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Nestle Loses U.K. Bid to Block Nespresso Rival Capsule Sales

While Nestle sold about 4 billion Swiss francs worth of Nespresso products last year, those revenues are under threat from companies making cheaper versions of the coffee pods used in its machines. Photographer: Gianluca Colla/Bloomberg
While Nestle sold about 4 billion Swiss francs worth of Nespresso products last year, those revenues are under threat from companies making cheaper versions of the coffee pods used in its machines. Photographer: Gianluca Colla/Bloomberg

April 25 (Bloomberg) -- A Nestle SA unit lost a patent infringement lawsuit that sought to block a U.K. company from making capsules for the Nespresso coffee-making machines.

Dualit Ltd.’s products don’t infringe Nestle patents for the refill packs, Judge Richard Arnold said in a ruling on April 22. Nespresso customers “would assume that they were entitled to obtain capsules to use with the machine from whatever source they pleased,” he said.

While Nestle sold about 4 billion Swiss francs ($4.2 billion) worth of Nespresso products last year, that revenue is under threat from companies making cheaper versions of the coffee pods used in its machines. Nestle, the maker of Kit Kat chocolate bars and Shredded Wheat cereal, lost legal bids in Germany and Switzerland to restrict the sale of rival capsules.

The U.K. judgment “is inconsistent with the ruling by the European Patent Office in April 2012, confirming the validity of a key patent for the Nespresso system,” Nestle spokeswoman Diane Duperret said in an e-mail.

Dualit said in a statement its capsules could now be sold throughout the U.K.

Nestle, based in Vevey, Switzerland, stopped reporting sales details for Nespresso midway through last year due to “the competitive environment,” Chief Financial Officer Wan Ling Martello said at the time.

Ethical Coffee

In 2010, Sara Lee Corp. and Ethical Coffee Co. both introduced refills compatible with Nespresso machines. Swiss retailer Migros sells five flavors of capsules from 556 stores in the country.

Nestle is also involved in a legal dispute with Ethical Coffee in Paris over alleged unfair competition practices.

The company had its slowest first-quarter sales growth since 2009 and said April 18 that full-year revenue growth will be at the lower end of its forecast, amid a slowdown at the unit that includes Nespresso. Revenue was also hit by the destruction of a factory in Syria and by reduced demand for frozen food and weight-loss products.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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