Challenge brews to Nestle coffee capsules in France

Nestle faced a fresh legal challenge to its booming Nespresso coffee capsule business after a competitor said Wednesday it had filed a lawsuit against the food giant in France. Swiss generic capsule maker the Ethical Coffee Company (ECC), which has won legal battles against Nestle for the right to market its biodegradable capsules in Germany and Switzerland, claims Nestle has tried to discredit its products in France via its Nespresso club, Internet blogs and distributors. "Basically we want to stop this slurring and disloyal competition," ECC chief executive and founder Jean-Paul Gaillard told AFP, accusing Nestle of giving "false information" to consumers about ECC's capsules. Nestle did not respond immediately to requests from AFP for comment. ECC meanwhile said the French market accounted for 60 percent of its coffee capsule sales, and insisted it had would seek from Nestle "considerable compensation for the damage it has suffered since it arrived on the compatible capsule market". A source close to ECC said on condition of anonymity the damages claimed in the lawsuit amounted to more than 50 million euros ($65 million). Gaillard, who jumped ship as Nespresso managing director to create ECC in 2008, insisted the company had no choice but to bring its battle to court. "When we launched (the capsules) we knew there would be a fight," he told AFP, adding that there was "no problem with a normal fair fight between companies, but when it becomes unfair there is only one way to go, and that is the courts." ECC launched its capsules in France in 2010 and nine other European countries in 2011. In a bid to protect Nespresso's capsule sales, which hit 3.0-billion Swiss francs (2.5-billion euros, $3.2-billion) in 2011, Nestle hit back with lawsuits in several countries. But the food giant suffered a double blow in July when Swiss and German courts decided not to grant an injunction against the sale of ECC's biodegradable coffee capsules. The overall market for such capsules is expected to reach over $8.0 billion by 2014.