Single Serve—A Demise Told Prematurely

The single serve category may be maturing but that doesn’t mean “the end is near” or that it is even softening. It is simply a new environment and one that includes stiff competition and requires constant smart innovation. The popularity of the two dominant single serve brands has crested and this is being reported as if it were a surprise. It isn’t, that is what happens when you have an innovative product that dominates the market for years going on decades. Whether or not your patents expire (you can create new ones or tweak your old ones) other folks are going to jump in and compete regardless, you just can’t create a multibillion dollar market and share it with one other competitor and expect to be left alone. Some will genuinely innovate on your innovation; some will simply imitate and litigate. Either way, no one should be surprised that there are now several single serve platforms and many more lines of single serve pods that are compatible with the two most popular platforms on the market.

What’s more, there are also “compatible” brewing devices on the shelves of most major retailers (in North America, at least). These appliances are marketed by companies other than the two market leaders but they are nonetheless familiar with coffee and with housewares; they are on familiar terrain and know how to compete. In addition, there are also a few other systems/platforms that have their own proprietary pods, some still open to licensing. It is amazing, actually, that the share of those two dominant founders of the single-serve category hasn’t lost more share more rapidly.

If anyone feels sorry for Keurig or Nespresso, no one seems anxious to say so…and if either company has received flowers or even a note of sympathy for losing, in one case, one half of one percent of the market that they helped to create, for the past six or seven years, they are remaining mum about that as well. But creating and then leading the market in a new way for coffee drinkers to consume one of the world’s most popular beverages is not necessarily the best way to start off a pity party. Especially when your success has not only come at the expense of others but also caused many people a lot of embarrassment: Who saw it coming? Not all of us assumed that people would consume coffee the ways they always had and be unwilling to try something new or to pay over USD $30.00/pound for coffee in a new format simply because it wasn’t messy and made just one cup at a time. Before people were afraid to “waste” coffee (and the grounds all over the kitchen counter were a little annoying)— who knew they’d be much less sensitive about “wasting” money by opting for a brewing system that wasn’t messy and didn’t leave any coffee in the pot to throw out later.

Are SS’s Days Numbered?

 The idea that the single-serve market is somehow ailing, then, because the two dominant brands are showing slowing sales and negative or slowing growth is simply untrue. What is true is that the concept overall is still popular and probably here to stay.

More dubious than the proposition that single-serve’s days are numbered are some of the reasons put forth to explain it. Rather than to point to the obvious cause, widespread competition at every level of the market, some analysts have asserted that coffee drinkers are fed up with the amount of non-recyclable or hard-to-recycle waste that single serve involves. First of all, several of the new competitors are offering pods that are putatively 100 percent recyclable and, in the case of the grounds and paper at issues, compostable.

Another explanation for the as yet unsubstantiated demise of single serve is that the economy has now improved to the point that folks no longer need to stay in and avoid the expense of having a barista prepare their coffee for them. While there may be a net savings in preparing coffee from a pod at home versus having it nmade at a coffeehouse it is difficult to understand how someone concerned about the expense of their morning coffee wouldn’t opt for something a little less than USD $30/pound—like brewing a cup of Folgers?

Finally, it has been postulated that single serve is sick because the platform has been so successful at seducing folks into becoming coffee lovers that they are all migrating out of the category and are now buying their coffee either brewed for them in small roaster/retailer shops or grinding and brewing freshly roasted coffee at home with their Hario pour overs and French Presses. While the super-premium specialty coffee market seems to be healthy as well, no mass migrations have been witnessed from the land of single serve.

The single serve category is not the same as it was five years ago, but it should not be categorized as softening or retreating. Rather, it is maturing: the founders are settling in to a new environment that now includes a healthy degree of competition, but they face that competition with the most experience and brand recognition of any of the players. They are refining their proposition, improving their quality and selection and making sure their current customers have reasons to stick with them while they also ensure that new customers find their proposition appealing as well. Yes, it will be challenging, but just Google “single serve” or check out a shelf at Kmart, Walmart or Bed Bath & Beyond if you remain unconvinced…these retailers don’t give sides of aisles (not shelves, aisles) to dying categories.

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