Coffee Pods and Capsules Market Size, Share & Trends Analysis Report By Type (Pods, Capsules), By Distribution Channel (On-trade, Off-trade, Supermarkets/Hypermarkets, Specialty Stores, Online Retailing, Other Distribution Channels) and By Region(North America, Europe, APAC, Middle East and Africa, LATAM) Forecasts, 2024-2032

Market Overview

The global coffee pods and capsules market size was valued at USD 34.53 billion in 2023. It is expected to reach USD 65.16 billion in 2032, growing at a CAGR of 7.3% over the forecast period (2024-32). Coffee pods and capsules provide a wide range of flavor profiles, blends, and coffee types (e.g., espresso, cappuccino, flavored coffee) to cater to diverse consumer preferences. Manufacturers offer customization options, seasonal flavors, and specialty blends to attract coffee enthusiasts.

The most popular beverage, coffee's enormous demand is the primary driver of the market for pods and capsules. The one-time-use and disposable nature of coffee pods are one of the main reasons for their growing consumer appeal. Their convenience makes coffee pods increasingly popular, especially in industrialized nations like North America. Due to market maturity and the dominance of the Keurig system in the area, the capsules category is predicted to grow slowly during the projected period. The parent business, Keurig Green Mountain (KGM), has greatly benefited from its near-total dominance of the American and Canadian pod industries. Still, it has also worked adversely on the category by maintaining high pricing and limiting consumer options.

Market Dynamics

Global coffee pods and capsules market drivers

Increasing usage of single-serve coffee in households

In the case of coffee, quick preparation methods like coffee pods and capsules are gaining popularity among the general public. Players are introducing coffee pods compatible with well-known machines, such as Nespresso, to capitalize on the trend of people buying coffee machines to replicate the coffee shop experience at home.

In the biggest cities in the US and Western Europe, single-serve brewer penetration rates in households range from about 23 to 75 percent. In the US, single-cup brewers exist in 41% of homes and 28% of workplaces, according to the National Coffee Drinking Trends survey. Compared to 2012, 26% of coffee drinkers used single-cup brewers the day before. Most single-cup brewer owners are between the ages of 25 and 39, with children living at home; households with a combined income of over $100,000 own most of these appliances. Coffee brewing at home is gaining popularity.

Increasing demand for specialty and organic coffee pods and capsules

Globally, the demand for organic food and beverage, mainly tea and coffee, is growing at a faster pace due to changes in lifestyle patterns, as well as increased expenditure on food and beverage, awareness about healthy foods, changes in meal patterns, and existing food habits, and the desire to taste new products. The above factors boost the demand for specialty and organic coffee pods and capsules. Therefore, the installation of coffee machines and a growing number of coffee bars are increasing the demand for coffee capsules and pods.

Moreover, the consumption of healthy beverages is necessary for fitness-oriented consumers. Hence, the demand for healthy organic coffee capsules and pods is gaining traction among consumers at large, which, in turn, offers ample opportunities for manufacturers to innovate in the category. For instance, in 2019, Spanish coffee brand Cafés Novell launched a range of organic coffee capsules for at-home and retail coffee shops. The No Waste line of coffee capsules in the UK is "the beginning of entirely compostable and 100% natural." Hence, the demand for coffee pods and capsules is anticipated to increase quicker during the projected period due to the growth in product innovation in organic offerings, which is consistent with shifting customer tastes and preferences.

Global coffee pods and capsules market restraint

High cost of coffee pods and capsules

One of the major obstacles limiting the market's overall growth is the high price of coffee pods, which are more expensive to use than ground coffee or entire coffee beans. For instance, the price difference between Nescafe Dolce Gusto PRELUDIO and Nescafe Coffee-Classic (100-gram jar) is USD 4.85. The Nespresso Arpeggio costs USD 5.70 for ten espresso capsules, while the Folgers Black Silk blend for a K-Cup brewed coffee machine is USD 10.69 for 12 pods. The Nespresso capsule contains 5 grams of coffee, costing about USD 51 a pound. With 8 grams per capsule, Folgers works out to more than USD 50 a pound. These coffee capsules and pods are more expensive than the priciest coffees sold by artisanal roasters. The coffee is costly because, for single-serve systems, consumers are not just paying for coffee. They are paying for the convenience and the technology that make it possible to brew a single cup in seconds. Hence, such elevated cost becomes a hindrance factor for market growth.

Global coffee pods and capsules market opportunities

Enhanced and convenient packaging gains consumer attraction

Packaging is increasingly essential in creating a sensory experience associated with a particular brand or product. The look and feel of a pack form part of the consumer experience and can help to drive loyalty. Styling and decorative touches have an indulgent feel and help to enhance shelf presence.

Many consumers, particularly millennials, are also looking for products with more visible benefits and functions that can enhance user experience. The introduction of more unusual formats with flexible packaging can be used to offer user-friendly alternatives that open opportunities for consumption. Convenience is also crucial for busy consumers, and, as illustrated by the massive growth in the coffee pods and capsule market, people are willing to pay more for added ease of use. Simple things, like measured-portion packs and idiot-proof ways to make proper coffee, create the perfect drink ever.

Private label brands are also gaining significant traction among Americans, as various companies like Joe's Garage, a private label brand, offer one-cup round filter coffee pods in the United States, which are 60 mm round and come wrapped in a high oxygen barrier film to keep coffee fresh and fragrant. The packaging of these coffee filter pods is lightweight, soft, and flexible. All such factors contribute to market growth.

