The impact of capsules on the coffee market (Part 1)

In recent months we have heard about cold brew, nitro brew, French press and other formats and wizardry in order to engage new generations and increase coffee consumption.

Some people have even defined this phenomenon as a really damaging blow, which may be capable of turning some crucial issues in the coffee world upside down. For example, important factors such as an increase in the average price of coffee at a bar, the quest for the quality of raw materials and the involvement of young people in the coffee culture.

In the last ten years, what has really shaken the world of coffee – changing its reputation forever – are capsules, whose impact on the market occurred both in terms of double-digit growth and share percentages of the overall consumption mix, taking into account however, that capsules and coffee pods represented, on average, in different European countries, only 10% of the market compared to ground and instant coffee. (Read also: Coffee Pods About to Overtake Instant and Ground Coffee).

coffee pods & capsules

The change has been gradual and dates back to quite some time ago. The pioneering phase took place in the late 1980s with the invention of a patented product by Nespresso, aimed only for high-end customers and intended to be marketed through direct distribution.

The Big Bang which has occurred in the last few years that resulted in the gradual loss of patents that has allowed the Swiss multinational, Nespresso, to achieve a monopoly in many countries, not without costly lawsuits. Most operators have started the production of capsules that are compatible with the main systems. Companies whose business model is focused on the production of capsules were brought into being too. From a niche product, the coffee capsule has become a mass product.

Almost like a wave, all these changes have had a strong impact on the European and world coffee markets (Read also: Coffee Pods in South East Asia), raising the competition and pushing operators to expand their range of offerings more and more.

Considering the pressure on prices, quality and sustainability, the spread and the massive use of capsules has sparked a strong competition on pricing resulting in even leading companies taking part with offers and promotions, as they worry about losing market share.

The capsules price war, however, has in some cases put the quality at risk, which is the real point of reference for this product.

To keep the quality high and to offer something different from each other, some companies have created alternative lines with a single-source and organic products.

Other producers have launched biodegradable or vegetable fibre-based capsules to counter the problem of waste disposal.

The action of a few producers is, however, still marginal when compared to the vast majority of low- cost capsule offers.

The awareness of the consumer is increasing with regards to the variety, origin and types of favourite coffee which could have a future impact on consumption choices, especially at the bar, where in most cases we can still see a unique range of proposals. And the need for a wider range of blends is a consequence of the advent of the capsules.

Continue: The impact of capsules on the coffee market (Part 2)
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Mariano Peluso

More than 15 years of experience in competitive market analysis, data surveys, worldwide markets, and a significant experience in the study of the coffee industry, especially in B2B, HORECA and professional markets. He is in charge of selecting the appropriate research methodology and supporting techniques to meet customers' business objectives, with a specific expertise in research plans and questionnaires. Consultant in interpreting data, writing reports, and making actionable recommendations. For Mariano, coffee is not only a job but also a passion.

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