Case on Nescafe

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Nestl Nescafe Charge Case Study CSCM0281/Published 11/2009

Datamonitor. This brief is a licensed product and is not to be photocopied Page 1

DATAMONITOR VIEW

CATALYST

Product packaging serves various functions, from protecting product content to appealing to consumers at point-of-sale.

Convenience and low environmental impact have become imperative issues to the packaging industry and consumer

goods manufacturers, and this case study examines how Nescafe Charge, an instant coffee refill product with an innovative

packaging, is meeting both trends and succeeding in the Japanese market.

SUMMARY

Modern lifestyles have triggered many consumers to look for convenient products as a simple solution to fit into

their fast-paced lives. While the global economic downturn has caused many consumers to cut back on their

spending and seek comfort at home, they are looking to replicate high quality consumption experiences from

branded channels at home.

With an intensified concern over the impact on the environment, more products are featuring green credentials. At

the same time, the benefit of cost-saving through less product packaging is appealing to both consumers and

industry players. As a consequence, an increasing number of refill products have been launched.

Nestl Nescafe Charge features an innovative package design that has the benefit of being convenient and

environmentally friendly. It enables a simple and quick refill process, plus the compartments of the package can be

easily separated for disposal and recycling. Marketing campaigns that communicate its unique selling point and

clearly demonstrate the unconventional method of refill have contributed to its success.

The implication Nescafe Charge's success is that although refill products are generally perceived as involving lower

purchase risk, an innovative packaging can add to a product's perceived value. Nevertheless, a well-executed

communication campaign is necessary to inform and educate consumers about the product benefits.

CASE STUDIES

Nestl Nescafe Charge Case Study

Combining convenient and ethical benefits with packaging innovationReference Code: CSCM 0281

Publication Date: November 2009


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ANALYSIS

Product packaging serves a wide variety of functions including protective benefits (to ensure product safety), retaining

freshness and conveyance of relative quality. Food and beverage packaging is mainly driven by key innovations andtechnological developments to further preserve/protect the contents and improve convenience during usage/consumption.

At the same time, it acts as a marketing tool to attract consumers. It is widely regarded that over half of purchasing

decisions are made at the shelf or at point-of-purchase; for this reason, product packaging is sometimes refereed to as 'the

silent salesman'.

Todays consumers have become ever more demanding. They not only regard good packaging as an essential part of a

good product, but actively seek packaging that is user-friendly and convenient to support their lifestyles. A more

aesthetically pleasing design of packaging is constantly associated with premium quality, although it has become

increasingly difficult to use it as a product differentiator since many consumers take it for granted. Nonetheless, packaging

has become a common target for criticism among environmental campaigners and consumers, particularly with regards to

the excessive use of materials and reliance on plastics among contemporary consumer packaged goods (CPG) products. It

is no surprise, then, that environmental concerns have become a new focus among industry players. Therefore, it is crucial

to incorporate practical functionality along with aesthetic designs into packaging to appeal to consumers.

Consum ers quest for convenient produc ts for home-based consum pt ion has intensi f ied in

the economic d ownturn

Feeling 'time-poor' pressurizes consumers to look for convenient products and services

Modern lifestyles have increased consumers' feelings of pressure and time scarcity. With more advanced technology,

product packaging that helps to save preparation and consumption time while delivering better quality or improved

consumption experiences are set to become more popular.

Consumers are also looking for products which offer speed and convenience and allow them to feel more in control of time,

so that they can either multitask or put more time into the 'important things in life' such as family and friends. The so-called

'quick-fix' trend reflects how consumers are highly influenced by the convenience attributes of a product, including the

simplicity of use, ease of storage, portability, time-saving features and actual efficacy.

In the 2008 Datamonitor consumer survey, 60% of global respondents agreed that they rely heavily on time-saving

products and services, and the same percentage of consumers also stated that using such products and services has

become more or significantly more important to them compared to two years ago. It highlights that convenience-oriented

products and services are generated as a side effect of hectic lifestyles and simultaneously reinforces the need of such

products/services because of the consumer need of for a 'quick-fix'. This resonates with the comments made by JamesWomack and Daniel Jones ('Lean Consumption', in the Harvard Business Review, 2005) that its about providing the full

value that consumers desire from their goods and services, with the greatest efficiency and least pain. The implication is

that what is deemed convenient for consumers will ultimately evolve and needs to be conveyed by 'features and benefits'

marketing: communicating with shoppers to establish what brings true convenience will be crucial.


