Coffee Pods Market

Market Overview

The global coffee pods market size was valued at USD 27.8 billion in 2023 and is projected to reach a value of USD 50.8 billion by 2032, registering a CAGR of 6.93% during the forecast period (2024-2032). The increase in coffee pod market share during the forecast period is related to increased adaptation to modern consumption trends and changes in consumer perception of sustainable packaging.

Coffee pods began by easing the process of preparing a single cup of coffee, as each pod helped brew enough coffee for a single serving. Coffee pods reduce the time taken to measure the exact portion of coffee and the need for additives. They are similar to tea bags and have the same functionality. Changing consumer preferences and increasing demand for convenience-based products propel coffee pods market growth. Coffee pods ease the process by requiring consumers to insert their desired flavored capsule or pod into a machine and press a button. This simple and time-saving mechanism of preparing a cup of coffee is driving the growth of the coffee pods market.

Additionally, more and more consumers are noticing a change in lifestyle and demand quality products with varied characteristics and practicality. The vital factors responsible for the increase in the consumption of coffee pods among consumers are ease of use, speed, convenience, and affordability of coffee machines. Consumers' desire for quality coffee stimulates coffee pod consumption.

Highlights

• Medium Roast leads the market by the intensity segment.
• B2B dominates the global market through its distribution channels.
• Hard Pods or Capsules hold a significant market share by form.

Market Dynamics

Coffee Pods Market Drivers

Increased Adaptation to Modern Consumption Trends

The increase in people's standard of living and the growing disposable incomes of consumers leads to the growth of the global market. The increasing working population results in a fast-paced life that demands easy-to-use products. Consumers expect their day to start with freshly brewed coffee, similar to the coffee they get at cafes. Coffee pods provide the ease of brewing single-serve coffee through machines to their customers, thus allowing them to manage their morning chores. It is not only the working community adding value to the global market but also the growing coffee chains and hubs that drive the market.

For example, the United States consumes 0.73 billion KG of coffee annually, with an average of 1.72 KG per individual, distributed across a population of 340 million. In the United States, 65% of individuals consume coffee daily, while only 55% consume bottled water. 80% of households in the United Kingdom have instant coffee in their pantries.

Sustainable Packaging Changes Consumer Perception

Due to increased awareness among consumers about the harmful effects of coffee pods on the environment, they ask for a more sustainable solution. The industry has introduced and continues to produce coffee pods in innovative and recyclable packaging. In response, significant players in the market, such as Nespresso S.A., are introducing initiatives to recycle the coffee pods used by its customers. The recycling program is planned according to the customer’s convenience and includes drop-off points for used pods in its specialized coffee boutiques or at flower stores near the customers.

Furthermore, the market leaders and raw material providers have developed biodegradable capsules such as Capsul’in and Dutch coffee roaster Peeze, which are compatible with coffee-making machines. The sustainably packaged coffee pods are a positive indicator for the global market.

Coffee Pods Market Restraints

Availability of Substitutes

The market has various substitutes for coffee pods and for consumers who want a sustainable solution. Customers looking for a less harmful alternative choose coffee beans or coffee pods made from fiber. Ground coffee machines and disposable coffee cups are substitutes for plastic or aluminum coffee capsules that hurt the environment. Access to substitutes may hamper the growth of the global market.

Coffee Pods Market Opportunity

Specialty Coffee Adding Value to Market

The introduction of specialty coffee capsules is an ongoing trend in the single-serve market. This is a massive opportunity for the coffee pods market to scale this specific segment of the global market rapidly. For instance, Nespresso recently launched a program, ‘Reviving Origins,’ which promises to deliver specialty coffees from historic coffee-producing regions. However, it is not yet a developed and small market where manufacturers can take advantage of the market as early movers. This allows market players to open the market and popularise specialty coffee pods of different origins and flavors.

Regional Analysis

The global coffee pods market analysis is conducted in North America, Europe, Asia-Pacific, the Middle East and Africa, and Latin America.

Europe Dominates the Global Market

Europe is the most significant market shareholder and is estimated to grow at a CAGR of 6.7% over the forecast period. France, Belgium, and the Netherlands dominate the coffee pods market, accounting for a considerable share of global coffee consumption. It is estimated that Europe will contribute 37% to the growth of the worldwide coffee pods market during the forecast period. Retail expansion in Europe is driven by specialty and organized retail establishments that meet consumer demand for single-serve pods and capsules due to their convenience and diversity. Fair-trade and organic coffee are becoming more popular in Germany, Italy, and Belgium, offering green coffee exporters great potential. Premium coffees are in demand in the region, boosting market expansion.

In addition, Nespresso (Nestlé), Tassimo (Jacobs Douwe Egberts), and Lavazza are some of the major players in the European market. There is a strong focus on sustainable packaging solutions. Also, premiumization and the demand for specialty coffee are significant trends.

North America is estimated to grow at a CAGR of 7.1% over the forecast period. , led by the United States. The ease of coffee pods is driving demand in North America. U.S. coffee pod use has decreased due to concerns about plastic waste and a preference for freshly brewed specialty coffee in cafés, but the area still dominates the market. The region's economic expansion can be ascribed to the presence of affluent consumers with substantial disposable incomes, a robust coffee culture, and the widespread use of single-serve coffee machines.

