THE

Sarah Ali, Alec Lintz, Anav Vedi SOCIOL359 – April 20th, 2018 WHY ? • Average coffee consumption in the United States is approximately 3.1 cups of coffee per day.

• This percentage has grown dramatically since the 1990s when the consumption of coffee was only around 50 percent.

• Furthermore, 87 percent of these coffee drinkers drink coffee from home, up from 82 percent just one year prior to the study. THE COFFEEMAKER

1908 – COFFEE FILTER 1953 – DRIP MACHINE 1996 – SINGLE-CUP Bentz uses nails to punch Brews multiple cups via Instantly brews individual holes in the bottom of a brass electricity, automatically cups, reducing wait times, cup, which she then lines with heating water and allowing cleanup and waste. a sheet of blotting paper from for quick cleanup. Preserves flavor. her son's school notebook. REVOLUTIONIZING THE COFFEE INDUSTRY

• Innovation invented by Melitta Bentz • Started by wrapping loose grounds in cloth and boiling it in water • Evolved into brass cup

• Wigomat - first electric machine

• Did not gain rapid traction until large corporations incorporated the innovation. LET’S DEMONSTRATE. TREND 1: COCOONING

• Creating “insperiences” without compromising quality • Nespresso: “full-café experience” • Starbucks’ Verismo: “Your favorite Starbucks beverages, all from one machine” • Costa Coffee: “Experience the magic of Costa in the comfort of your own home.” TREND 2: SENSORY FUSION

• Pursuit of novel sensory experiences that combine taste, texture, smell, sound, and shape to meet customer demands for more sensually indulgent products • Companies are leveraging this desire for a sensory experience through their ads

TREND 3: MADE FOR ME

• Express yourself through your coffee

• Hand in hand with creating “insperiences”

• Who knows what you want better than you? THE INNOVATOR’S DELIMMA • Throughout his book on the Innovator’s Dilemma, Christensen explores this sort of failure that great firms encounter by exploring how business models, good management, and a blind eye to small, but nonetheless competitive innovations have the potential to knock down industry giants.

• The introduction of and Nespresso into the coffeemaker market has caused a similar disruption to incumbent companies that specialized in drip coffee machines. • Satellite initiative by Nestle to target drinkers at the office. • Nespresso was launched by Nestle in 1986 to specialize in single-use pods for espresso drinkers in Europe, but by 1987, the company encountered numerous machine defects, which consumed maintenance and service budgets. • Yannick Lang, a young entrepreneur with experience outside of the coffee and food industry, created a Nespresso Club for consumers of the machine, guaranteeing perks like two-day pod delivery and around-the-clock order taking. DIFFUSION OF INNOVATION: NESPRESSO • Based in Switzerland, Nestle (Nespresso’s mother company) decided to introduce at home coffee makers in all major coffee drinking countries. • First target of 100 sales not met by even half. • Designed recyclable capsules that cut costs. • Under Willem Pronk, concept of a-la-carte Nespresso was introduced. • Boosted sales by 200% THE NESPRESSO CLUB • 24x7 ordering and customer service. • Services • Machine repair • Coffee expert advice • Recycling program • Partnered with major airlines to serve on first class flights. • Partnered with top restaurants in Europe. • Came to be known as the ‘Armani of Coffee’.

• First Nespresso store opened in 2004 in USA. • Took advantage of 2008 crises, when people decided to drink coffee more at home. • Grew astronomically since with an image of a high-end coffee maker • Coffee startup by two roommates from Colby College.

• Founders worked in technology firms, quitting their jobs to pursue a single-cup coffeemaker. Created the cups at home.

• $1,000,000 investment by VC firm, MT Advisers. VC investment opened doors for manufacturing and advertising, leading to innovation diffusion.

• Demonstration based marketing strategy solidified public perception of the brand. DIFFUSION OF INNOVATION: KEURIG • Objective from the start: ‘brew one perfect cup of coffee at a time’ • Keurig partnered with Green Mountain Coffee Roasters, introduced the K- cup. • First, targeted the office market- created the ‘office coffee service’ (OCS). • Capitalized on people’s desires to drink good coffee at convenience and entered the home market. • Under leadership of John Whoriskey. • Conducted market surveys • Still in partnership with GMCR • Brand image as highly convenient and good-tasting coffee for everyday purposes. PUBLICITY • The Good: • Industry leaders • Train coffee farmers • Provide employment

• The Bad • Pods (Aluminum and K-cups) not quite recyclable. • Degrading the environment

• The Ugly: • No transparency- do not disclose how many pods manufactured • No change in production • Partnership with big corporations like Coca-Cola. Share of U.S. consumers who own a single-cup coffee brewing system from 2005 to 2017

United States; National Coffee Association; January 9 to January 23, 2017 Household penetration rate of coffee makers in the United States in 2009 and 2015, by type

United States; The J.M. Smucker Company; 2009 and 2015by type S-CURVE FOR TECHNICAL DISCONTINUITY

BENTZ FILTER DRIP MACHINE SINGLE-CUP TECHNICAL DISCONTINUITIES: DRIP MACHINE • As electric home appliances became widespread after World War II, the options for at home began to increase.

• The Wigomat in 1953 revolutionized coffee making. Mr. Coffee introduced the first variation of the electric drip machine as we know it today.

• Quantity, quality and speed of coffee preparation increased. Easier cleanup and less potential for burning hazards. TECHNICAL DISCONTINUITIES: SINGLE-CUP • How many students own a Keurig or single-cup coffee machine at home or on campus?

• Single-cup reduce waste, make coffee almost instantaneously, and have heightened the demand for coffee quality and flavor. Ease and variety of options.

• Particularly attractive for office use. Easy and quick cleanup. LOOKING FORWARD • Coffee machines bordering kitchen appliance and technology industries • Compatibility with other technologies

• Social Response • Health concerns, environmental concerns

• Universalizes coffee • Cafes may be catered to wealthier segments of the population. Coffee is not. “Coffee’s far more than a beverage. It is an invitation to life, disguised as a cup of warm liquid. It’s a trumpet wake-up call or a gentle rousing hand on your shoulder… Coffee is an experience, an offer, a rite of passage, a good excuse to get together.” – Nicole Johnson