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By minimizing customers' time and effort and delivering exactly what they want, when and where they want it, companies

can reap huge benefits.

Womack and Jones, Harvard Business Review, March 2005

Many convenient products have been focusing on the simplicity of application, or less hassle occurred in the process of

consumption. More consumers are looking for ways to reduce physical and informational clutter and complexity in their life

to minimize stress and generate time and energy. Datamonitors consumer survey (conducted in August 2008) found that

72% of global respondents considered living a less complicated lifestyle as being either important or very important. This

highlights the growing propensity of convenience-oriented products: those that are easy-to-use and fast-acting, and which

allow consumers to spend less time and effort on a task in order to maximize their time on doing what makes them happy.

The resurgence of at-home consumption is accelerated by the trend of 'cocooning' and the economic

downturn

The trend of cocooning was used by Faith Popcorn in 2001 to describe the phenomenon that consumers are using their

homes as a base for comfort, safety and heightened enjoyment as well as viewing their homes as a safe retreat. Popcorn

modified the term in 2008 to 'uber-cocooning' as consumers increasingly view their homes as a place to recharge from

busy lifestyles and as an entertainment center. In other words, the increase in consumption and time spent at home is not

only about cost-saving but also because of a feeling of safety and security.

The trend can be interpreted as consumers bringing more out-of-home experiences into their own premises, facilitated by

easy-to-use, high-quality products and services that can recreate the consumption experience of branded outlets. The

slowdown of global economic activities that has occurred in many major economies since 2008 has prompted an increasing

number of consumers replacing 'a big night out' with 'an indulgent night in'. As a result, at-home consumption has become

a more viable, value-for-money option for many with a tight budget. An example is the popularity of coffee machines.

Despite its seemingly high ticket price, a report from Which?, a consumer magazine, estimated that consumers could save

around 225 a year by replacing the habit of buying a cup of coffee from high-street branded outlets with a home espresso

machine and ingredients. The Datamonitor consumer survey held in April/May 2009 also found that 40% of consumers

globally reported that they have been making more or significantly more effort to cook from scratch at home.

In addition to the economical purpose, the psychological comfort of the home environment is also a main driver behind the

booming 'stay-at-home economy'. The heightened escapism which consumers have demonstrated under the harsh reality

of recession could have contributed to the phenomenon that consumers are becoming more houseproud and an increased

spending on off-trade food and beverages.


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Environm ental ism is gain ing mom entum due to perceived cost-savings and the cont inu ed

r ise of consum er awareness of environmental issues

Ethical consumerism continues to grow despite the economic downturn

Product packaging also continues to be heavily influenced by environmental principles, as exemplified in various consumer

studies. The Datamonitor consumer survey found that in August 2008, 80% of respondents from 15 countries considered

protecting the environment to be 'important' or 'very important'. Another Datamonitor survey carried out in April/May 2009

revealed that 61% of global consumers stated that protecting the environment has become 'more' or 'significantly more'

important to them personally compared to two years ago. This highlights the growing propensity for environmentalism

despite many predictions that consumers are likely to opt for 'economy' over 'environmentalism'; research conducted by the

Pew Global Attitudes Project in 2009 also found that the majority of consumers in 23 out of 25 countries agreed that

protecting the environment should be given priority even if it causes slower economic growth and some loss of jobs. The

research found that there is a relatively strong inclination that consumers 'should be willing to pay higher prices in order to

address global climate change' as well.

Studies have suggested that consumers have continued buying green productssome with higher priceseven in the

midst of recession. According to the 2009 National Green Buying study commissioned by Green Seal and EnviroMedia

Social Marketing, around 80% of the 1,000 US respondents stated that they were still buying green products at the time of

the survey, and 50% of those surveyed said that they were buying as many of these products as before the economic

downturn. Another key point highlighted in the survey is packaging: 60% of respondents look for minimal or reduced

packaging products because of the environmental benefits. The 'dual benefit' of saving on expenses has also been cited as

a major driver behind the increased purchases of environmentally friendly products. For example, using energy-efficient

light bulbs is not only environmentally sound but also saves consumers money on their utility bills. The Energy Trends

report published by Nielsen (October 2009) found that 80% of the 32,000 respondents which participated in a recent poll by

the company stated that their main motivation for conserving energy is 'cutting costs'.

