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Ethical Coffee Pursues Nespresso Case After Losing Swiss Appeal

Ethical Coffee Co. said it will appeal a ruling by a court in the Swiss canton of Vaud upholding a nationwide injunction against sales of the company’s capsules that that fit in Nespresso machines.

The decision earlier this month barring sales of Ethical Coffee capsule by Metro AG (MEO)’s Media Markt stores doesn’t match a ruling in a St. Gallen cantonal court that overturned a similar prohibition against another retailer, the Fribourg, Switzerland-based manufacturer said today in a statement.

“We are very surprised by the court decision,” Chief Executive Officer Jean-Paul Gaillard said in the statement. The cases against the two retailers are, on a factual and legal basis, “totally similar, and we do not see any reason for upholding a decision which was not upheld in St. Gallen.”

Nespresso’s owner, Vevey, Switzerland-based Nestle SA (NESN), has pursued legal action against Ethical Coffee and U.S. foodmaker Sara Lee Corp. since they began last year offering coffee-filled capsules compatible with its machines. The St. Gallen dispute centered on Swiss supermarket chain Denner, which was allowed to resume selling Nespresso-compatible capsules made by another supplier, Alice Allison SA, after a temporary halt was ordered in July.

Ethical Coffee is also developing its own coffee machines and may begin selling them “over the summer,” with initial 12-month sales in the first markets of France and Germany targeted at about 100,000 units each, Gaillard said in an e-mail. A second machine is also under development, he said.

Nespresso must provide a deposit of 2 million Swiss francs ($2.1 million) for potential damages in the event a ruling allows Ethical Coffee capsules to be sold, Ethical Coffee said. Nespresso must ask the court by late February to decide on the merits of the case, Ethical Coffee said.

Nestle is “pleased” with the decision in the Media Markt case, the company said in a statement. “This ruling, which is subject to the final decision of the court, supports the Nespresso arguments.”

To contact the reporter on this story: Dermot Doherty in Geneva at ddoherty9@bloomberg.net

To contact the editor responsible for this story: Sara Marley at smarley1@bloomberg.net

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