How Nespresso is revamping its stores to market itself as a premium coffee brand

0:28Hello, everyone, and welcome to the Modern Retail Podcast. especially such a venerated coffee brand like Nespresso, I want to talk to them. As I said, she leads marketing in the U.S. I know that Nespresso specifically has been doing some really interesting things on the retail experience side, and so I want to go into all of that. And I'd just love to talk about her job, what she's focused on, what's going on in the world of coffee, all that jazz. But how are you doing, Jessica? Oh, it's great to be here. And that's a great introduction. I tell people it never gets old, really, to hear how much love there is for the Nespresso brand.

0:58It's a really fun business to work on for that reason alone. Well, so I'm going to geek out for one second just because I can and I have you here. But like my mom, like my mom got espresso way, way, way back in the day. And I remember when it was new and I lived in Europe when I was like 18. And that was what everybody used for their coffee then. But then I've also I really like coffee and I covered coffee. I weird trivia fact about me is that I was the first person to review coffee for the wire cutter.

1:32And Nespresso has always been this weird thing where it is both a very mass product and people know what it is, but it is also widely considered really good or at least really consistent, if that makes any sense. It does. And it's been one of those anomalous coffee brands that like everyone can kind of agree on. And so I've always been fascinated with you guys. It really is. It's hard, you know, to compare us for that reason, not just to other coffee brands, but to other categories in that way. We're really, really lucky because we are super committed to the quality of the product. And that comes through consistency.

2:09When you're talking to something at home, you make yourself. And yet, we've really been able to build awareness significantly in the US. In Europe, it's a whole other story. It makes tons of sense that you're an espresso fan when you come from Europe. So, no, that's a great insight because it's very true and it makes us unique in a lot of ways. Absolutely. So let's start with you for a little bit. So you've been at Dispresso for a little bit, according to your LinkedIn, and you've had a variety of roles. Just walk through your sort of what you were doing before, how you got there, and how you ultimately became the head of U.S.

2:42marketing. Yeah, sure. It's been a fun journey. My origin story, I guess, is a variety of both agency and brand side roles. Started out at Gray, New York and moved into brand management sort of. But the way I got my foot in the door was through social media. You know, I was sort of an early adopter just being of the age, I guess, and of the generation that was experiencing that. Really leaned into the digital and social space as a way to kind of differentiate myself as a brand manager. Moved into food initially, kind of out of necessity. I was living in Denver, Colorado at the time. and then really wanted to get back to beauty and luxury and fashion space.

3:22I went to Swarovski for a minute and then have been at Nespresso for over eight years now, which is crazy. It's kind of funny to think about life before Nespresso because so much of my experience has been here. And my journey at Nespresso has been really incredible. I kind of say that I've grown as the company has grown. I've been able to take and build up a really depth of skills in that social and digital space, influencer PR events is kind of where I was born, moved into owning the full brand and communications team. And then about a year and a half ago, was was put into the role that I'm in now running the full team, which includes all of your traditional brand and product management roles.

4:02So yeah, got it. So yeah, can you just give a brief overview of what your current man so you like pretty much oversee it all? Yeah, I mean, if the brand is involved, I'm gonna have been somewhere in the mix. And the great thing is we're a very brand-led organization. So kind of five pillars of my team. I oversee product marketing, brand and comms, which I mentioned is kind of where I grew up, our CRM program. So as a D2C brand, we have a very sophisticated program of talking to our known customers, as you can imagine. We also have a very significant B2B business and growing B2B business. So Nespresso Professional, I also oversee from a marketing standpoint.

4:41And then many people may or may not know this, but a lot of our machine sales or acquisition of new customers by the first initial machine purchase is done in trade partners. So we also do shopper marketing within our marketing organization. So those are the five big focus areas. But of course, I get involved significantly, again, anywhere the brand is showing up. So whether that's our e-commerce, our retail footprint, things like that, where you see channel ownership being an extension of the brand and the broader brand experience that ultimately connects back to what we do. Got it. Got it. And so when you joined or not joined, but took this role about a year and a half ago, was there a strategic shift or was there something that you were set out to do or sort of what is your focus been for the last year and a half?

