With a market share of 11.3%, Nestlé is the second biggest player in the global consumer packaged coffee market. The company is not satisfied sitting second to Mondelez International (15.7%) and is implementing market segmentation strategies aimed at making it the undisputed market leader.
Nestlé’s offering at the lower, instant end of the market revolves around the highly popular Nescafé brand which, according to the company, is the most-consumed coffee in the world. In recent years, the company has grown this brand and launched new products, most noticeably the Nescafé Super Premium Coffee range. In order to grow the Nescafé brand, Nestlé has employed market segmentation and product differentiation strategies and these have proved successful.
At the low-end of the market, the company has segmented its offering into the following categories: Everyday, Super Premium, Café Menu, and Decaf. In the cases of the first three, the company has adopted a behavioral segmentation approach, primarily looking at spending and lifestyle behavior.
For example, the Everyday segment includes the brand’s most basic freeze-dried soluble coffee (Nescafé Original), as well as variations on it like Original 3-in-1, Fine Blend, and Gold Blend. These are low-end products, with some variation in taste to appeal to different palettes. Ultimately though, they are aimed at the lower-end of the market in terms of price and the convenience of instant, hence the name ‘Everyday’.
In a bid to attract customers who want to drink a higher grade of coffee without losing the convenience offered by instant, the company has launched the ‘Super Premium’ line of products, marketed as being made ‘100% from Arabica beans’ and the packaging includes a strength rating to differentiate between the variants. The brand’s Café Menu range is aimed at consumers who want more than a simple soluble coffee drink, but again need or want the convenience of an instant beverage. The Café Menu range therefore consists of various powdered cappuccinos, powdered lattes and powdered mochas in sachets.
In the case of the Decaf segment, the company is segmenting its offering based on benefits. Some consumers perceive health benefits from limiting caffeine consumption and so will not buy non-decaffeinated coffee. These consumers would be lost entirely if the company did not market a decaffeinated variant, so producing such a product again allows Nestlé to maximize Nescafé’s market.
This is part of a wider market segmentation strategy that sees Nestlé target mid-range consumers through its Nescafé Dolce Gusto single serve capsule system and high end consumers with its Nespresso brand.
To learn more about the market segmentation strategies Nestlé employs as it bids to become the undisputed leader in the consumer packaged coffee market, see MarketLine’s case study, Nestlé: Quest for dominance in the global coffee market.
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