LONDON - While Keurig and its ubiquitous cups are the more popular coffee capsule brew-at-home (or work) option, it??s Nespresso coffee and its closed system of capsules that prompted Starbucks to announce plans last week to reach for a larger share of the capsule brewing market, estimated to be worth roughly $6 billion annually, the Financial Times reports.
Nestlé??s Nespresso coffee machines, whose capsules generate more than SFr3.5bn ($3.8 billion U.S.) annually, operate on a "locked-in" machine-and-capsule that prevent the use of a rival??s coffee. It??s a luxury coffee brewing segment that Deutsche Bank analyst Jamie Isenwater characterized as "the closest thing to a luxury brand within fast-moving consumer goods," and the reason that Nespresso boutiques generate higher sales densities than Louis Vuitton stores, according to Isenwater. And it??s a phenomenon not lost on Starbucks.
"The premium single-cup segment is the fastest-growing business within the global coffee industry," said Howard Schultz, Starbucks chairman and chief executive, as he unveiled the company??s new Verismo machine last week.
Starbucks began selling Keurig-compatible capsules last year and will continue to do so after Verismo reaches the marketplace, as both target distinct demographics.
Nespresso distinguishes itself from other capsule systems with a delivery system that produces a crema-rich espresso, a desirable, if relatively expensive serving at roughly 60 cents each.
The Nespresso brand has fought off competitors and compatible capsule wannabees with thousands of patents that it staunchly defends in the courts.
Data consultancy Euromonitor projects the upscale coffee market to be worth $8.5 billion within five years, a reason that Nespresso is slowly seeing its robust sales slowing (but just barely) to competition. 2006 was the sixth consecutive year of 30% sales growth for the company, with 2010 year-on-year sales growth coming in "above 20%," while last year it was "around" 20%.
Verismo is expected to be available by the winter holiday season.