5:26Absolutely. We are still in household penetration build mode. We are really solid in terms of awareness. We've hit kind of the metrics we needed to over the first five or so years I was at Nespresso. Did George Clooney help with that? Of course. I mean, George is the answer to every question at Nespresso. No, he was significant. He kind of helped us in many ways launch the Virtuo system, which is the American sort of prioritized system for a full cup of coffee. and we're celebrating 10 years of Virtua this year in the company. And so he really stewarded a lot of that. So significant movement because, you know, it's George Clooney.

6:10But then, of course, as you hit sort of your thresholds on awareness, you're needing to look further down the purchase journey and saying, okay, but what's going to kind of hold us back from making our sales goals or what do we need to unlock in order to get to that growth trajectory? And that's really been more in that mid-funnel consideration. Really getting familiar, our customers familiar with not just, of course, accepting, like you said, that we are the best, most premium, luxurious, great tasting, consistent. But like what's going to really drive you to make that purchase, not just the one time machine purchase, but keep coming back to us.

6:42And that's really where we've been focused. But it all starts with household penetration. And even though we've got great awareness, you look at the households of coffee drinkers in the U.S., of which most people are coffee drinkers. and our penetration is still like fairly low given where we think we really can be. I wanted to ask you this, and this is all anecdotal myself, but like I have a Nespresso machine, but I have a very specific use for my Nespresso machine, which is afternoon coffee. It's my afternoon coffee machine. And so is that a common thing? Like, cause I feel like, especially when you have a pod system, like Virtuo answers this cause it's a full cup, but also it is not the same as a full pot.

7:23And so I've always been interested just in the makeup of usages that people have specifically for an espresso and how that fits into their overall consumption patterns. Yes. First of all, I love this because this is exactly what we've been talking about. So you are an insight of one. You're a focus group for me. I think we just turned the tables on this podcast. Yes, the easy answer is because our origins were in a format of coffee espresso, like you said, that was not your traditional American morning cup of coffee. I think we started out being almost special occasion, right? You can make a shot of espresso in the afternoon.

7:57You can make a cappuccino. All of these sort of like secondary experiences or secondary uses of coffee. Huge focus for us in establishing Virtuo when it launched 10 years ago was becoming more of your morning cup of coffee. That is still overwhelmingly just because of the nature of how coffee is consumed. That's still overwhelmingly like the number one use case. That being said, you're still a slightly higher price point. You're not a whole pot of coffee, like you said, although we do have a carafe option. So, you know, there is that. We're trying to unlock those opportunities to be more of an everyday coffee option and be kind of your preferred, your primary, right?

8:36The first one you go to on your shelf. Interestingly, we have some data that shows that a U.S. consumer has more than one solution for coffee on their countertop, even though coffee countertop or countertop space, excuse me, is such a premium. Like it's so hard, especially living in the New York area. What you choose to put on your countertop is a dog-eat-dog world out there, right? So we not only need to get on the counter through that household penetration that I mentioned and the machine sale, but then become the singular choice, like the first one you go to. And it's great that you drink it in the afternoon, but Cale, we got to get you drinking it in the morning too.

9:14Okay, yeah. I mean, like this isn't – I drink it. Don't worry. But I'm also the weird one, and then we'll stop about me for a second, but I don't have the virtue. I have the old system, but that's because it reminds me of being in Europe and having a little bit of espresso. So can you just talk about that mid-consideration funnel? Because I'm always interested, especially since I imagine specifically on the consumer front, you rely mostly on subscriptions or people doing repeat buys, right? Yes. Yes, we do. How are you approaching that? And how has that changed over the last few years in terms of getting people to be those repeat customers?

