Coffee Pods and Capsules Market

The global coffee pods and capsules market is expected to register a notable growth rate during the forecast period. The increasing consumption of coffee in Asia-Pacific and rising use of capsule coffee machines are the major factors driving market growth. The rising adoption of innovative products is expected to create new opportunities for the vendors active in the global market. However, the high prices of coffee capsules and pods is restricting the growth of the market. The major challenge faced by the market players is limited consumer awareness and adoption in developing nations.

Capsule coffee machines are gaining popularity among various end users as they are easy and convenient to use. Such machines are similar to espresso coffee machines and offer high-quality coffee. The maintenance required for capsule coffee machines is less as compared to espresso coffee machines due to its hassle-free functionality. These machines are highly efficient units and are compact and lightweight. Additionally, the single-serve capsule coffee machines are eco-friendly as they are available with automatic power-off functions, which limit power consumption. Owing to such benefits, the use of these machines is increasing in small offices, cafés, cafeterias, households, schools and colleges, retail stores, hotels, and other places providing high-quality coffee. As per MRFR analysis, the global capsule coffee machines market is expected to register a CAGR of 7.86% during the forecast period of 2019 to 2025.The increasing use of capsule coffee machines is, therefore, expected to drive the demand for coffee pods and capsules during the review period.

Rising consumer demand for innovative and healthy products such as flavored coffee capsules, high-grade coffee products, and functional beverages is encouraging coffee pod and capsule manufacturers to introduce innovative products. Growing consumer awareness about health and wellness has increased the demand for functional beverages. Consumers are inclined toward beverages that aid in improving certain bodily functions. This growing trend for functional beverages has widened the scope for functional coffee capsules, which, in turn, is catalyzing the demand for coffee pods and capsules. Manufacturers of coffee and coffee pods and capsules are, therefore, focusing on addressing the health concerns of consumers.

In the current market scenario, coffee pod and capsule manufacturers offer products compatible with their own capsule coffee machines, which limits the product choices for customers. For instance, Nestlé capsules are only compatible with Nescafé Dolce Gusto machines. Hence, the launch of coffee pods and capsules compatible with capsule coffee machines of any brand is expected to render the market lucrative as it would allow customers to use their preferred coffee capsule brands with a single machine. Hence, the launch of innovative coffee products and coffee pods and capsules is expected to pave the way for new growth avenues for the players active in the global market.

Coffee capsules are highly priced due to the cost of packaging, single-serve use, need for a high level of purity, and fluctuating raw material prices. To maintain the quality of coffee packed in capsules or pods, the filled capsules are packaged in aseptic conditions to avoid contamination. Moreover, the coffee beans are finely ground while maintaining a high level of purity, adding to the overall production costs of coffee capsules and pods. The adoption of biodegradable materials for the preformed cups is also a crucial factor impacting the cost of coffee capsules and pods.

Coffee is one of the most highly traded commodities in the world and the prices of the same are volatile. The consumption of coffee is rising rapidly in coffee-producing and non-producing countries. However, there is a growing concern for the lack of supply to meet the growing demand for coffee. Fluctuations in climatic conditions can affect the yield of coffee, which influences the overall price. High temperatures often lead to the increasing spread of plant disease known as coffee rust or la roya, caused by a fungus that attacks the leaf and destroys the branches and the coffee cherry. Such diseases, pests, and defects hamper the supply of coffee in the market, creating a supply-demand gap which adds to the total price of coffee beans and, consequently, the price of coffee capsules. The following figure depicts the fluctuations in the ICO’s indicator prices for coffee in 2019.

Thus, the fluctuating prices of coffee beans have a negative impact on the already high-priced coffee capsules, which restricts their consumption. As a result, the sales of coffee pods and capsules are expected to be hampered which can restrain the growth of the global coffee pods and capsules market.

Global coffee consumption is increasing; however, the adoption of coffee pods and capsules is comparatively low in developing nations. Even though Asia-Pacific is a production hub for coffee, the majority of the coffee harvested in the region is exported to the US and Italy where it is filled in capsules or pods. Indonesia, Vietnam, East Timor, Laos, Myanmar, the Philippines, and Thailand are amongst the major coffee-producing countries in Asia-Pacific. However, the rate of adoption of coffee pods and capsules in these countries is low as compared to North America and Europe. Low availability, the limited presence of market players in the rural areas, and high prices of coffee capsules are the major factors responsible for the lack of awareness and adoption of coffee capsules and pods in developing nations. To sustain their positions in the growing market, manufacturers of coffee pods and capsules must overcome these challenges by focusing on marketing strategies and introducing products at affordable prices for the growing middle-class consumer group.