The years of rapid growth of the North American coffee pod market are over and by 2019, North America will be the slowest-growing pod region of all, Euromonitor beverage analyst, Matthew Barry, said.
Between 2011 and 2016, the North American coffee pod market quadrupled in size, reaching $5.7bn in annual sales. Euromonitor projects that the 82% annual growth rate the coffee pod market once experienced in 2012 will fall to 6% by 2019.
Keurig is the hindrance
“While much of this has to do with market maturity, there is another factor playing a major role: the supremacy of the Keurig system,” Matthew Barry said.
North America is the only market where Keurig dominates instead of Nestlé or other brands, which account for 1% of coffee pod system sales.
Its parent company, Keurig Green Mountain (KGM), has maintained its near control of the US and Canadian coffee pod markets, which has been detrimental to the category as a whole, keeping prices high and limiting consumer choice, Barry explained.
A liter of coffee brewed from pods is six times more expensive than a liter brewed from standard ground in North America, compared to four times in Australasia and just two times in Western Europe, according to Euromonitor.
“This disparity strongly suggests that there is still a base of consumers who are being priced out of the category,” Barry said.
Due to Keurig’s dominance, American and Canadian coffee pod consumers are not getting full access to newer, more advanced, and less expensive coffee pod systems such as Lavazza’s extension to the Modo Mio system, Jolie.
“It is doubtful most consumers will ever hear about it [Jolie],” Barry said. “Presumably there are consumers who might be interested in purchasing a machine, but most will never get the chance to because of North America’s market structure.”
Unmet market potential
Even with the rapid expansion of the coffee pod market in North America, household penetration of pods falls well below the levels in Western Europe – 9% of household coffee in the US came from pods compared to more than 30% in France and 20% in Spain.
“It would be easy to blame the slowdown in North America purely on a maturing market,” Barry said. “While that is of course part of it, it cannot be the only factor because of the evidence that indicates unmet potential still does exists.”
One option is to attract a group of consumers that had been previously avoiding the coffee pod category, according to Barry.
“The most promising is probably environmentally-minded consumers who have avoided the category because of the amount of waste it generates,” he said.