9:49They have the machine. Now they need to keep ordering their pods in a regular cadence. Yeah, it's the beauty of being a D2C brand in many ways because you have the data that supports and teaches us what people are buying, how they're using it. Our machines offer Bluetooth connectivity. And so if your machine is connected, we can also start to unpack, hey, Kale's only drinking in the afternoons. What message might encourage him to try upgrading to Virtuo? Because then you can have your afternoon espresso and your morning cup of coffee, for example. But that mid-funnel to me is really getting more sophisticated and more targeted in our marketing messages beyond just broad awareness, right?

10:28George still plays a role for us, as you brought up, in TV advertising, in broad-scale digital video to drive awareness. and to drive that like gotta have it quality of Nespresso as a brand that you so rightly pointed out at the beginning. But now where we're looking is, what is that next message that you need to see once you're aware of us to understand that this coffee is a coffee choice for me, right? That it is something that's valuable to put on my counter. And like you said, to continue purchasing from, because the worst case scenario is we sell you a machine and you never come back to us.

10:59And so that means it can't just be because it's on a discount, although that certainly helps and is part of our marketing mix. It can't just be because you fell in love with the new color of machine that we launched, but rather you really understand that full ecosystem because we are a coffee brand at the end of the day. The machine is just a means to the end, the end being the way Nespresso sources and customizes and crafts that cup of coffee. And that's really what we need you to fall in love with. And that's where that mid funnel journey starts to be a little bit more personalized because what you don't know from George is what type of coffee you're going to like, what types of coffee we offer, et cetera.

11:36Can you, I want to go into that a little bit more because you said this just a few minutes ago, but I think Nespresso is one of the very few true like DTC brands in the sense that you've been doing this for so long. You have a very, like most people are buying it directly from you. Maybe they're buying it from Amazon, but like for the most part, they're going to you or your retail store. So like when you have that much data and we're in the marketing period we are right now, how, A, like, do you have too much data, I guess is my one question, because I feel like that can be way too much, like way overwhelming.

12:07And B, how are you able to prioritize and make it so that the campaigns you're sending and the automated journeys you're creating are actually working and iterating and doing better than they were, say, five years ago? Yes. I mean, data is such a hot topic in the marketing landscape right now for good reason, because, you know, even when I started, when social media was first coming up, we almost didn't have to validate marketing. I mean, go back even further, right? Radio TV days, you couldn't measure it. You just knew you had to do it to build a brand. And now every possible thing that you can do as a marketer is measurable.

12:43And so I often say that the CMO role is really about managing the CFO in many ways now. And so that's data can be a tool, but it can also, to your point, be very overwhelming. I don't think we necessarily have too much data. we have an opportunity to continue to become more sophisticated in how we use and talk about the data internally, right? Because it's all about organizing and having the data tell a story. And if you've organized it in the right way and you've validated it against the things you're actually trying to achieve, not just looking at every possible data point, right? It's like baseball, right?

13:18Like baseball, you look at so much data and you're like, is it a good player or not? I have no idea. But if you're saying, who is the best player at doing this, you can start to get a little more sophisticated. So that's the journey that we're on today. We have a really strong partnership in marketing with our data and insights team that allows us to say, not just on a singular email basis, right? How did that email perform? But rather, you mentioned journeys, right? How might this consumer's journey look different from that? And one's not better than the other. They just have different objectives that we're reaching.

13:48One person might be, hey, they're new to the business, and so we need to introduce them to the world of Nespresso so they know they can buy lots of different coffees for different moments of the day. And that's the KPI we're looking at versus someone who's maybe been with us for 10 years and they're a high-value customer, but they don't purchase as frequently as we might like. And so what's the path for them that's going to drive more often purchases and increase that order frequency? So it's really a matter of getting that level of sophistication. And I think CRM marketing today is just a huge opportunity in terms of marketers coming up in the world to marry art and science and data and marketing together for that reason.

14:33let's switch gears because i mentioned this at the top and i wanted to really go into this but um i mean nespresso has had stores for a very long time i'll be honest i've not gone into a nespresso store for a while just because i don't like i think about the one i don't need to i got i know you know what you like but like i also remember like i i went to the nespresso store i think when i was researching for the wire cutter if i'm not mistaken to go try some coffees out in Soho. And it's a really good experience. But I know that they've changed a lot over the years. So can you just talk about the evolution of how the retail concept and the retail strategy has changed?

