Plenty Of Opportunity
With several of Green Mountain Coffee Roasters' key patents now expired, retailers have a chance to grab their share of the single-cup coffee market.
Few Americans could survive the day without their morning cup of Joe. And with people more time-starved than ever, it's understandable that more and more people are turning to easy-to-prepare single-cup coffee pods to get their morning fix.
The switch to single-serve [coffee] is rampant," says Daniel Granderson, analyst with the Packaged Facts division of Rockville, Md.-based MarketResearch.com.
How rampant? According to data from SymphonyIRI Group, Chicago, dollar and unit sales of private label single-cup coffee jumped 104.5 percent and 72.8 percent, respectively, during the 52 weeks ending Aug. 12.
Trends with traction
Granderson notes that the single-cup format is becoming the preparation method of choice for many coffee buffs.
"Sales of coffee through retail channels will continue to grow at a fast pace as more consumers switch to single-serve coffee formats," he explains.
And those coffee buffs can expect to see a wave of new releases during the next year — especially products under retailers' own brands. In September, Green Mountain Coffee Roasters (GMCR) saw several of its key patents for K-Cup packs expire, according to an article on Forbes.com.
The expiration of these key patents has "opened the floodgates" for private label manufacturers to team up with small coffee roasters to provide Keurig brew system-compatible single-cup products for retailers' store brand programs, says Jonas Feliciano, industry analyst - beverages with Euromonitor International, Chicago. "This will bite into GMCR's current dominance of [K-Cup packs] and help the [single-cup coffee] category grow as a whole," he points out.
A number of retailers already have released Keurig system-compatible single-cup pods under their own brands, including Minneapolis-based Supervalu and Safeway, Pleasanton, Calif.
Younger consumers also present a potential growth opportunity. "Category Insights — Coffee," a May 2012 report from global market researcher Mintel, reports that 82 percent of U.S. consumers drink coffee, but that only 61 percent of those between the ages of 18 and 24 do so.
Therefore, retailers might want to consider flavor innovation as a way to broaden the appeal of their coffee products — including their single-cup pods — as younger consumers are more likely to drink flavored coffees than they are to sip on non-flavored ones. Some of the top coffee flavors the national brands are introducing are hazelnut, French vanilla, cinnamon, caramel, pumpkin spice, Irish cream, peppermint and egg nog, the Mintel report states.
Trends on the horizon
In September, Starbucks jumped on the single-cup machine bandwagon with a product of its own: Verismo. The machine — a premium-positioned product that uses exclusively designed pods to make coffee, lattes and more — produces drip coffee from coffee pods, espresso shots from espresso pods, and hot milk from milk pods.
Feliciano notes that although the Verismo's price tag might be too high to "move the needle" among all consumers, the machine certainly will create interest in the premium segment of single-cup brewers — as well as in milk pods.
"While single-serve coffee pods have been good in creating single brewed coffees, it was only recently that the concept of milk pods and the ability to make lattes and other coffee drinks has been available," he said.
As more coffee machine manufacturers explore coffee and milk pods — which could occur in the near future — competition should be expected to drive these price points down.
"[And] if milk pod technology were to reach [private label] manufacturers, lower-priced pods could supplant the premium market Starbucks is seeking to create," Feliciano explains.