Capsules Part 226 May 2016
The growth of the coffee capsule market in the last two decades has been meteoric. Nespresso presciently identified the potential of the market and was the first global player to dedicate the R&D and marketing resources to exploit that potential. The numbers are now astonishing with Nespresso selling 6 billion capsules last year.
The U.S. market is dominated by K-Cup, the American Nespresso equivalent and the signature product of Keurig Green Mountain, with almost 85% of the market. Discarded K-Cups in 2014 are estimated to be able to circle the Earth by up to 12 times.
The explosion in capsule popularity has seen the inevitable entry into the market by a host of players either utilizing existing Nespresso and compatible capsules or their own dedicated machines and capsules. In some ways it has become a race to the bottom with cheaper machines and cheaper coffee regularly introduced to capture market share still locally dominated by Nespresso.
The Aldi Expressi is probably the best known category killer machine at $89. For those not pronunciation challenged, Vittoria coffee has recently introduced the Espressotoria Capsule Machine. Catch of the Day has it at $89 but you also get 144 capsules. Move over Aldi!
A Nespresso capsule costs 67 cents and typically contains 5.5 grams of ground coffee. (Cafes use about double that amount which might explain why a milk based Nespresso cannot taste like a coffee from your local. ) That price works out to 1000/5.5 x .67 = $122 per kg. A kilo of Espressohead beans is $28 per kg. For an office, the massive saving afforded by fresh beans will quickly offset the higher cost of machinery. Qualitatively, there is little comparison between the two.
While capsules provide a simple and neat solution to a cup of coffee, the discarded capsules inevitably end up in landfill and as they do not decompose, that’s where they stay. Coffee machines that cost $89 do not get repaired when they break but find themselves keeping company with the capsules. Businesses that embrace corporate social responsibility should be aware of the associated sustainability issues. Even the inventor of the K-Cup, John Sylvan, now expresses regret over the popularity of the capsule and their environmental impact.
Coffee capsules may appear to be a cheap solution to the office coffee question but when factoring in consumable and environmental costs, that price needs to be viewed differently.