Single-serve coffeemaker market heats up

Nespresso coffee pods

Nespresso coffee pods have gained popularity in recent years.

Coffee is the single-most popular food item — solid or liquid — that Americans consume at breakfast, according to the NPD Group. And although American coffee consumption has been more or less flat since the 1980s (and has fallen since peaking in the 1940s), one category is booming: single serve.

The dominant player in the domestic market is Green Mountain’s Keurig machines and their K-cup pods — with 72 percent market-share, according to a recent report from Euromonitor. Switzerland-based Nestle and its Nespresso machines have just 3 percent of the U.S. market.

But Nespresso — which is dominant in Europe — is trying to muscle in with a new offering called the VertuoLine. Nespresso's original line of machines — which has seen double-digit growth in recent years in the U.S. — is designed to reproduce a "European" coffee experience, says Nespresso CEO Jean-Marc Duvoisin.

"The objective was to be able to create concentrated strong espresso coffee especially as drunk in Italy, France, Switzerland," Duvoisin says. In other words, a strong short shot of espresso with froth, or crema, on top.

But Duvoisin acknowledges that the market for this style and size of coffee drink is limited in the U.S. So the company's new VertuoLine — with a new coffee-making technology that swirls the hot water through the pod in a centrifuge motion — delivers what the company thinks many more Americans want, says Duvoisin, "the long mug of coffee." 

It's an eight-ounce cup, similar to what rival Keurig machines deliver.

Harry Balzer, who researches American eating and drinking habits at the NPD Group, says Nespresso’s move to a bigger drink is probably wise.

"Look at the sandwiches we have, look at the drinks we have," says Balzer. "We tend to prefer things bigger. Feel like we're getting a good deal, a good value."

But Americans may not feel like they're getting such good value from Nespresso, says Jim Hertel at retail consultancy Willard Bishop. It's not the price of the machines — at around $300 they're in the same price-range ballpark as the competition.

It’s "the price of the pods themselves," says Hertel. He says one can find K-cups for Keurig machines online or at discount groceries for just over $0.30 apiece. Nespresso's pods cost twice that, and they have to be ordered from Nespresso.

"It's going to start off being elite," Hertel says of Nespresso's expanding footprint in the U.S. market, "and then it's going to move its way down. It may never get down to the mid-market."

Right now, Nespresso machines are available in Nespresso's own branded stores — just a handful in upscale markets like Beverly Hills, New York and Miami. The company also has store-within-a-store displays — where customers can sample Nespresso coffee free — in stores like Bloomingdale's and Sur La Table. And the company plans to introduce its new VertuoLine at Target later this year.

 

SOME RULES OF OFFICE COFFEE ETIQUETTE:

1. If you drink the last cup, make a new pot!
2. Re-read Rule No. 1 — it's that important.
3. Never leave a dirty cup in the single-serve coffeemaker. Empty the used pod, or pod reservoir if it's full.
4. If there are multiple flavors of single-serve coffee in a rack at work, don't pick a co-worker's favorite if it's the last one left.
5. If there are free snacks in the office kitchen, eat the whole cookie — or donut or Danish. It's okay to count calories, but no one wants a pastry you've already torn apart with your grubby fingers.
6. Chip in to the office coffee pool if there is one — no one likes a freeloader (and eventually you'll probably be found out.)

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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