Furthermore, the convenience and assortment provided by coffee pods are well-suited to the fast-paced lifestyle of North American consumers. The market is dominated by prominent brands such as Keurig Dr Pepper, Nestlé's Nespresso, and JAB Holdings (which includes brands including Peet's Coffee and Caribou Coffee). Companies are increasingly introducing recyclable and compostable pods in response to environmental concerns, indicating a growing trend toward sustainability.

The Asia-Pacific coffee pod market is undergoing significant expansion due to urbanization, increasing disposable incomes, and the increase of the middle class. Japan, South Korea, China, and Australia are prominent markets in the region. Well-known international companies are increasing their influence, while domestic participants are increasingly joining the market to meet the preferences of specific areas. The current market is witnessing a convergence of Western coffee culture and local preferences, increasing the desire for high-quality, specialized coffee pods.

Segmental Analysis

The global coffee pods market is segmented based on form, intensity, and distribution channels.

The market is further segmented by form into Pods (Soft Pods), Capsules (Hard Pods), and Sachets.

Hard pods dominate the global coffee pods market in the form segment, accounting for over 60% of the market share in 2023. They contain powdered coffee powder in cylindrical vacuum-sealed containers composed of plastic and aluminum foil, typically made of the latter. These capsules are utilized to brew coffee using automatic coffee appliances. They are intended to provide consumers with convenience and a precisely measured serving of coffee. The market for hard pods is anticipated to expand due to rising consumer preference for them, fueled by the convenience and health advantages they offer. Manufacturers are introducing novel coffee capsules to satisfy consumer preferences and improve the experience of consuming coffee.

Pods, also known as soft pods, are pre-packaged portions of coffee that require infusion in hot water to become consumable. They operate similarly to tea bags, albeit with distinct functional distinctions. These capsules are inserted into pod holders within coffee machines to prepare coffee. Manufacturers have developed unique soft pod products to provide consumers with various coffee choices. The escalating consumer interest in soft pods' health advantages and convenience propels their demand. Innovative soft capsule products are the focus of manufacturers' efforts to satisfy consumer preferences and improve the coffee-drinking experience.

Sachets, an alternative packaging option for single-serve coffee, are an additional variety of coffee capsules. Although firm and soft pods are the prevailing options, sachets offer an alternative packaging solution that caters to consumers seeking portability and convenience when consuming coffee. Increasing urbanization and demand for convenient food and beverage items are two factors that contribute to the expansion of the sachets segment of the coffee pod industry. Sachets provide a practical and effortless alternative for individuals searching for coffee solutions while on the move.

The market is further segmented by Intensity into Light Roast, Medium Roast, and Dark Roast.

The intensity segment of the global coffee pods market is dominated by Medium Roast, which is anticipated to experience a compound annual growth rate (CAGR) of 6 to 7 percent during the forecast period. The mild Roast coffee capsules possess a well-balanced flavor profile characterized by mild acidity and body. These moderately roasted coffee capsules offer a well-rounded, rich flavor that a wide range of coffee enthusiasts enjoy. The popularity of medium roast coffee is attributed to its adaptability and capacity to emphasize the flavors of the beans. People who prefer a balanced flavor and a classic coffee taste are fond of medium-roast coffee capsules. The smoothness and approachability of medium roast coffee make it a popular choice for coffee capsules.

Light roast coffee pods have a lighter color and softer flavor. These coffee pods preserve coffee bean flavor by roasting them briefly. Light roast coffee has more acidity and fruity or flowery aromas, appealing to delicate coffee drinkers. Consumers want brighter, more nuanced coffee, so they choose light roast pods. Light roast coffee is famous among specialty coffee drinkers who value distinct coffee bean properties.

Dark Roast coffee pods have a rich, deep flavor profile with low acidity and a strong, robust taste. Longer roasting gives these coffee pods a dark hue and rich, smokey flavor. Dark roast coffee is popular with coffee drinkers who like a more pungent taste. Coffee lovers who want a robust flavor choose dark roast coffee pods. Dark roast coffee is famous among full-bodied coffee drinkers because it tastes rich and powerful.

The market is further segmented by Distribution Channel into B2B, B2C (Store Based Retail (Hypermarket and Supermarket, Convenience Stores, Specialty Retail Stores), and Online Retail).

The global coffee pods market is anticipated to be dominated by the B2B distribution channel or business-to-business during the forecast period, and it held the largest market share in 2023. The B2B (Business-to-Business) segment of the coffee pods market is marketed to organizations such as hotels, restaurants, and offices, which purchase in bulk for commercial purposes. In business-to-business agreements, manufacturers or suppliers sell coffee pods directly to enterprises. The B2B distribution channel guarantees a consistent supply of coffee pods to business enterprises. This category is designed to accommodate the requirements of businesses that wish to provide exceptional coffee to their employees and clients.

The coffee pod market's business-to-consumer (B2C) segment involves direct sales from producers or retailers to individuals for personal use. Business-to-consumer transactions target home coffee pod buyers, giving convenience and various solutions to fit consumer preferences. Reaching coffee enthusiasts, households, and individuals seeking convenient, high-quality coffee solutions requires the B2C distribution channel. This section makes coffee pods accessible through retail, internet, and specialty stores.

Recent Developments

• March 2024 - Keurig recently launched a new product line called K-Rounds, which consists of compostable coffee pods. They have also introduced a new coffee machine named Alta. The K-Rounds are capsules constructed from plant-based materials and have a cellulose coating that is totally compostable.