Nespresso Rival Says Order Book Full at 4 Billion Capsules

By Tom Mulier
March 31 (Bloomberg) -- Ethical Coffee Co., which makes cheaper capsules for Nespresso machines, stopped seeking orders after retailers asked for 4 billion pods, double the amount the company aims to produce next year.
Casino Guichard-Perrachon SA, which runs the Casino and Monoprix supermarkets, will start selling the capsules in French stores by mid-May, said Ethical Chief Executive Officer Jean- Paul Gaillard, who was head of Nespresso from 1988 to 1997.
Nespresso, Nestle SA’s fastest-growing brand, has vowed to defend its patents on the capsules as sales growth slows. Sara Lee Corp. said yesterday it will begin selling a Nespresso- compatible coffee capsule in French stores on April 7. The rival capsules will be priced as much as 20 percent less than Nespresso’s. Gaillard said his capsules don’t infringe Nestle patents, citing lawyers he and his clients contacted in France.
“We know that there is no problem,” the 55-year-old said in an interview at his office in Lausanne, Switzerland. “You can patent the way to get an effect, but you can’t patent the effect itself. You cannot patent hot water. You can patent a way to heat water.”
Nestle makes Nespresso capsules, relying on partners such as Koenig and Krups to produce the machines. Revenue at the unit rose 22 percent to 2.77 billion Swiss francs ($2.6 billion) last year, slowing from growth of 33 percent in 2008.
Casino has said it will sell the biodegradable capsules at 20 percent less than the price of Nespresso. The recommended price for Sara Lee’s L’OR Espresso capsules is about 10 percent to 20 percent less than Nespresso, the U.S. company said. A tube of 10 Nespresso capsules costs as much as 3.70 euros in France.
‘Unique Experience’
“Nespresso fully expects others to seek to share our success,” its CEO Richard Girardot said by e-mail yesterday. “Nespresso offers a unique experience which consumers won’t find, and