However, the attitude-behavior gap is more prominent on the packaging issue. The Datamonitor consumer survey carried

out in August 2008 found that nearly 70% of respondents from 15 countries agreed that 'grocery products today have too

much packaging'. Nevertheless, less than 50% and 40% expressed their willingness to buy an alternative product if they

see their preferred choice has too much packaging or have actively sought products with more environmentally friendly

packaging in the six months preceding the survey, respectively. Consumers are unwilling to sacrifice other prominent

product features such as convenience purely for sustainability and to pay for green options at any cost, and it is therefore

vital for manufacturers to preserve and enhance the functionality of packaging while reducing the amount of materials used

and increasing the usage of reused/reprocessed materials.

The economic crisis could compel manufacturers to be more efficient in packaging on the basis of cost-

cutting

The commodity price peak of 2008 led to many companies to look at sustainable packaging in a different way. The

turbulent petroleum price and global economic downturn has prompted, or forced, retailers and manufacturers to reassess

their current practice on packaging given the cost-saving potential associated with efficient packaging. General Mills, for


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example, changed the case configurations of its Progresso soup range. Figures cited in the report The Food, Beverage and

Consumer Products Industry: Achieving Superior Performance in a Challenging Economy 2008 (conducted by

PricewaterhouseCoopers for the Grocery Manufacturers Association) showed that the company reduced 2,000 tons of steel

from Progressos annual steel input and reduced costs, while at the same time making consumers happier (due to theenvironmental benefit) with lighter cans. Another example is Boots, a UK personal care and pharmacy retailer, which is

reported to have saved more than $300,000 on more efficient cosmetics transit packaging and nearly $180,000 related to

multiple-use sandwich trays in one year (Shelf Impact, March 2009).

As consumers are buying more products with consideration for ethical principles, the industry is echoing

the trend with more sustainable packaging

As discussed in the previous section, consumers are putting more emphasis on the environmental credentials of products

and packaging. To meet this rising demand, manufacturers and the packaging industry have been focusing on the issue.

Research conducted by Packaging Digest and the Sustainable Packaging Coalition (both based in the US) in 2008 found

that among the 1,163 packaging professionals surveyed, 67% stated that they were 'moderately' or 'very' familiar with the

sustainability issues. Additionally, 53% said that more than half of their customers (retailers and manufacturers) are seeking

more eco-friendly packaging. The study also noted that consumer requirements have a major role in pushing the industry to

adapt to such concepts and incorporate them into practice.

Environmental consequences have also become a key issue to be addressed among fast moving consumer goods (FMCG)

producers. According to Food Engineering (October 2008), packaging is estimated to account for half of the solid waste in

US landfills. Therefore, the importance of the 'three Rs' (reduce, reuse and recycle) is growing in such a way that brands

have to recognize them, especially in light of the escalating belief that many products are over-packaged. To this end,

manufacturers are expected to cut out unnecessary waste to help protect the environment.

Today's more environmentally aware consumer is of a different mindset, and raises questions about chemicals, trace

contaminants and the use of petroleum-based plasticsquestions that the industry as a whole sometimes struggles to

explain or justify.

Terry Glass, the appl icat ion technology leader for r ig id plast ics at The Dow Chemical Com pany, wr i t ing in Global

Cosmet ic Industry, November 2008

Many CPG manufacturers have been forging ahead with new packaging innovations that are positioned as 'better for the

environment', while at the same time retaining convenience benefits. Besides the application of biodegradable materials,

many have adopted packages that are made with reduced materials (see Figure 1). An example is PepsiCos Aquafina

bottled water, which was launched in the US earlier this year, and its Eco-Fina Bottle is said to be made with 50% less

plastics than before. In addition, Eric Comte red wine is packaged in resealable pouches that are much lighter than

traditional wine bottles. Pret a Boire, the pouches' manufacturer, claims that such packaging doubles the amount that can


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be transported in containers used by lorries when compared to traditional glass bottles. It can be concluded that 'reduce'

and 'recycle' have become the most popular traits to be adopted by the industry.

Figure 1: 'Reduce and recycle' initiatives have been adopted by many manufacturers

This Eric Comte Red Wine

available in several Europeancountries and Japan are packaedin pouches that have been

adopted in many sauce products.Pret a Boire, the maker of thepouches, claims that one lorrycan carry twice as much wine in

its containers as it could carrywere the wine in glass bottles.

