Coffee and tea have long been popular beverages worldwide, but new single-serve delivery systems hitting the shelves have turned the heat up on these venerable drink segments.
“According to a recent report by the National Coffee Association (NCA), single-serve machines are the second most used coffee equipment in the household, after drip coffee makers,” notes Amy Lester, spokeswoman for Emeryville, Calif.-based Peet’s Coffee & Tea Inc. “Also according to the NCA, 27 percent of U.S. households own a single-cup brewer.”
“Single-cup brewing is becoming the new norm,” affirms Cynthia Hswe, VP of marketing at Portland, Ore.-based Boyd Coffee Co., who cites the same report. “Also, brewer affordability is helping to convert prior traditional-brew consumers, as well as bring in new coffee consumers into the category.”
The main reasons for this trend, according to Lester, are “convenience and variety — the single-serve format offers consumers a way to quickly and easily brew a cup of coffee. By brewing one cup at a time, there are more opportunities to explore different flavors, roasts and varieties.” Hswe similarly sees the “significant increase in sales and shelf space for single-serve products [as] a signal of a shift in coffee and tea consumer behavior towards convenience.” Beyond that, she observes, “Single-serve products also tend to be profitable for retailers, so they’re willing to devote increasing shelf space to them.”
Portsmouth, Va.-based Massimo Zanetti Beverage (MZB) USA performed its own study, which yielded additional insights. “Our research shows single-serve use is driven by personal, experiential and usage occasions — one person desires a single cup that is easy to make and ready in a moment,” explains MZB USA VP of Marketing Brian Kubicki. “Individual preferences concerning brand variety, taste intensity and different flavoring choices are other major factors. Finally, there’s ubiquity — single-serve machines are seemingly everywhere, from a growing percentage of homes and workplaces, breakrooms and offices, to waiting rooms and hotel rooms.”
Manufacturers’ findings are borne out at retail. “We continue to see strong sales in the single-serve and pod offerings,” says Maria Brous, director of media and community relations at Lakeland, Fla.-based Publix Super Markets, which operates 1,102 stores across six Southeastern states. “Customer convenience is driving the category, as customers can each select different flavors of coffee without having to brew an entire pot.”
By now, everyone’s heard of coffee pods, but tea is increasingly being offered in the same format. “In North America, hot tea pods — which carry a much higher price per serving than individual tea bags — continue to increase their share of total retail value and provide a new avenue for value creation in the industry,” writes Anne Bruce on BeverageDaily.com. Such major tea brands as Bigelow, Lipton, Tetley and Twining already offer their product in pod form.
Tea and coffee purveyors are naturally keen to emphasize the quality of such products. “We put a great deal of effort into ensuring our Peet’s K-Cup Packs deliver a full flavor that many do not expect in this format,” observes Lester. “We use the same beans and artisan approach in our Peet’s K-Cup Packs that we do in our bag beans. On average, we put 20 percent more coffee in our Peet’s K-Cup Packs than our leading competitors.”
This July, the company is augmenting its K-Cup Packs collection with full-flavored Sumatra, long a customer favorite, and medium-roast Guatemala San Marcos, a brand-new brew available exclusively in this format. Lester describes the latter as featuring “chocolate-tasting notes.”
“Innovation in single-serve and pod offerings has allowed Starbucks to build its leading position on the K-Cup platform through ongoing product innovation, such as the introduction of single-origin coffees and seasonal coffees, including holiday blends,” notes a representative from Seattle-based beverage behemoth Starbucks.
As well as being used to create hot brews, the pods can deliver cold drinks — the latter particularly desirable as the weather grows warmer. With this knowledge in mind, Starbucks launched Starbucks Sweetened Iced Coffee K-Cup Packs and Tazo Sweetened Ice Tea K-Cup Packs in March. “These new Iced K- Cup Packs are specifically crafted to brew over ice, ensuring the rich, bold iced-coffee and refreshing iced-tea flavors reminiscent of the iced beverages available in Starbucks stores,” the rep says.
Melitta, meanwhile, is adding to its existing line of Café De Europa capsules and bringing out a second line of Melitta branded capsules in four varieties — Classic, Colombian Supreme, Hazelnut Crème, and Euro Dark Roast — in the third quarter of 2015, according to Chris Hillman, VP marketing at Clearwater, Fla.-based Melitta USA.
Along with their contents, the pods themselves are a focus for many consumers and manufacturers, particularly in terms of the items’ eco-friendliness.
“The negative issue associated with single-serve is clearly the waste generated by the billions of cups that are making their way to landfills across the marketplace,” admits Clay P. Dockery, division V P, corporate brands at MZB USA. “All coffee roasters are looking for the best alternative to solve the environmental challenge.”
One major way the industry has addressed the problem is through a 100 percent compostable coffee pod developed by Toronto-based Club Coffee. MZB USA plans to convert its entire portfolio of single-serve coffee pods to the PürPod100 format, which will be introduced first through the company’s Chock full o’Nuts, Hills Bros. Coffee, Kauai Coffee and Segafredo Zanetti brands in the retail, foodservice and online channels.
“Not only is the pod compostable, but the ring is also made with coffee chaff, the skin of the coffee bean, which has previously simply gone into the waste stream,” notes Dockery. “This product will be available in late 2015 across a variety a brands and offered to retailers for their private brands.” Among those also adopting the PürPod100 are Boyd’s Coffee and Indiana-based, family-owned Copper Moon Coffee.
“An added benefit is that our new single pods will also be Organic Fair Trade as well as 100 percent compostable,” notes Copper Moon CEO Brad Gutwein. “We think these new pods will be very appealing to retailers and consumers alike.”
“Innovation in single-serve with the compostable pod will play a significant role in the coffee category,” predicts Dockery. “Many municipalities in the United States have initiated commercial composting, and many more will join in the near future.”
Other manufacturers, however, have made their own contributions to the planet’s environmental health. “Our capsules are, and always have been, recyclable,” points out Melitta’s Hillman.
Promotion and Merchandising
Single-serve coffee and tea products may be on everyone’s lips — and down everyone’s throat — but they still need to be promoted and merchandised to their best advantage to keep sales brisk.
“The majority of our stores have an 8-foot section with single-serve options to include the traditional brands such as Folgers, and we also offer Green Mountain, Starbucks, Publix private label and everything in between,” says Brous. “We often feature/promote our single-serve options in our sales circular.”
“These items should be merchandised by segment type — i.e., mainstream products, premium products, etc., together — and by brand,” advises Melitta VP Sales Ed Mitchell. “The category has become as heavily promoted as cans and bags, with the majority of the volume sold on promotion. Many retailers are promoting these items with bag coffee at a common price point and with pre-packed floor displays.”
“We’ve had great success driving trial with in-store sampling paired with coupons or promotional pricing,” says Boyd’s Hswe. “When people have the opportunity to taste our [eco-friendly] soft-mesh filter product,” which, she explains, enables coffee drinkers to experience the fresh-roasted coffee’s aroma, “they immediately understand its differentiation from the competition, and promotional pricing or coupons encourage them to buy it on the spot. The successful trial then drives repeat purchases.”
“We … focus our promotions for Peet’s K-Cup Packs on the quality and flavor that they deliver,” notes Lester, citing in-store POS that takes that approach to store aisles.
Copper Moon’s Gutwein, meanwhile, believes that “pallet and corrugated shipper promotions containing attractive signage [are] a great way to promote single-serve items.”