Single Serve Sees Growth in Latin America

The Latin American single serve coffee sector is steadily growing thanks to the
current trend of premiumisation and the ever-growing demand for Western-style coffee among local consumers.

In fact, active growth of the market has been observed since the early 2020s, being driven by urbanisation and a search for convenience. According to data from coffee marketers and independent local analysts, capsule consumption has grown by an average of more than 10 percent per year over the last decade in most of the countries in Latin America. The biggest growth was witnessed during the pandemic. In 2020, per data of major market players, sales of capsule coffee in most countries of the region grew around 45 percent year-on-year, which was the result of new consumer preferences and the consequences of the pandemic. A sharp growth in demand for capsule coffee at that time created conditions for the growth of regional players as well as global majors, most of which have significantly expanded their market share in Latin America since then.

Currently, single serve coffee is positioned as a premium product in the Latin American region, being primarily addressed to younger audiences. Most marketers are aware of these market trends. Some local companies are already investing in this segment, launching capsules compatible with popular machines. However, competition with international giants, which have strong marketing and brand power, remains tough.

As for multinationals, Latin America has attracted the interest of major players, some of which have recently announced plans to establish their own single serve production facilities within the region.

For example, in May of this year, Nestlé announced a new investment of R$500 million (USD $93 million) in the coffee capsule sector in Brazil, with a focus on the Nescafé line. The investment, scheduled to be made by 2028, adds to the plan already announced in 2024 of more than R$1 billion ($187 million). Valéria Pardal, executive director of coffee at Nestlé in Brazil, noted that the objective is to continue investing in the development and expansion of coffee consumption in the country. “When we stop to think about the important role Brazil plays in the world, we are talking about Brazil, the world’s leading producer, the world’s leading exporter of coffee, and the world’s second largest
coffee-consuming market,” she said.

The investment will be directed primarily towards expanding capacity at the Montes Claros factory in Minas Gerais, which produces coffee capsules. The company plans to increase the number of capsule production lines, which started with just two in 2009 and will reach seven.

Furthermore, Nestlé plans to expand its Nescafé Dolce Gusto machine fleet.
Pardal also added that while 35 percent of households in Europe already have a capsule coffee machine, in Brazil that number is only eight percent, indicating significant growth potential. Currently, the facility produces one billion capsules per year and is the only one of its kind in Latin America.
Nestlé is investing in increasing the number of capsule production lines and expanding the number of machines for the Nescafé Dolce Gusto line.

“We believe in Brazil’s potential as a strategic hub for coffee production and
consumption, both at home and abroad. The investments planned through 2028 reinforce our commitment to offering products that will positively impact the entire chain, from farm to consumer,” Pardal explained.

Demand Rises in Other SA Countries

Representatives of major regional retailers also confirm the ever-growing demand for coffee capsules in Brazil. Per a recent report in the Brazilian Super Varejo business paper, there is strong demand for coffee capsules among middle class consumers. An official spokesman of Rede Plus Supermercados,
the Brazilian food retailer, said sales of the category have already grown by 30 percent since the beginning of the current year and are expected to grow by another 30 percent by the end of the current year. The biggest growth is expected during colder months. The expansion of domestic and corporate consumption of coffee pods in Brazil and other regional states in recent
years has encouraged retailers to diversify their product mixes, explore promotional activities, and expand product access.

In addition to Brazil, there is a steady growth in demand for coffee pods in
Argentina — another major regional state. In Argentina, an interest in coffee capsules is being driven by thousands of immigrants who have migrated to this country in recent years (including those from the West) seeking naturalisation and acquisition of citizenship.

Like Brazil, the single serve coffee segment in Argentina demonstrated high growth rates between 2018 and 2022, but in recent years has faced some stagnation.

According to Nestlé’s latest data, capsule coffee accounts for eight percent of the overall coffee consumed in the country.

That creates conditions for more active expansion of local players in this segment, with most of them paying bigger attention to the issues of sustainability.

For example, local company Caffettino, has recently launched the first compostable coffee capsules compatible with Nespresso machines. The company produces its capsules, which are made from renewable biopolymers, specifically potato starch, at its Villa Lynch plant in Buenos Aires province. The  plant’s output is currently estimated at 12,000 capsules per day with the possibility of this doubling within the next several months.

“These capsules represent the perfect balance between sustainability,  functionality, and experience,” explained Christian Faraoni, founding partner of Caffettino.

Global players also have a strong presence in the Argentinian coffee market, particularly in the segment of coffee pods. One of them is Starbucks, which has a strong presence in the country’s main cities. The company recently said there is a “consumer transformation” occurring in Argentina and its coffee market, which also concerns coffee in capsules and the way they are produced.

“We see customers who are much more informed and curious. They ask about the origin, preparation methods, and seek new sensory experiences,” said Soledad Fantuzzi, Starbucks marketing manager in an interview with Argentinian media.

The growth of single serve coffee category can also be seen in another key Latin American coffee market — Colombia. Presently, while the share of the segment in the overall market does not exceed 3-4 percent, most local analysts and producers expect its significant growth in years to come. In recent years, many global marketers have strengthened their positions in the
local market. For example, after 10 years of operations in Colombia, Nespresso expanded its store model to be closer to consumers. That was previously confirmed by Javier Ranjel, the brand’s director in the country.

According to Ranjel, the company’s plan is to be close to the people and create those ties of communication with the end consumer. “We have about 12 operations here. We have three boutiques in Andino and Unicentro, in Bogotá, and in El Tesoro, in Medellín, but our plan is to continue expanding. We also have two small locations in Viva Barranquilla and Buenavista II,” he said. The company hopes that the expansion will contribute to the growth in demand for its coffee in Argentina, including for capsule coffee.

Finally, the demand for capsule coffee is also growing in the USD $600 million coffee market of Chile. This is reflected by a significant increase in the number of new products in the market and the number of manufacturers. An example is Bonafide, a brand with over a century of history, which has recently launched its line of coffee capsules in the country.

Claudia Chaparro, the brand’s product manager said in an interview with the local radio station that the company is putting big hopes on their new product line. “The boom isn’t just about demand; it’s also about technique. We’ve trained each barista to deliver the best possible coffee: controlling the temperature, grind, and every detail that defines a perfect extraction,” Chaparro said.

Bonafide is not expected to be the only Chilean coffee producer expanding into coffee capsules segment, as the same plans are being considered by other local players. For most of them, the main competition in coffee pods segment is Nestlé.

Continued Growth Expected

Most independent analysts believe the Latin American coffee capsules sector has big potential for further growth. According to earlier estimates, in 2024, the level of consumption was only 20,000-22,000 tonnes. Still, they expect the industry will reach around 26,000 tonnes by 2028, with the biggest growth expected to be in such countries as Brazil and Colombia. However, this will depend on the ability of major players to choose the correct strategy to match local culture and habits with the product options.

Still, despite this, the average share of single serve coffee in the overall structure of coffee sales in the region is still varied in the range of 10-12 percent.

While the market is primarily dominated by large global players, such as Nespresso, in recent years the share of local brands – small and medium sized companies – has also increased.

Analysts also expect brands competing within the single serve segment in the region will be focusing on recycling initiatives and the development of compostable products to remain competitive as the importance of environmental issues among local consumers is growing.

Eugene Gerden is an international freelance writer who specialises in covering the global coffee, tea and agricultural industries. He may be reached at [email protected].