Swiss coffee capsule maker leaving 'losing' Nespresso format

[GENEVA] Swiss firm Ethical Coffee Company, which has long butted heads with Nestle over its capsules compatible with Nespresso machines, said Thursday it was winding down production of the "losing" format.

ECC, which has been locked in legal battles with the world's leading food company over its Nespresso-compatible pods for nearly a decade, said it would all but close its production of the "loss-making" format by the end of the year.

"We're leaving the Nespresso format market, which is totally outdated, where nobody makes money any more," ECC founder Jean-Paul Gaillard told AFP.

The company, which was the first to challenge Nestle's monopoly on the capsules used in its machines, at one point was making around 300 million Nespresso-compatible pods a year.

But the aim now is for it to make only 10-15 million of the biodegradable capsules "just to please our most loyal customers," Mr Gaillard said.

Instead, he said, ECC would focus on producing a "next generation", environmentally friendly and more flexible capsule format that he promised would "do to the coffee market what the iPhone did to the mobile phone market."

Mr Gaillard, who founded ECC in 2008 - 10 years after leaving his position as Nespresso chief executive - said his company had been hit hard by the constant legal squabbles with Nestle, and had also taken a beating from the some 100 competitors who have followed in its path.

Nestle has lost many of the court cases, including one this week in Germany and another at the end of May before the European Patent Office for violating an ECC patent by using a "harpoon" device in some of its machines to jam third-party pods.

But Mr Gaillard said the constant legal squabbles with Nestle and the global food giant's pressure on retailers not to carry ECC capsules had taken a heavy toll.

At the same time, he claimed that the Nespresso format had reached the end of the road and that everyone in the market was struggling.

"Even Nestle is on the way to lose money," he said.

Nestle flatly rejected that claim.

"I can tell you that the portioned coffee market is a dynamic and growing category and we are delivering solid, profitable growth year on year," spokeswoman Katherine Graham told AFP in an email.

Nestle does not provide breakout statistics for Nespresso but the Bloomberg news agency estimated sales at US$4.5 billion in 2015.

AFP