PepsiCo launched its

Aquafina Bottled Water in anEco-Fina Bottle which wastouted as using 50% less

plastic, saving an estimated75 million pounds of plasticannually. The rippled webdesign also ensures the

structural soundness andfunctionality.

The Aquamantra Natural Spring Water (left) and

State of Mind Bottled Waters Planet Green'sREVERTE Back to Nature (right) are packaged inbiodegradable and recyclable PET bottles. Both

launched in the USA, they demonstrate the effortof bottled water sector to boost their greencredentials amid the attack of consumer excessand waste.

Reduced material/transportation Recyclable/biodegradable material

Source: : Datamonitor analysis, Product Launch Analytics D A T A M O N I T O R

Refill packs have become a popular format that is welcomed by both consumers and manufacturers

Refill packs combine the concept of 'reduce' (on packaging material) and 'reuse' (of original container of the product). In

addition, it is usually packed in flexible packaging and is easier to transport from manufacturing sites to consumers

households. Data from Product Launch Analytics supports the increasing popularity of refill packs: the number of products

tagged as 'refill pack' recorded in the database has been growing between 32% and 65% on a year-on-year basis (2004

2008). Although the growth rate appears to be slowing after the peak of 2006, this could be an indication that the product

diffusion has reached the 'point of infection' as the accumulative adoption seems to continue increasing (as more new refill

products are launched), and the acceptance of refill products has entered the 'early majority' stage (based on the normal-

distribution model/the Rogers adopter categories).


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Figure 2: Refill packs have become more popular since 2004

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009*

NumberofSKUs

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

%o

fgrowth

Number of SKUs Year-on-year growth

NOTE: 2009* data covers products reported from January 1 to November 5.

Source: Datamonitor analysis, Product Launch Analytics D A T A M O N I T O R

A successful example is Kenco, an instant coffee brand under Kraft, which launched new 150g Eco Refill packs in the UK

in September 2009. According to the company, these refill packs have 97% less packaging weight compared to

conventional Kenco jars (on the basis of per gram of coffee), and consumers also save money by purchasing the product:

the retail selling price for the pack is 3.58, which costs less per gram of coffee than the 100g (2.58) and 200g (4.98)

jars. Indeed, the company's 'go-green' efforts appear to continue reaping benefits in the market: according to TNS data

quoted in TalkingRetail (October 6, 2009), Kenco instant coffee is estimated to be worth 116m with a year-on-year

increase of 16.2%, and it is the premium coffee brand brought by most households. This shows that consumers still support

products with an ethical image during the economic downturn, and it is expected that a cheaper price tag is going to

provide an even stronger incentive for brand loyalty.

The (refill) packs fit with consumer demand for a good value, convenient product that encourages more environmentally

friendly behavior yet still offers the great taste of Kenco."

Malcolm Hett , Kenco's senior brand m anager, quoted in a report publ ish ed in The Grocer, September 5, 2009


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Figure 3: Refill packs with various package materials have been launched in many markets across various

CPG categories

Source: Datamonitor analysis, Product Launch Analytics D A T A M O N I T O R

The innovat ive packaging of Nescafe Charge com bines these convenience and

environm ental ism trends

Nescafe is the leading brand in the instant coffee sector in Japan, but its position faces strong challenges

from competitors

Japan is no exception to the phenomenon of increased at-home consumption discussed in the previous section. With

consumers cutting back on dining out, the Shurui Shokuhin Tokei Geppo (August 2009) reported that regular and instant

coffee products for domestic consumption showed growth in the first half of 2009. In addition, it stated that 'refill pack' is

one of the key categories in instant coffee that has gained popularity.

Coffee consumption among Japanese consumers has shown an increasing trend over the years. According to the survey

conducted by All Japan Coffee Association, on average a consumer (aged between junior high school students and 79

years old) drank 10.6 cups of coffee per week in 2006, a 2% increase compared with 2004. This includes 4.4 cups of

instant coffee and 3.7 cups of regular coffee being consumed per person per week. At the same time, historical data from

the survey indicated that the consumption of instant coffee shows a slightly downward trend in recent years, while that of

regular coffee has been growing since 1983. The trend was also indentified by Datamonitor Market Data Analytics, as

shown in Figure 4, revealing a similar pattern that the consumption of regular coffee is estimated to grow at a faster pace,

perhaps due to a better aroma and taste profile. Another key driver could be the rapid expansion of a more convenient

method of making a coffee drink the 'drip bag coffee', which is ground coffee packed in single portion one-cup filters.

