By Martyna Fong, Unit Manager – Packaging, AMI
A pod, or a single serve capsule as I would technically call it, is a phenomenal little thing.
Is it just packaging or is a product? Is it premium or is it value? Is it wasteful or is it resourceful?
I’d asked myself these questions and got increasingly interested in knowing more about opportunities that a capsule format can offer. Three years on, I know a whole lot more.
I’m a professional B2B researcher with expertise in packaging (AMI, Bristol, UK). My interest in single serve capsules resulted in an authoritative market study (commercial/technical angle) and specialist Single Serve Capsules conferences in USA and in Europe.
Changing Supply Chain
Single serve capsules are a dynamic market segment with a complex value chain.
The rigid capsules (metal and plastic) market is estimated at 60 billion units in 2018. While rigid capsules are conventionally associated with metal formats, the popularity of plastic alternatives have largely overtaken the metal ones.
There are several coffee brewing systems available with proprietary capsule designs. Nespresso and Keurig are brands that pioneered the segment and have the highest machine installment rates globally.
Nevertheless, the expiration of their design patents in 2012 brought about disruptive changes in the supply chain. The changes created new opportunities for both end-users and converters to tap into this growing market segment.
On the other hand, the supply chain of capsules is rapidly losing its oligopolistic nature and the former dominance of major suppliers is challenged as the market expands. A more fragmented supply chain affects the overall profit pool and the way consumers make their choices.
Market reach, new channels, and gaining more efficiencies leads to a heightened M&A activity in the segment. The industry is likely to consolidate further, which will lead to withdrawal of some capsule systems in favor of others.
AMI Consulting estimates the volume of all compatible capsules (both plastic and aluminum variants) in 2018 is equivalent to 23% of the single serve capsules market worldwide, driven by Nespresso, K-Cup and Nescafe Dolce Gusto machine penetration in households.
Compatible single serve capsules have now become fully embraced by consumers. They are accepted as good-quality alternatives. Mainstream commercialization of compatible brands has leveraged their need to differentiate and add value.
Quality and shelf impact dictate high barrier specification for capsules. Compatibles formerly serviced with mono-layer PP and PBT capsules are now being re-specified.
High barrier technologies include: co-extrusion thermoforming, co-injection, barrier IML, barrier coatings and barrier compression moulding.
Thermoformed single serve capsules account for nearly 70% of the global plastic capsules demand. The bias towards thermoformed formats has been created with the interlinked success of such systems as Keurig K-Cups in North America and Nescafé Dolce Gusto in Europe. The share of injection moulded capsules has grown versus thermoforming, driven by ‘value’ capsules (low oxygen barrier) that are compatible with Nespresso machines.
This type of capsule is relatively easy to produce and the investment can be easily amortized with quick returns. Consequently, barriers for market entry are much lower than those wishing to cater for high-barrier thermoformed capsules with integrated extrusion.
Additionally, compression moulding technology was recently commercialized for the production of capsules, and is gaining strong supporters in the industry.
With the growing number of capsules in landfills, the industry is under pressure from environmentalists as well as more conscientious consumers.
There is an urgent need to review the materials used for capsules conversion in search of more sustainable options, as well as to explore end-of-life solutions. An all-compostable capsule variant is an end-of-life solution, focused on organic recovery of coffee grounds given that the volume of coffee is much higher than the volume of capsule itself.
The milestone of an all-compostable barrier capsule solution has now been achieved and commercialized. Most of compostable capsules materials are PLA compounds, rather than pure PLA. PLA is the bio-based element in the compound. Compostable capsules are developing market presence as both material science and moulding technologies (injection and co-injection moulding, thermoforming, compression moulding), driven by the increasing sustainability pressures of the capsules industry. Fine-tuning the new material solutions to processing technology delivers best results.