuccino (which includes powdered milk that comes in a separate capsule) and even hot chocolate, and a capsule for preparing iced tea, making them suitable for the whole family. On the Dolce Gusto website in the US, a package of 16 capsules sells for $9.50 (NIS 38), which comes to NIS 2.35 per capsule. If this ends up being the price for consumers in Israel, it will indeed be very competitive relative to Nespresso and others.
It’s possible that the element of competition will be manifest in the prices of the coffee machines manufactured by De’Longhi for the brand. A basic machine on the Dolce Gusto website sells for $40 (NIS 160). The most expensive machine, which is circular in shape, sells for $180 (NIS 700). The capsule-coffee-machine sector has been flourishing in recent years. Estimates are that the sector has an annual turnover of NIS 300 million (including machines and capsules).
Many varied players are entering the market, and they operate on a few different fronts: capsules for Nespresso machines (the biggest player in the sector); independent machines that are offered with membership deals that include capsules (Espresso Club); expansion of coffee machine operations to gas stations (Lavazza) and more.
Strauss Group Ltd. (TASE:STRS) entered the market two years ago, but does not have its own system, and instead sells capsules for Nespresso machines, which has not been very successful. It appears that the competition that Osem is bringing will benefit the consumer, in terms of price relative to competitors in the sector.
Osem declined to comment on this report.
Published by Globes [online], Israel business news - www.globes-online.com - on March 25, 2015
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