Consumers only need to pour hot water onto the coffee to produce a cup of regular coffee quickly and easily. This is

another piece of evidence supporting the burgeoning convenience trend discussed in previous sections.


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Figure 4: The consumption of regular coffee and instant coffee is expected to grow over the years

668.4678.3 686.0

692.8 699.5707.5 716.7 727.2

738.9

606.2 609.7 613.2616.8 620.6 625.2

630.7 637.0644.1

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013

JPY

Roast/Ground Coffee Instant Coffee

NOTE: Expenditure per Capita by Category for 2005-2013 in Local Currency (JPY); figures are estimated and projected.

Source: Datamonitor Market Data Analytics D A T A M O N I T O R

For the longest time Nestl Nescafe has been the market leader in the instant coffee category in Japan, but its lead faces a

strong challenge from competitors. As shown in Figure 5, despite Nestl Japan (with brands including Gold Blend and

Excella) still enjoying a major leading position in the instant coffee sector, the share of Ajinomoto General Foods (AGF),

with brands including Maxim and Blendy, has expanded around 10% between 2001 and 2007. The successful launch of

refill bags for instant coffee is cited as the main push behind AGFs expansion (Shurui Shokuhin Tokei Geppo, 2007). This

indicated the need for Nestl to launch new products that meet the changing demand in the market.

Figure 5: Nestls leading position in the instant coffee sector has been eroded over the years

18.7%

4.5%

15.1%

29.3%

4.1%

12.9%

61.7%

53.7% Nestle Japan

AGF (Ajinomoto General

Foods)

UCC Ueshima Coffee

Others

Inner circle: 2001

Outer circle: 2007*

NOTE: Calculated on the basis of shipments (tones) of each company, 2007* = estimate.

Source: Datamonitor analysis, Shurui Shokuhin Tokei Geppo D A T A M O N I T O R


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Nescafe Charge is an innovative refill package for instant coffee products, and its launch is backed by a

communication campaign including website and TV advertisements

Nescafe Charge was launched in September 2008 as the brand celebrated its 70th anniversary in Japan. According to the

company, it took three years to develop the product from concept to launch. A consumer survey held by the company found

that the key issues of existing refill instant coffee products included how to provide the granules in a refill container that

retains the freshness and aroma of the coffee, and preserving the quality of content during transportation until consumption

without the product suffering from humidity and oxidation. In addition, the most widespread reason cited among consumers

who do not buy refill packs is the common problem of spilling content outside of the container during the refill process.

Consequently, the need of developing an innovative package that enables a simple refill process and safeguard refill

content was initiated. Furthermore, since an explicit expectation of refill packs is their lower impact on the environment, the

packaging should feature reduced garbage disposal and meet the increasing demand for recycling.

At the time of writing, Nescafe Charge is available under three sub-brands: Nescafe Excella, Nescafe Gold Blend and

Nescafe Komi Baisen [aromatic roast]. The different pack sizes are to be used with specific original products to fit the jar

size. Consumers only need to remove the over cap, turn the paper-based canister upside down and push it onto the glass

bottle until the aluminum seal breaks. The granules come out fast and smoothly into the glass jar with the aroma kept inside

the container.

Figure 6: There are five varieties available in the Nescafe Charge series, and instructions on how to use the

refill pack is clearly shown

Instructions on the refill packaging tell theconsumer how it should be used, and the jarsize it is intended to refill is also indicated

Source: Product Launch Analytics, http://gigazine.net D A T A M O N I T O R

Due to the structure of the whole package and the refill method, the Charge series is very different from conventional

instant coffee refill products. Nestl not only presents instructions on how to use the product on the package, but

demonstrations are also shown as part of the website content and TV advertisements (see Figure 7 and Figure 8). The

company has even developed an iPhone application to promote the products. This consistent message apparently helped

to raise consumers awareness of and interest in the product, and encouraged trial purchases when the product was first

launched.


