And how millennials are involved.
By Jonah Koenigseker, Research Analyst, Euromonitor International
Despite the pervasion of pod machines and pod capsules in retail and marketing campaigns with celebrities, there are several factors negatively impacting sales of the machines and capsules in the US.
The first won’t come as a surprise to the leading companies in the market. For several years now, these companies have been fighting critical press coverage and consumer perception of pod capsules’ negative impact on the environment. Unlike bags of coffee, in which several cups or pots can be made, capsules make a single cup, leaving plastic packaging behind each time. Companies have tried combatting this issue by showing consumers on their websites where they can recycle the pods.
Source: Euromonitor International
One benefit consumers initially found with pod machines was the possibility of personalizing each cup of coffee. However, many other non-pod machines can claim the same functionality at a lower price point. Even espresso machines, which before were much costlier, can be found at big box retailers selling for under $50. There is now mass acceptance of specialized coffee machines, and the demand has led to competition driving the price point lower. Specialization continues to be a trend in the coffee space, and is expected to be one in the future.
At the same time, the convenience of pod machines is no longer as much of a competitive advantage. Many coffee machines can be programmed the night before to have it brewed as one wakes up. With the evolution of the Internet of Things, this type of functionality will be widely prevalent. Many machines can also make smaller pots, even small enough to simply make for a to-go mug. Consumers want to make their own cup of coffee, and companies are willing to oblige. The multi-functionality of these machines allow one person to have their flavor, then make a single cup for a friend or family member who prefers a different brew. In addition to personalization and convenience, consumers are not being wasteful by tossing half a pot or more out each time someone wants a different type of coffee. Appliances making smaller portions is also a trend in slow cookers, rice cookers and other devices.
Price is also a major consideration – both in terms of the machines and pods – for millennials strapped with student loan debt and impending costs that come with starting a family. Pods are relatively expensive when consumers can buy loose coffee or even cheaper readymade drinks from inexpensive fast-food restaurants, which increasingly offer premium coffee drinks.
Some trends would appear to be beneficial to pod companies. Those include smaller dwellings and urbanization. This is true of millennials as well as baby boomers who are downsizing. However, as detailed above, the demands of personalization, convenience and multi-functionality are met by other machines, which are often at lower ticket prices.
For more information and additional insight from Euromonitor International, visit their website.
Jonah Koenigseker is a Research Analyst for Euromonitor International in Chicago. He has a strong background of market research which provides him with a vast experience on several industries across the region.
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