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issue: February 2005 APPLIANCE Magazine

European Report
More Coffee Anyone?

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by Paul Roggema, European correspondent, APPLIANCE magazine.

As the advertising cliché says, Europeans love coffee. And it is true, according to the huge number of new coffee appliances sold in recent years.

As noted before in an earlier column, Philips Electronics’ household division started a coffee war by introducing a new coffee system using pods in a low-pressure (max. 3 bar), single-serving machine. Since the coffee maker’s 2001 introduction, more than 7 million have been sold in Northern European markets, with the most sold in Philips’ home market of The Netherlands, followed by Belgium and Germany. Philips chose to sell the appliances at a low price point and also participates in the sales of the coffee pods. Amazing was the late reaction of competitors: only recently Bosch and Braun followed, as well as smaller German firms Petra, Severin, and Melitta. Why did it take so long for these European manufacturers to see the market opportunity?

Bosch recently introduced the Bosch-Gustino coffee maker. In bright colors, and with several innovations, the machine uses coffee pods, now manufactured by most major coffee producers. Product manager Mark Heier admits that Bosch would “have loved to enter this market earlier.” However, he adds, “Our choice was an open system, which allows the consumer to use all kinds of single-serving pods offered by different coffee companies. After making this decision, product design started, followed by new, unique technical solutions. Regarding timing, we should realize that Philips worked on the project for several years before launching the product, which created a new market. One has to remember also that the success of the product was unexpected, and competitors were not sure in the beginning that the success in the Dutch market would be copied in other markets.

“We also realized that a ‘me-too’ product would make no sense, so we had to come up with significant improvements,” Mr. Heier continues. “All these aspects together took some time, for us and for the other players.”

He also notes that based on customer research, Bosch developed several improvements, which justify a higher price tag: a flow-through boiler (no re-heating of water, no wait time), a much larger water reservoir, and a warning light indicating lime scale buildup. “Across Europe, the size of coffee cups varies, so our machine allows for variable water volume,” Mr. Heier says. “Also, a real on-off switch provides zero standby power usage.”

Germany is Europe’s most important coffee market, with France coming second, followed by Holland, Belgium, UK, and Spain. Italy, known for its espresso, has a different coffee culture. Where “drinking coffee” is synonymous for socially getting together in Northern Europe, the Italian consumers are more “on-the-go” and prefer strong espresso. In Central Europe, people use the water cooker with instant coffee, or they simply mix ground coffee and water in their cups.

In Holland and Belgium, pod systems now have a 50-percent market share. The much larger German market is following with about 15 percent and rising.

Bosch co-developed its system with a European partner it asked to keep confidential. “Bosch focuses their own development in small appliances on motorized products (where we are market leader), and we decided to join forces with one of Europe’s most experienced coffee specialists,” Mr. Heier tells APPLIANCE. “We are happy with sales, as production is running at full capacity. Bosch is one of the strongest brands in the world, and we are convinced that the brand will prove its strength again with this new product.”

Bosch chose to use the existing coffee pod design and improve the coffee maker. However, Germany-based Braun, part of The Gillette Company, took a more radical approach. The company designed a new machine called Tassimo that comes with a coordinating new cartridge called T-disc.

The innovation lies in the cartridge: the brewing process takes place inside the cartridge, and the beverage flows directly from the plastic housing into the cup, allowing for different beverages without mixing flavors. There is a bar code on the cartridge, so the machine can distinguish between traditional coffee, espresso, and cappuccino, as well as discs for tea and cocoa. Because there is also a concentrated milk T-disc, the machine can prepare cappuccino, which is wildly popular in Europe. Some believe this aspect alone compensates for the higher price, as no other appliance in this market segment currently offers this feature. Also, the discs are much harder to copy, thus protecting the margins. Just as Philips did, the product was co-developed with a food specialist, the French establishment of U.S. food giant Kraft Foods, part of Philip Morris Companies Inc. (recently renamed to Altria Group Inc.).


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