15:06Absolutely. It's amazing how we've almost forgotten in some ways how breakthrough it is, the idea of selling coffee in a boutique type environment, right? Our stores are not, you know, most people buy coffee at the grocery store, and we sell them at these luxury boutiques that are akin to shopping in a, you name it, luxury store, right? And so that much has been consistent over the years. But what we've seen is, specifically in the US, those retail locations and the evolution, of course, of the customer who was stuck at home and is now going back out in the world. We won't believe by that point, we all know it.

15:44We've had to adapt from just being maybe transactional focused because we were in a different mode where consumers were still just discovering us and knowing that you want to come to Nespresso to try the new coffee, buy your new refill, your next refill, et cetera, to a world where if you're trying to focus on household penetration, you want to bring new people into that store. You really want to bring prospects and be welcoming and get them to come in the door to experience something that's going to sit with them and stick with them, even though they might purchase down the line or something like that, right?

16:19So the The evolution has been, I think, consistent in some ways to really being an innovative way to sell coffee. But moving from engaging kind of existing club members or existing members, right, that know who we are and what we do and are just kind of coming for the latest and greatest to really thinking about how a retail footprint might serve more of a brand building and a consideration driving approach. How do you really mean something in that experience so that you're driving acquisition at the end of the day in those stores, which we really weren't doing maybe five or 10 years ago? Then how do you do that?

16:57So what is that all about? I know that you have education stations. I'm forgetting what the exact words are, but you have these two different stations that they host like events, right? Yeah, exactly. We do a lot of really interesting things at the boutique. First of all, we've always offered free samples. Come in and taste our coffee because of course, tasting is believing, but you want to go a level deeper with the customers. You really want to, again, like they're not just coming in for a free shot of espresso and leaving ideally, right? They're kind of learning something about the brand in service of this consideration and purchase intent.

17:28So we started doing masterclasses, which are really fun and different and they're educational, right? They're how might you learn a little bit more about who Nespresso is, how we source our coffee. Again, I mentioned before, We're like, we want to be known and we are truly a coffee brand. But sometimes the machine, since the machine is what you lead with, that often gets in the way. And so how might the boutiques actually reestablish that we first and foremost are a coffee brand? We have expertise in coffee and we can, you can share your love of coffee with us. I think, Kel, when you started, like you love coffee, you're engaged in coffee and like Nespresso meets you there, right?

18:07And might teach you something more. So I think the retail environment and these new stations, this evolution of the new boutiques that we're opening just starting this year, actually just opening in Austin, Texas, our very first of this new model that's much more interactive and this idea of a two-way conversation around coffee in that way. And is that, when you say this is a new concept, is that in everything from store layout? Is it in how you're talking to store associates? How does that manifest that that's different from what it was before? Yeah, look and feel is evolved and modernized for sure as the brand has updated things like color palette and things like that.

18:45That's base level. But then absolutely, it really is about the experience first and foremost. I think when we look at our data, we're showing that something like 63 % of customers want to come to a store in person if it provides a novel experience. So it's not just that you're coming in and like seeing something you can't see elsewhere, that it's really this like memorable, unique, et cetera, way of engaging. So the new store is founded on that principle, which is, yes, of course, we're going to sell something. It exists. It has a retail footprint that you have to justify through sales. But how might you look at other KPIs for that boutique that is more about time spent, engagement, understanding and education.

19:30so the boutique is structured in such a way that the journey through the store, not just to the sales counter, is really prioritized. For those types of stores, they're about experience, and maybe this is incorrect, but it strikes me more like a showroom-y sort of thing, where you want people to buy, but also not everyone will buy. What are the metrics? If you talk to other brands, they talk about four-wall profitability. This sounds like that's probably not the case for a type of store like this, right? Yeah, I'll be very honest. That's where we're still learning together. It's hard. It's absolutely looking at that operating cost and justifying the sales on the operating cost.

