Nespresso is the Apple of coffeemakers and Keurig is like Microsoft

By Adam L. Penenberg , written on December 17, 2013

From The News Desk

Take one look at a Nespresso coffee machine, and you can see the Apple influence. Why, it's as if Jony Ive has been freelancing at Nestle S.A., the Swiss conglomerate that operates Nespresso.

Most of the machines have a generous skin of chrome and Apple's signature curved edges. They're user friendly -- so easy to use, in fact, it's difficult to make a bad cup of coffee (although coffee snobs turn up their noses at it). It's possible to make a fresh cup of coffee or an espresso in 15 seconds. Nespresso stores, which my colleague Kym McNicholas has pointed out, have a decidedly Apple flair to them. The company controls a tightly sealed proprietary system, selling the coffee pods as well as the machines, which go for a premium. Well, someone has to pay Penelope Cruz for appearing in the television commercials, as well as Matt Damon, who was reportedly givenĀ $3 million to appear with George Clooney in a 20-second ad.

Quality construction, ease of use, elegant look and feel, savvy marketing, somewhat pricey, tight control over the software, er, coffee, and you have a very Apple-like experience.

Meanwhile, its arch competitor in the at-home, single-cup coffee game, Reading, MA-based Keurig, in addition to selling its own line of machines has licensed its technology to several coffeemaker makers (Mr. Coffee, Black & Decker, and others). It has also enlisted Dunkin' Donuts, Starbucks, and Green Mountain Roasters, which sells hundreds of flavors, including non-coffee items like tea, cider, and lemonade), to create capsules for it.

Personally, I think Nespresso's coffee is better, but that's a matter of taste, and no doubt Keurig is immensely popular. One article from two years ago estimated that Keurig machines were in 13 percent of American workplaces, and I have to believe that number has only increased. These coffeemakers have, for the most part, the look of a clunky Dell laptop from the late 1990s, but the machines are cheaper while the coffee pods are about the same price as Nespresso's.

I say Dell, but a better analogy might be Microsoft, and the Nespresso-Keurig competition for consumer preference reeks of the original battle between Apple and Microsoft that raged in the 80s and 90s. Apple under Steve Jobs maintained tight control over its ecosystem, manufacturing the machines and creating the operating system to run on them. Microsoft, on the other hand, didn't make a computer. It simply licensed the operating system to computer makers and made money every time one was sold.

Like Nespresso, Apple products were considered more elegant, easier to use, and priced higher than computers running Dos, then Windows. After Jobs was forced out at Apple the company he co-created floundered and at one point was on the verge of going out of business, while Microsoft became one of the wealthiest companies in the world (and co-founder Bill Gates became the richest man on earth).

Ultimately, Apple had the last laugh. Exerting iron-fisted control over its proprietary ecosystem and constantly innovating -- first with the iPod then the multi-touch iPhone and iPad, all of which created a halo effect for its line of computers and peripherals -- Apple, upon Jobs' return in 1996, went from a company with a market capitalization of $3.1 billion to $555 billion today. That's almost double Microsoft's market cap.

This does't mean that Nespresso and Keurig are destined to go the way of Apple and Microsoft, of course. It is notable, however, that they have gravitated toward these Apple-Microsoft models. Nevertheless, stark differences exist in their respective markets.

First, the coffee capsules. Nespresso and Keurig have discovered that it's possible to sell a product that is both cheaper while simultaneously being more expensive, which sounds like an inherent contradiction but in this case it's not. That's because each capsule goes for 70 cents, more or less, with some premium coffees (like Nespresso's limited edition Kona) going for $2 a capsule. I don't know about you, but paying 70 cents for a good cup of coffee feels pretty cheap, whether it's Nespresso or Keurig.

Actually, though, these pod peddlers are charging more than $50 a pound for their coffee. Some go for much more, equal to a pound of Jamaican Blue Mountain, considered by many to be one of the best coffees in the world. So that's how your coffee can be both cheap and expensive at the same time. Also, with capsules, you probably waste far less coffee than you do when you brew a pot. Then again, you have to dispose of all those metallic capsules (there are recycling programs, although they are not exactly convenient, since in the case of Nespresso you have to schlepp your used pods back to the store).

Also, consumers already face sticker shock over coffee whenever they buy a grande skinny wet carmel cappuccino at Starbucks for $5. While Dunkin' Donuts and others have carved out a niche on the lower price end Starbucks still reigns supreme on the upper end. With a shot of espresso at Starbucks going for $1.50 or so (depends on location) and there being about 24 double espressos in a pound of coffee (or almost 50 single shots) that means a pound of Starbucks espresso beans (used in in-store drinks) costs customers roughly $75 a pound.

That's even more than Nespresso and Keurig charge.

Image via Nespresso.