Regional Analysis

By region, the global coffee pods and capsules market is segmented into North America, Europe, Asia Pacific, and the Rest of the World.

Europe dominated the global coffee pods and capsules market and is estimated to grow at a CAGR of 6.8% during the forecast period. The biggest importer of green coffee beans in Europe is Germany. The country can efficiently supply both its local market, which is the largest in Europe and export markets because of the size of the coffee roasting industry. A single-cup brewer was used to brew coffee for roughly 13% of Germans daily as of 2016. This demonstrated the surge in single-serve coffee and specialty coffee demand in Germany. Because of an increase in the average retail price of coffee, which is fueling the expansion of the coffee pod industry in the UK, the popularity of coffee pod machines is rising dramatically. According to the British Coffee Association, 95m cups of coffee are consumed in the UK every day, which offers ample opportunity for critical players to innovate in the category. For instance, in 2019, Lavazza, one of the largest coffee manufacturers in the country, launched a range of compostable one-cup pods. Its compostable coffee pods break down in six months without any price difference, enabling consumers to dispose of their capsules conveniently. Such factors drive market growth in the country.

North America is the second largest region. It is estimated to reach an expected value of USD 50 billion by 2030, registering a CAGR of 7.3%. The demand for coffee pods in the country is increasing due to the convenience factor associated with coffee pods. However, as this market for pods and capsules has matured in the United States, it is expected to witness stagnation in the growth rate throughout the forecast period. To gain consumer attraction, National Coffee Roasters (NCR) launched the Peoples Organic Coffee® brand (Compostable Pod) in the United States, which includes Café Classics™ and Donut Shop Classics ™, in compostable pod packaging. The need for coffee capsules and coffee pods is rising due to the installation of coffee machines and the rise in the number of coffee bars around the United States. Fresh-ground coffee pods are expected to experience a significant increase in both volume and value over the forecast period due to the rapidly expanding coffee shop culture.

The Asia Pacific is the third largest region. China holds a substantial opportunity for significant coffee retailers, as the country has witnessed a shift in preferences due to the consumption patterns of millennials. The rise in product prices and the concerns regarding the usage of plastics in coffee pods and capsules offer opportunities for the players to innovate in the category. One example is when Nespresso launched its doorstep recycling program for its coffee capsules in China. China is expected to gain prominence in the market in terms of revenue during the forecast period because of the country's need for ready-to-drink coffee products.

Segmental Analysis

The global coffee pods and capsules market is segmented by type, distribution channel, and region.

By type, the global coffee pods and capsules market is segmented into pods and capsules. The capsule segment dominated the global coffee pods and capsules marketand is estimated to grow at a CAGR of 7.1% during the forecast period. Due to the rise in demand for quick non-alcoholic drinks in recent years, coffee capsules have seen significant public acceptability. Due to its appropriateness, ease of use, and wide variety of coffee equipment, coffee makers prefer coffee capsules. Additionally, the growth of upscale coffee shops like Starbucks has increased customer demand for premium, freshly brewed coffee. Hence, there is increasing demand for coffee capsules. The brands Nespresso and Nescafe Dolce Gusto are quite crucial in the capsule business. Other single-serve technology-related brands held by JAB, such as Keurig, the JacobsDouweEgberts, Tassimo, and Senseo, help to raise the value/volume share ratio. The popularity of coffee capsules has increased due to evolving packaging technologies and the capacity to compete with high-end or exotic brands. New competitors and brands are entering this category with innovations in biodegradable capsules. This sub-segment is expected to continue to be an intangible-driven and high-growth portion of home consumption.

The pod's segment is the second largest. Coffee pods are packed in single doses, and the roasted, ground coffee is measured and pressed within two sheets of paper, making it a portable single-serve coffee packaging for household, office, and on-to-go purposes, driving the growth of the segment. Additionally, coffee pod machines have become a cornerstone of consumers' traditional coffee shop experience. Furthermore, the moderate growth rate of the coffee pods market is likely to continue throughout the forecast period, with mushrooming coffee chains offsetting some of the sluggishness. On the other hand, market players are introducing premium or specialty coffee pods to improve sales. For instance, in 2019, Notes Coffee launched a range of premium, single-origin coffee in pods. These pods are fully compostable and biodegradable and have a 12-month shelf-life. Online retailers are increasingly coming up with enticing offers, providing customers with pods at substantially discounted prices, boosting the demand for coffee pods in developing economies.

By distribution channel, the global coffee pods and capsules market is segmented into on-trade and off-trade. The off-trade segment is divided into specialty stores, supermarkets/hypermarkets, online retailing, and other distribution channels. The supermarkets/hypermarkets segment accounted for the largest market share and is estimated to grow at a CAGR of 6.9% during the forecast period. Supermarkets and hypermarkets are the primary outlets for selling coffee items due to their vast retail spaces that appeal to a wide range of preferences. Supermarkets and hypermarkets offer a wide variety of brands and products. These shops offer premium coffee and sell pods and capsules at a given price range. The expansion of the retail sector and the opening of numerous stores, the accessibility of a wide variety of goods at lower prices, and the superior shopping experience are some of the main drivers of this segment's growth.

Recent Developments

• April 2024 - Nespresso—the industry leader and go-to for premium portioned coffee—announced that its at-home curbside recycling service would accept aluminum coffee capsules from residents of Jersey City, New Jersey's low-rise residential buildings, just like metal, glass, and plastic.
• April 2024 - Nespresso introduced coffee capsules that are entirely biodegradable. Paper pulp and other entirely biodegradable ingredients are used in their creation. After three years of development, I'm so happy that they've finally dropped.