Spotlight Report: Coffee Pods Destined to Commoditisation?

Coffee as a whole is experiencing premiumisation, led by coffee beans and fresh ground coffee pods

The pace of value growth for pods, however, has declined since the introduction of private label and compatible brands. Companies are looking for ways to recreate a value-led category.

Issues surrounding the recyclability of pods, growing consumer interest in single-origin coffee, and increased connectivity, have given brands ways to attain that goal

Realistically, however, these strategies will only resonate with a moderate proportion of consumers, meaning price growth is likely to continue slowing. Despite the prospect of price growth deceleration, fresh ground coffee pods still have room for growth. Pods are not the first category by value sales in nine of the 17 Western European markets, and the equipment rate of European kitchens should continue to grow as the price of machines falls further.

Brands should aim to cannibalise share from other types of coffee and hot drinks, avoiding Nordic countries which are not expected to see coffee pods grow

The best way to conquer new markets is by targeting a broad audience. While a growing number of consumers learn about coffee, the vast majority still cannot tell the difference between robusta and arabica. In that sense, boasting of single origins with higher price points could put off potential users. Dolce Gusto uses this approach, leaving the higher end to its sister brand Nespresso.