20:10That's a limited view. That is how we have done it traditionally, in fairness. And we're looking at what are those next KPIs. To me, the first and foremost one is acquisition. If those stores in the past were not selling new machines or not generating new customers, then they weren't fully achieving this level of engagement because at the end of the day, that's what that engagement is in service of. And we're kind of lucky that it's a one-time purchase that then leads to this membership. Another way we're really just now focusing on, you mentioned subscription before, it is a part of our business, but not a significant part today.

20:44We offer a subscription service and the boutiques in the past, if they were motivated by in-store sales, right? Like for like store sales year-over-year, why would they want to put someone on subscription? Because that then moves them into the e-commerce world and doesn't retain them as an in-store shopper. What we've seen and what we've been able to show to both our internal teams and our internal retail team, but also the broader organization is that a shopper does not ever really leave the boutique. They're coming to the boutique maybe once, maybe some of their purchases are going to put online through subscription and things like that, but they're probably going to come back because they want to engage with a human.

21:22They want to come to the next masterclass. They want to learn about our new limited edition launch. So actually those omni-channel shoppers are really, the store experience is also setting up and the KPIs are set up in such a way to better support a true omni-channel shopper. Because again, while we are a D2C brand, we recognize that we can't be a D2C only brand. So you're talking with your retail teams now and like making it so that it's more palatable for them to go into an e-com subscription type of thing for the customers? How do you talk about that with those, with, I guess, this one store?

21:55I mean, listen, at the end of the day, it comes down to their sales incentives, right? We have to make it meaningful to them. If that wasn't part of their, their sales goals, which they're salespeople, then you have to, it starts there. But to your point, there's also a lot of cultivating that conversation around what an omni-channel shopper looks like and what it means and trying to level with them about the reality of consumer shopping behaviors and train them on, again, the financial compensation will be fair across those two channels. But you're not going to lose that person, right? You're still going to have that face-to-face connection that they embrace and they own that that never will go away.

22:35And our data shows that and they respond well, as we all do, to the proof is in the pudding in a way. Can you talk about location? Because this one's in Austin, correct? The newest location? The first one we open in the new concept is in Austin. Yeah. But you have stores elsewhere. How are you choosing for this new sort of concept retail strategy where you go? Is it where you think there is a potential penetration of new customers? Is it where, you know, should we expect to see the new concept come to New York, where I imagine you probably have a bunch of customers? Yes, it's a great question.

23:11So first and foremost, we needed to look at our boutique network. and in a post-COVID world assess, are we in the right places given the new sort of shopping footprint, the new places people are spending time? That was the starting point for this evolution and this rollout of the new boutiques or the new design boutiques. Some of them needed to be updated because they were in the right location. They just needed a refresh. And Austin is a good example of that. We had a great placement. We just needed a refresh to the experience that was happening there. Simultaneously, we are absolutely looking at new and different locations to add to our boutique network.

23:45And it's largely based on where we under penetrated in ability to engage with our target consumer. So if we're looking at a given city and call it Dallas, right, just to play it out another place in Texas, if we see that our target consumer over indexes in Dallas because of the wealth that is there or whatever the coffee drinking habits, and yet we don't have a lot of members in that Dallas area, a boutique could really help us drive added acquisition and engagement with that market. So that's one of the ways we've been evaluating it. And then of course, there are just kind of key cities where you have to have maybe multiple presences that then you're looking at, okay, what are the, you really hone in on the geographic data and the location-based data that we have vis-a-vis our D2C data to say, where is that overlap or where are their gaps?

24:38And we've definitely got gaps. We only have 38 boutiques across the US. That's fairly small given the scale of our business vis-a-vis some of competitors that are in a similar echelon. In New York, you may have heard it was in the news that our Soho Boutique is going to be relocating. So what I can say today is absolutely, we're thinking a lot. I'm spending a lot of time on the future state of our New York presence, what that will look like and how it will even take this new concept to the next level. Because at the end of the day, New York is New York, right? New York is a flagship in a way that is beyond even your traditional flagship.