Getting the coffee culture right

There'S always been a disconnect between the two parallel tracks within Singapore's coffee industry - traditional local coffee brewed by the likes of Killiney Kopitiam, and Western-style coffee that ranges from ice-blended lattes to purist espressos.

Nespresso has been playing in the espresso segment globally since it was founded in 1986 as a subsidiary of Nestle, but chief executive Richard Girardot readily admitted that his company needs to do more research into local coffee-drinking practices in order to better integrate Nespresso's appeal into the coffee scene here.

'Singapore is a key market for us so we must succeed here,' said Mr Girardot last month on his first trip to Singapore since becoming CEO two years ago.

'We must therefore do more research so we can find out how people drink coffee in Singapore and understand what we can do to build better relationships with coffee drinkers here,' he added.

Nespresso makes coffee machines that use capsule cartridges of ground coffee to make espresso and lungo-style coffee. You pop in a cartridge, press a button, wait for your coffee, then eject the cartridge. If you like, you can add milk or sugar.

The emphasis that Mr Girardot places on Singapore within Asia is reflected in his choice to come here first before Hong Kong, which he will only be visiting next year.

And while Singapore and Hong Kong both have two outlets each - with the recently-opened stand-alone ION Orchard boutique complementing the in-store branch at Takashimaya - Mr Girardot described Singapore as a crucial 'show window' for Asia.

Although Nespresso is also in Shanghai and Tokyo, Mr Girardot explained that Singapore represents a chance to restart on a clean slate in Asia after learning some painful but valuable lessons in Japan.

'We have been in Japan for 17 years but we still don't have a full understanding of the culture of coffee in Japan,' said Mr Girardot. 'We faced many difficulties there and Singapore and Hong Kong are the first platforms where we're trying to learn the local way of selling machines and coffee,' he added.

Ninety per cent of Nespresso's turnover currently occurs in Europe, and Mr Girardot wants more growth in both America and Asia.

The lion's share of Nespresso's marketing budget is spent on Nespresso's boutique experience, where well-trained sales people demonstrate the machines for customers.

When Mr Girardot visited the Takashimaya store, he observed a prospective buyer spending 40 minutes talking to the sales lady. 'In Europe, that would only have taken 15 or 20 minutes, so that shows that customers here are more demanding,' said Mr Girardot.

But there's also Nespresso's less obvious presence in Singapore via Nespresso's website, which allows customers to order capsules and get them delivered to their doorstop, along with newsletters and promotions.

In fact, the Web already accounts for more than half of all of Nespresso's annual global sales and that proportion is constantly increasing. Although Nespresso's artistically designed machines retail upwards of $500, its main revenue stream is sales of coffee capsules, which can easily be done online.

That's one reason why there aren't any plans to open any more stores here at the moment. 'First, we need to consolidate and improve,' says Mr Girardot.

A key area of consolidation is the cultivation of customer loyalty. That isn't surprising considering that more than half of all new Nespresso club members first try the brand through existing customers. Word of mouth is the brand's strongest marketing tool.

And considering the importance of capsule sales to Nespresso, customer retention is also obviously key to its primary business model.

Hopefully, some of the company's other initiatives overseas will also make their way to Singapore soon, such as its recycling programmes for used capsules, which are made of aluminium.

'We must adapt and learn, and ultimately we are a coffee company so we must offer our customers the best cup of coffee using the best beans,' said Mr Girardot. 'Even if they want to drink it with lots of milk and sugar, they will be able to taste the difference.'