Coffee pods came into existence with the idea to ease the process of preparing a single cup of coffee, as each pod helps brew enough coffee for a single serve. 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 an increase in demand for convenience-based products propel coffee pods market growth. Coffee pods ease the process by requiring the consumer to simply insert their desirable flavored capsule or pod in 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.
More and more consumers are noticing a change of lifestyle and demand quality products with varied characteristics and practicality. The vital factors responsible for the increase in the consumption of coffee pods among the consumers are ease of use, speed, convenience, and affordability of coffee machines. The desire of consumers for quality coffee stimulates coffee pod consumption.
The coffee pods market is in the growth stage of its life cycle and is expected to remain in the growth stage during the forecast period. This is because of the different forms such as pods, sachets, and capsules that are available to consumers. It is easy for consumers to use these forms in coffee machines and helps save time for consumers. Even with the presence of these forms in the coffee pods market, the capsule form of coffee pods is projected to dominate the market share.
The single-serve coffee pod is not restricted to pods, capsules, or sachets. Manufacturers are innovating their services by providing add-ons for better consumer experience. Nespresso, a leading player, offers its customers complimentary products, including flavors, disposable cups, storage boxes, and bags to store capsules after use.
The increase in the standard of living of people and growing disposable incomes of consumers leads to the growth of the global coffee pods market. The increasing number of working population results in a fast-paced life that demands easy to use products. Consumers expect their day to start with freshly brewed coffee that is similar to the coffee they get at cafes. Coffee pods are providing the ease of brewing a single-serve coffee through machines to its customers, thus allowing them to manage their morning chores. It is not only the working community adding value to the coffee pods market but also the growing coffee chains and hubs that drive the market.
The coffee consumption amongst millennials has increased, and they prefer visiting cafes rather than making a cup of coffee at home. Some prefer flavored coffee, which requires top players to introduce more flavors in coffee pods to suit the choices of their customers. The famous coffee chain Starbucks is located in 75 markets with more than 24,000 stores globally. This represents the demand for great coffee and premium services around the world.
Due to an increase in awareness among the 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 in 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 own specialized coffee boutiques or at flower stores near the customers.
The market leaders and raw material providers have come up with biodegradable capsules such as Capsul’in coffee capsules and Dutch coffee roaster Peeze that are compatible with coffee making machines. The sustainably packaged coffee pods are a positive indicator for the coffee pods market.
The market has various substitutes for the coffee pods and for consumers who want a sustainable solution. A customer looking for a less harmful alternative chooses coffee beans or coffee pods made from fiber. The substitute for plastic or aluminum coffee capsules that have a negative impact on the environment are ground coffee machines and disposable coffee cups. Access to substitutes may hamper the growth of the global coffee pods market.
An ongoing trend in the single-serve market is seen with the introduction of specialty coffee capsules. This is a huge opportunity for the coffee pods market to rapidly scale this specific segment of the global coffee pods market. For instance, Nespresso recently launched a program, ‘Reviving Origins,’ where it promises to deliver specialty coffees from historic coffee-producing regions. However, it is not yet a developed market and is a small market where manufacturers can take advantage of the market as early movers. This brings the chance for market players to open the market and popularise specialty coffee pods of different origin and flavor.
Countries are slowly shifting to urbanization and are witnessing growth in the retail sectors. There are emerging specialty retail stores and organized retail sectors. Europe is considered to be a large market for coffee and accounts for 33% of global coffee consumption, according to the CBI Ministry of Foreign Affairs (Center for Promotion of Imports). European consumers demand more single-serve pods and capsules because of their ease-of-use and the wide variety available at their disposal. The market share for coffee pods in the year 2018 reached the highest level in France with 32%, followed by Belgium and the Netherlands. Countries such as Portugal, the U.K., Italy, and Spain have reported faster growth in acquiring coffee pods market share, according to a report by the CBI Ministry of Foreign Affairs. The use of coffee machines is widespread in the European region and has become increasingly common in the Brazilian and Asian markets.
As displayed in the graph, Europe is the largest consumer for coffee, and incredible growth is noted in Asia-Pacific and South America. The consumers in these two regions are adapting to modern foods and their features that are present in the market. The increase in the disposable income of the individuals in this region allows consumers to afford coffee machines. The change in consumers from utilizing traditional coffee to coffee pods is an essential growth factor for the coffee pods market.
Coffee pods consumption in the U.S. is slowing as consumers have become more stringent when it comes to the use of plastic pods and other materials that harm the environment. The new generation in the U.S. has grown up drinking specialty coffee that is freshly brewed in coffee houses, hubs, and cafes and choose fresh coffee drinks instead of coffee pods.
In terms of the distribution channel of coffee pods, there is an online presence of key players in international markets. Currently, the retail channel holds the largest market share for all the brands in the coffee pods market. There are specialty stores and hypermarkets that make coffee pods accessible to the remotest of consumers. Companies that target premium customers are restricting their sales channels through specialized stores and boutiques that are located in posh spots of the metro cities in the world. The online sales channel for coffee pods is expected to grow in the estimated period as companies are collaborating with e-commerce platforms for exclusive sales of their products.
The major players in the coffee pods market are Nespresso S.A., The Kraft Heinz Company, Nestle S.A., Jacobs Douwe Egberts AU, Dunkin Brands, Inc., Luigi Lavazza S.P.A., Keurig Green Mountain, Inc., Kraft Foods Group, Starbucks Corporation, Coffee Roaster Peeze, Colonna Ltd. and Gloria Jean's Coffees International Pty .Ltd.
To retain their market position, significant players are focusing on introducing new flavors for coffee pods in the market to attract more customers and gain a competitive edge over others. For instance, Starbucks Corporation provides its customers with various flavors like hazelnut, caramel, vanilla, and cinnamon.