Coffee capsule manufacturer CaféPod is taking on Nespresso’s market dominance, launching it’s own range of compatible capsules in what’s been dubbed the “coffee wars”. Grainger goes into detail with us about competing with a market incumbents, developing new export markets, and the benefits and limitations of the Made in Britain brand.
When and why did you start the company?
Myself and business partner set the business up in March 2011. It took the first year and a half to get everything set up and we’ve been trading for two years. We worked in the city and we were looking for something different. We started looking at the coffee world, more specifically the capsules.
Nespresso is the market leader in terms of capsules, but only sells online and in its own stores; there’s a restriction on how they get hold of it. People love the convenience, but there was no convenience in terms of having access to the coffee. The gap was making things accessible to people, letting them get it when they wanted.
How have you found competing crowded market?
It’s been interesting. There’s pros and cons. They’ve created this amazing brand, which is up there with Apple in terms of brand loyalty, however, that gives visibility to the system. But by the same token we’re unknown, we’re a small, new startup business and we can play on that, it resonates with people.
Why do you roast and package coffee in the UK?
It was out of necessity. We’re based in the UK and as a startup you need to be quite close to it [production]. We did look at the possibility of doing it overseas. We were one of the first people in the world doing this and there was only two people in the world manufacturing. That meant there wasn’t much choice; if we put our manufacturing in another country we’d have to buy the equipment ourselves and we don’t have a manufacturing background.
How many countries are you exporting to now and how’s this progressing?
We’ve been selling for two years and in the last 12 months we started focusing on exports. We sell in Ireland, UAE, Morocco, Denmark, Russia, Cyprus, Spain, and are quite aggressive in our growth and getting a presence in these markets.
The UK is our home market, but 85 per cent of Nespresso’s market’s in Western Europe, so export’s a huge piece of our business.
What marketing have you done in these countries and does it help that the brand’s from Britain?
It can be useful. It depends so much on the particular market – I’ve just come back from a trip to Brazil. The perception of European products was imported product means higher quality. Spain there’s a premium.
[However] Britain and coffee don’t go hand in hand and we want to build a brand that stands on its own two feet. If we can leverage the “Made in Britain” brand that’s great, but we don’t want that to be the leading message, we want to build a world-renowned brand.
Read more on Made in Britain:
- There are more troubled than untroubled manufacturers
- Marketing a product in the US the right way
- The strength of Made in Britain in Brazil
What barriers have you had to overcome to export successfully?
Where do I start? When you’ve never done it before you just assume you call someone and make a sale. In reality there’s so many different ways to do it. Do we go through distributors or directly? The financing side of it, how do you get people to pay for it? How do you get around the terms? How do you vet them? When you are starting off those are big questions and you don’t know who to ask.
Culturally, doing business in different countries requires a different approach and the key thing is talking to people that are already in those markets. Negotiating is interesting, some countries expect you to negotiate others don’t. They expect a good price and don’t want to haggle and almost take offence: “Why didn’t you give me the best price the first time?” The Netherlands is quite straight forward. Southern Europe you’ll be going backwards and forwards.
How to you research and identify new markets?
The size of our market is dictated by the user base. who are the competitors and what’s the price? Also taxes and if there’s an impact on VAT? There’s no VAT on the UK, there is elsewhere. Those are the macro sides of things we look at before we go in more [detail].
Research on the commercial element is quite big. How do we identify people to do business with? Initially you start looking online for people that already sell coffee. Trade shows are a good way of getting exposure. They can come and try the product. It’s still a long process. You might meet people and conversations go on for 6-12 months; it’s a lead-generation exercise, but an effective one.
Did you receive any government assistance?
UKTI we’ve been working with them for over a year now. They’ve been pretty good. They have a global reach that makes a difference. We’ve done big food and drink trade shows in Barcelona, Dubai, France and Germany. All of these were done in conjunction with UKTI, sponsoring or part sponsoring. They’ve been very good. leveraging off their contacts has been invaluable.
What’s next for the business?
Our intention when we set up was to create a great coffee brand. The next 12 months is about focusing on the international side and looking for great international partners. [However] we have a lot of brand building to do in the UK and that’s our core focus. Getting the coffee to be better. Online is a massive factor and we see a lot of value.
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