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The European Retail InvasionCopyright 2004 Brian Martell Those who attended the 2004 SCAA show in Atlanta will no doubt have seen the new wave of retail coffee invading America from Europe. Mixed in between the specialty green coffees, the exotic syrups, the organic and Fair Trade purveyors will be what the North American industry sees as the new wave of coffee to hit the retail market…pods. Pods have been around for a while, used mostly in foodservice espresso applications to take the guess work out of portion and pressure application by inexperienced baristas. But for the past couple of years, they have found a home in the kitchens of Europe as more and more Europeans flock to their grocery stores to buy the one brew, one cup coffee. Philips of The Netherlands has sold over 2 million brewers in the last couple of years and has plans to sell at least 1 million brewers a year in North America. Other retail coffee equipment companies have invested heavily into the new trend, notably Salton, with their privately labeled machine for Melitta, as well as Saeco with their own branded machine. While the idea is European, the coffee roasters in the retail field see this as a turf war, with the North American Titans lining up with coffee competition to the likes of Melitta of Germany or Illy Caffè of Italy. Sara Lee (Douwe Egberts), Proctor and Gamble (Folgers), and Altria, formally know as Philip Morris (Kraft) all have raced down the marketing speedway to promote their own offerings in retail outlets. In a marketing coup, Amazon.com has offered a pre-launch on one brand of pods through their Kitchen and Housewares department. Melitta has targeted Target Stores for their product, which has been available for several months now. The demographics that make this phenomenon so popular is the fact that the home market used to be a place where you could brew a full pot of coffee and it would get consumed, eventually. Now, the advent of empty or close to empty nests, means that most people don’t want to bother making a full pot of coffee. Further, people have become less tolerant of bad coffee and are not willing to drink the dregs in the bottom of the pot that was made in the morning and is still lingering there in the afternoon. Enter the pod, which will make one cup at a time with variety in about 30 seconds. With almost instant gratification at hand, many Europeans have turned to this method of making coffee. The big machine manufacturers and roasters are betting heavily that North Americans will follow the same trend. What could be seen as a mercurial rise in the popularity of this system needs to be tempered with a few observations. The total West European market for retail coffee is about 100 million households. As noted previously, this system has been available for several years in this market and penetration is still happening. Trends that have taken off in the European context do not necessarily translate into North American successes. Take the at home beer tap, for example. Heineken and others now have the equivalent of a 20 serving keg that fits into a refrigeration unit made by a European appliance manufacturer which keeps the beer at the right temperature. This unit allows consumers to have an at-home draft tap, similar to what you would find at a pub, but obviously much smaller. Sales seem brisk in Europe, but will it fly to this side of the Atlantic? For the consideration of what will happen in the OCS industry with this technology, we need to look at what exists currently. The two dominant systems for OCS that offer cup-at-a-time cartridge coffees are Flavia and Kuerig. Both use a cartridge that has no over-wrap, whereby the consumer drops the desired coffee selection into the machine and presses a button to get the finished brew. Their advantages are ease of use and variety, with the disadvantage of higher cost. Pods have over-wraps which need to be removed before they are put in the machines. This may be a minor point, but one that has been raised by those observing the procedure who are used to the aforementioned systems. Further, the retail designed machines are not plumbed-in units, but rather have reservoirs needing refilling after 4 servings (or less) making them inappropriate for OCS use. Manufacturers of equipment like Gino Rossi, Grindmaster, et al are launching or have come out with OCS machines that will accept pods for the office market. The issue will be how they perform compared to the established OCS players in the coffee cartridge game and the ultimate cost of these machines as compared with Kuerig and Flavia. With some of the equipment, the inherent problem of capacity will have to be addressed by some of the manufacturers as the tanks run cold quickly. Further, there seems to be no established standard on pod size; there currently exist 44 mm, 47 mm, 55 mm and 60 mm pods on the market. Finally, as with traditional OCS, the potential of buying pods at Big Box Stores while the equipment is on loan with a service provider will be all the more attractive to office staff as the migration of this technology goes from foodservice to retail to OCS (which wasn’t the case with traditional OCS which went from foodservice directly to OCS). The continuing chapters of the pod saga are still in the works, and it will be interesting to see where they go. As with most mass market offerings, the pod can definitely be described in terms of invention being the mother of necessity. Questions or comments? Reach Brian at Brian@heritage-coffee.com |
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