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Figure 7: Nescafes website includes information on how the product is to be used, with a small game

designed to help consumers understand how to use the Charge series

Source: Datamonitor analysis, charge-n.jp/ , www.nestle.co.jp/ D A T A M O N I T O R

Figure 8: The TV advertisements of the Nescafe Charge series vividly demonstrate the products selling

point and how it suits consumers busy lifestyles

The first series of the TV commercial features Albert Einstein, the greatscientist, to imply the breakthrough of instant coffee refill package. The key

message was quick, unconventional, but high quality coffee experience. Themethod of refill is also demonstrated in the commercial.

The second series of the commercialmaintains the key messages of quick and high

quality coffee. The scene, set in the breakfasttime, focus on consumers real life experience.

Source: Datamonitor analysis, www.nestle.co.jp/ D A T A M O N I T O R

The Nescafe Charge series was relaunched in September 2009 to further capitalize on the environmentalism trend. The

compartments of the canisters can now be more easily separated for recycling, and the paper canister can be crushed to

minimize the size of disposal. The company states that the aluminum used in the Nescafe Charge product package is 30%

less compared with existing bag/pouch refill products from the company. In addition, the company estimates that the glass

used to produce glass jars for its instant coffee products has reduced by 16% since more consumers have switched to the

refill packs.


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Figure 9: The relaunch of Nescafe Charge focuses more on the green credentials of the packaging materials

used

The relaunch of the Nescafe Charge further emphasizes on its environmental-friendliness. Above is the

brands webpage focusing on the 3Rs of the product; below are pictures posted by users on how the partscan be separated easily.

Source: Datamonitor analysis, charge-n.jp/, http://gigazine.net D A T A M O N I T O R

Sales data and consumer reaction prove this award-winning innovation to be a success in the Japanese market

The unique selling point of Nescafe Charge is its ease of use, and the fact that the refill process reduces the product's

contact with air, which protects the quality and freshness of coffee. It encourages consumers to reuse glass bottles/jars as

well as solves the complaint of conventional refill products (easy to spill content and loss of aroma during the refill process).

The innovative design of the package is crucial. The refill container incorporates complex paper containers developed by

Toppan Printing, and its key features are described as ease of refilling, quality retention and reduction of environmental

impact. Indeed, Nescafe Charge has received the 33rd Kinoshita Award for innovative packaging and the 39th Food

Industry and Technology Contribution Award, sponsored by Shokuhin Sangyo Shinbun, as an innovative product in the

technology/idea area for its environmentally friendly attributes (Shokuhin Sangyo Shinbun, October 22 2009).


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The convenience factor also plays a crucial role in the product's success. The process of refilling the instant coffee glass jar

takes less than five seconds, and is completed without the hassle of traditional refill pouches or bags and the risk of spilling

the granules. A survey conducted by C-News (February 2009) found that 82% of Japanese respondents prefer the

packaging of Nescafe Charge to the conventional refill packs in standup pouch or vacuum pack format, and they expresseda high intention of purchase. The leading reason cited was it is easy to move the content into jars/containers (68%),

followed by the aroma and flavor are preserved well (16%). This signals that to general consumers, the most attractive

selling point of the pack is its convenience.

Figure 10: The refill process is described as 'instant' and 'no spilling'

Source: Datamonitor analysis, www.youtube.com D A T A M O N I T O R

The point of sale (POS) data, as shown in Table 1, reveal the popularity of the Nescafe Charge series. The biggest two

sub-brands under Nescafe, Excella and Gold Blend, account for nearly 40% of the instant coffee sales in Japan. The

Charge products in correspondence are also among the top-selling 17 products, accounting for around 8% of the total sales

(the sum of the four product varieties).

Moreover, it can be argued that this innovative product helps Nescafe to reinforce its position as the market leader; the refill

pack is an example of 'consumer lock-in' and encourages habitual buying. Coffee is a product that manufacturers can

differentiate with competitors based on various strengths, taste profiles and aromas that suit different consumer preference.

Once they have found the one which they prefer, it is easy for consumers to stick with a certain choice and demonstrate

brand/product loyalty. As shown in Figure 5, Nestls position in the market has been eroded of late; but the Charge variant

has the potential to halt this. Because the Nescafe Charge products are designed to act as refill packs for a specific variety

and jar size, it encourages consumers to stay with the same product and provides the benefit of an easy refill process and

a product with explicit environment credentials.


