The single cup phenomenon is here. The trend is an established fact.  But with its many applications, who knows which ones will win in the end? The concept of single cup is not new, but it seems it is an idea that has reached its time. Let us take a look at the whole picture, leaving out for this purpose the instant coffee entries and stick to the fresh coffee thoroughbreds. And let’s also ignore the traditional full-sized vending machines, single cup models of which came along in the early 1960’s.

On display at the 2004 NAMA show in Chicago were all the entries, but I got the impression that there was much uncertainty, not just among actual coffee service people, but with the manufacturers as well. It’s still too early to know how all this will turn out, but maybe by the time of the NBPA convention in Atlantic City in February, we will get a clearer picture.

I am reminded of Plato's allegory wherein he said there are basically three types of people. First there are the gladiators, the ones down in the pits fighting for their lives. That would stand for the many new single cup machines now doing the same thing – fighting for their lives.

Then there are the concessionaires, the ones who hire and train the gladiators, rent the stadiums, and peddle hot-dogs through the stands. That would be the manufacturers of the pod-making and dispensing machines, hoping to make the right guesses. Some big risks here, but they want to make a buck on the trend.

Then there are the spectators, the vast majority who are perfectly content just to sit in the stands, watching and waiting. These are the OCS operators who are wondering upon which ones they should place their bets. Which horse might be the winner? “Maybe I’ll hedge a bit and go for the Trifecta, and pick the three most likely winners,” say some OCS people.

The concessionaires in this case have paid their “entry fees” by making the machines upon which small fortunes have been invested, and that are still in the running. Then we have other young colts such as Flavia and Kuerig, along with older horses like System Seven, Avalon, Brio and Vend King, small sized vending machines. And some unknown animals will undoubtedly be coming out of the stables that we haven't even seen as yet.

First, let’s do a little analysis, just a brief taste of the variables surrounding this issue. How did we arrive at this point in the business?  After all, twenty years ago there were some 7,000 single cup Vend Kings in Montreal alone, the leading city in that respect. Beyond Montreal there were some mild successes, but hardly a firestorm of desire to switch to single cup from half gallon brewers.

A look at the historical background may be important in understanding how this all came about. This new pod phase of single cup brewing started long ago in Italy, where 99 out of 100 cups of coffee are espresso, which by definition must be made one cup at a time. And consumers didn’t seem to mind the pace at which they made and drank the stuff.

Immigrating to North America, Italians brought their coffee drinking habits with them. The city with which I am most familiar, Toronto, received some 400,000 Italians between 1950 and 1985. Espresso was their thing, and ethnic roasters followed along to capitalize on it, while traditional roasters airily dismissed it because of the small poundage involved. The coffee was over-roasted by North American standards, seeming to the locals to be unfit for human consumption. Besides, a drinker only got enough coffee in a single shot “to fill a hollow tooth.”

North Americans were used to faster action. Classic espresso preparation seemed ridiculously slow by their standards. Nonetheless, gradually, espresso began to gain acceptance among the general population, aided by the move to specialty coffee stores with their almost mystical reverence for espresso based drinks. Eventually espresso crept into better class restaurants, though in many if not most cases with disappointing results in quality.

Busy restaurants have always experienced problems in caring properly for coffee preparation, but espresso was something else again. It was much worse. The problems in training a dishwasher to follow proper standards of preparation became insurmountable to many foodservice people. And, even in quality restaurants charging high food prices, the espresso at the end of the meal was disappointing.

So, “How about a simple pod containing a precise amount of coffee that could brew at the touch of a button,” became an urgent issue. Once such machines did arrive on the market, their convenience gradually began winning the battle, a victory for convenience over quality. And it wasn't long, first in Europe and then in North America, that domestic models of these machines began to appear. And as espresso began converting the masses, coffee roasters started installing small, domestic pod production equipment to meet the demand.

Against this background OCS operators were already getting into single cup brewers through the advent of soft or cup cartridges that brewed a decent cup of North American style coffee and that was, unlike coffee held in air pots or glass bowls, fresh. Not only that, they provided oddball coffee-based flavored drinks one cup at a time, negating the need to make a whole pot of French Vanilla, take a cup, and throw out the rest. This broad variety of drinks, to the surprise of many people, enabled single cup sales to outpace cups consumed through batch brew, not just in dollars but in actual number of cups consumed. Further, here was proof, that given quality and convenience, price was much less a consideration than operators had come to believe.

BUT THERE ARE PROBLEMS!

Kuerig and Flavia were making their mark. The important thing to note here is the concept of CONTROL. Many people miss this aspect of how a company can work its way into a position where it can more easily manage results. In the case of the coffee business, make and patent a machine that no one else has. Configure a single brew cup or soft cartridge that no one else has, and sell the OCS buyer on the idea of exclusivity. Arbitrarily raise prices 2 cents a cup, and “the silence is deafening.” With this kind of control, everyone involved can get good selling prices, and no one seems to mind. For a while everyone in the race makes money – the machine maker, the soft or cup cartridge maker, and the OCS operator lucky enough to cash in on the monopoly.

Enter Adam Smith and the free market. The pressure began building among operators who were not in on the booty, but who recognized the need to do something as their higher volume customers were being lost. Brewer manufacturers, feeling that pressure and responding to the lure of volume equipment sales, leaped for their drawing boards. Many concepts of pod brewers began going on display, building on the European espresso pod concept, each manufacturer nervously wondering what variations among competitors might require some rethinking on their own part.

While the returns are not yet in, it is safe to predict some of the things that will happen as the pod issue matures and the machines to make them become plentiful. Because of the free market competition, prices for both pod machines and pods themselves will find a level well below those of current and soft or cup cartridge models. But how low is low enough to spur pod sales? And how much price cutting will the current soft or cup cartridge suppliers indulge in to protect their sales?

What is that difference in cost that will give the advantage in sales to pods? In other words, will it take 5 cents lower do it, or will it only have to be 2 cents or even less? Assuming the coffee quality to be potentially the same in all these alternatives, and ignoring for the moment the relative machine costs and the difficulties in selling customers on the single cup concept, what are the intrinsic advantages of soft or cup cartridges, if any, over pods that will make a buyer willing to pay the extra? And what will the pitchmen say in selling their method against the others?

For one thing, pods do require the touch of a human hand in opening and placing the naked pod in the holder. That is bound to be a selling point for methods that do not. And a time study might penalize it slightly for the additional second or two that is involved. Ejection of used pods will be an important requirement for them to be equally attractive. Beyond that it will be incumbent upon non-pod venders to justify their higher selling prices.

When the price per unit becomes a big issue in something as subjective as coffee, watch out for the future of quality. The one big virtue of single cup coffee so far is that, through monopolizing the concept, the Kuerig and Flavia people have been able to maintain a certain level of quality – take it or leave it. But when the power to control through exclusivity is lost due to free market forces, watch out for the onslaught of lower quality and lighter weights, the same factors that have in my opinion hurt the image of coffee throughout the years. And be ready for the plethora of used machines flooding the market.

Let us then try to be comfortable in our seats as we watch the horses round the far turn and head for the home stretch. And let’s hope we haven't gambled the farm on a losing horse.