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Table 1: Point of sale data of instant coffee products in Japan, August 2009

Ranking Manufacturer Brand/Variety Market share (%)

1 Nestl Japan Nescafe Excella 250g jar 17.17

2 Nestl Japan Nescafe Gold Blend 100g jar 14.36

3 Nestl Japan Nescafe Gold Blend 150g jar 7.85

4 AGF Maxim Instant Coffee 130g bag 4.36

5 AGF Blendy Instant Coffee 200g bag 4.22

6 Nestl Japan Nescafe Excella Charge 220g 3.11

7 Nestl Japan Nescafe Gold Blend + President Pack (100g + 24g jars) 1.96

8 Nestl Japan Nescafe Excella Ice Cool Original 8P 1.91

9 AGF AGF Maxim 100g jar 1.83

10 Nestl Japan Nescafe Excella jar + Charge 270g 1.83

11 Nestl Japan Nescafe Gold Blend Charge 80g 1.78

17 Nestl Japan Nescafe Gold Blend Charge 120g 1.22

NOTE: Market share is based on sales value and calculated as items sales/total sales * 100%. The data was published in The Japan FoodJournal (Oct 16 2009). AGF is Ajinomoto General Foods.

Source: Datamonitor analysis of August 2009 POS data from KSP-SP D A T A M O N I T O R

Look ing ahead: impl icat ions of Nescafe Charge's suc cess

Tracking consumer trends and providing innovative products that meet consumers needs is vital for

businesses continual growth

Successful products and brands are rooted in satisfying consumer needs, and changes in consumer behavior and needs

must be met by constantly evolving product portfolios. Because trends are heavily aligned with consumer needs, they set

the preconditions for new products. Developing a 'winning innovation' plays into changing habits, even unlocking existing

needs, in completely new and profitable ways. New innovations also shape consumer expectations: once they become

familiar with a particular feature or benefit it becomes ingrained into consumers habits, and similar benefits are usually

sought from other products. So, industry players shape trend direction through cutting-edge innovation and marketing.

Therefore, trend progression and innovations are dictated by both consumer pull and manufacturer push. From

manufacturers point of view, identifying broader consumer trends such as convenience and environmentalism is the

foundation of product innovation. At the same time, uncovering consumers dissatisfaction with current product choices and

identifying their hidden needs helps to capture precise directions of innovation.

Nescafe Charge can be said to be a successful showcase of innovation development rooted in consumer needs. Although

refill products congregate with consumers escalating environmental concerns, the problem of easy spilling of the content is

a barrier for further diffusion of such products. The development of Nescafe Charge is a solution to the problem, and its

function of preserving the quality of the contents meets the prerequisite of such products. The emphasis of the product on


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convenience is the 'pull' to satisfy consumers needs, while its environmentally friendly design and materials add further

value to the product.

A closely-knit communication campaign helps to educate consumers and encourage trial of an innovative

product

Refill pack products are perceived to have lower purchase risk since consumers are likely to be familiar with the original

product already. Nonetheless, in the case of Nescafe Charge, the innovative package design and method of refill still

requires a well-designed campaign to educate consumers about the product benefits and push it into consumers

'consideration set'. The marketing campaign, incorporating website, TV and print advertisements and mobile phone

applications, emphasizes demonstrations of how to use the refill package. This helps to lower the potential risk perceived

by consumers about buying an innovative, 'different', product. This unconventional feature also acts as a novelty factor to

attract consumers attention. As shown in Figure 8, the coherent campaign also cleverly illustrates the main product

benefita quick, convenient and high quality consumption experiencein scenarios that can reverberate with consumers

own consumption experience. To other manufacturers, Nescafe Charges case highlights how a consistent, easy-to-

understand message can be presented in a multi-channel communication campaign and facilitate an innovative product to

break into a developed market.

Tangible environmental benefit and the incentive of saving could hasten the acceptance of new, greener

products

With growing ecological awareness and concern, the expectation of packaging with minimal environmental impact is

increasing. Industry players need to evaluate sustainable packaging in all aspects and contribute to broader efforts to

educate consumers. Going green is no longer an option but a necessity as the ongoing effort to address environmental

issues becomes even more pronounced. Meanwhile, consumers have become more skeptical about companies claims to

be ethical or environmentally friendly. They demand hard evidence rather than mere assurances, therefore it is critical for

businesses to communicate accurate and tangible green benefits if they are to convince consumers.

In Japan, the cost of garbage disposal is high and the rules of the recycling system are strict. Nescafe Charge provides

detailed information through its website and print advertisements regarding the package material and how each part can be

recycled/disposed. Anecdotal consumer records (posted via blogs) indicate that their experience of the product and the

delivery of the products promise have been positive.

Substantial environmental benefit is the basis of consumers opting for green products, and the attribute of cost-saving or

added value can be the accelerator of a products success. As discussed in the previous section, many consumers have

maintained a high intention of purchasing such products even during the economic downturn. Datamonitors 2009

consumer survey revealed that value consciousness among consumers has increased in many countries. The increasing

support of ethical products could be because their total value perceived by consumers is higher than conventional choices.


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The overall value of a product is a combination of price and product benefits. Nescafe Charge satisfies the elementary

requirement of 'preserving the freshness and quality of instant coffee', with the added benefits of being convenient and

environmentally friendly. It is no surprise, then, that the total value provided by the product surpasses consumers' usual

expectations.

Conclusion

According to the Packaging Industry Research Association, the consumer trends of convenient and environmentally f riendly

packaging are expected to be among the top drivers of the advancement of food packaging technology such as modified

atmosphere and active packaging. This reiterates the importance of monitoring and incorporating consumer trends into

innovation. In the meantime, finding the value 'sweet spot' to increase perceived product value is essential as consumers

become savvier with a tightened budget. It is easy for an innovative product to seize consumers attention, but it is the real

product benefit that can be easily comprehended and felt by consumers that will lead to its success.


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APPENDIX

Case study s er ies

This report forms part of Datamonitor's case studies series, which explores business practices across a variety of

disciplines and business sectors. The series covers a range of markets including food and drink, retail, banking and

insurance, pharmaceuticals and software.

Each case study provides a concise evaluation of a company that stands out in some area of its strategic operations,

highlighting the ways in which the company has become one of the best in its field or how it deals with different problems

encountered within that sector.

Methodo logy

A variety of secondary research was carried out for this case study. This included researching the instant coffee market on

Datamonitor's Market Launch Analytics database and the Product Launch Analytics database of new products, alongside

an extensive review of secondary literature and other in-house sources of information.

Secondary sources

All Japan Coffee Association (2009). Available from:

C-NEWS (2009) Brand Survey (18): Instant Coffee Refill Packs [Internet]. Available from

[Accessed November 2009]

Green Seal and EnviroMedia Social Marketing (2009) 2009 National Green Buying Study

Mahajan, V., Muller, E., and Wind, Y (2000) New-Product Diffusion Models

Nihon Shokuryo Shimbun (2009) The 27thShokuhin Hitto Taisho

Packaging Industry Research Association (Pira International) (2009) The Future of Global Packaging: Market

Forecasts to 2014 [Internet]. Available from [Accessed November 2009]

TalkingRetail (2009) Kenco Stirs Up Coffee Category with Eco Refill Pack [Internet]. Available from

[Accessed November 2009]

The Grocer (2009) Kenco Goes Greener (and Cheaper) With Refill Packs, September 5

Womack, J. and Jones, D. (2005) Lean Consumption, Harvard Business Review 83(3): 5868

Shurui Shokuhin Tokei Geppo (2009) The Food and Beverage Industry in 2009, Vol. 51(6): 224

Shurui Shokuhin Tokei Geppo (2007) Instant Coffee: The Pressure of Rising Raw Material Cost, Vol. 49(10) 61

64


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Further reading

Datamonitor (2009) Global Consumer Trends: Connectivity, October 2009, DMCM4696

Datamonitor (2009) Global Consumer Trends: Comfort, September 2009, DMCM4694

Datamonitor (2009) Global Consumer Trends: Convenience,August 2009, DMCM4695

Datamonitor (2009) Sustainable Packaging Trends: Consumer Perspectives and Product Opportunities, April

2009, DMCM4676

Datamonitor (2007) Consumer Attitudes Towards Packaging: New Insights and Future Perspectives, September

2007, DMCM4593

Ask the analyst

The ConsumerKnowledge Center Writing team [email protected]

Datamon itor cons ul t ing

We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you

have further requirements, Datamonitors consulting team may be able to help you. For more information about

Datamonitors consulting capabilities, please contact us directly at [email protected].

Discla imer

All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,

electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Datamonitor.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that Datamonitor delivers will be based on information gathered in good faith

from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such

Datamonitor can accept no liability whatever for actions taken based on any information that may subsequently prove to be

incorrect.


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