Increasing Popularity of Single-serve Coffee in Homes

The use of single-serve coffee solutions is on the rise in households. Coffee pods and capsules, known for their convenience, have gained popularity, especially in North America and Western Europe, as they allow individuals to enjoy a great cup of coffee in the comfort of their homes quickly. Moreover, an increasing number of consumers are investing in coffee machines to recreate the café experience within their own four walls. Market players are responding by introducing coffee pods that are compatible with popular machines like Keurig and Nespresso to cater to this trend.

To meet the growing demand for single-serve coffee, active players in the market are launching various types of coffee and pods, including lattes and cappuccinos, to tap into this highly promising segment. Across supermarkets, drugstores, and select dollar chains nationwide, well-known brands such as Keurig Green Mountain, Starbucks, Folger Coffee Co., and Kraft Heinz Co. are becoming household names.

As of April 2022, Intelligent Blends, a prominent player in the single-serve beverage market, reported that more than 25 million Keurig and K-Cup brewers were already in homes and offices throughout the United States, with millions more being sold every year. The demand for single-serve coffee pods and capsules is substantial across the United States. Consumers in this region tend to prefer products from established brands due to factors like brand recognition and credibility.

For instance, Keurig Green Mountain led the single-cup coffee market in the United States in 2022, with overall sales exceeding USD 1.2 billion. Private labels ranked second in terms of sales, totaling approximately USD 1.1 billion in the same year. Hence, the increasing adoption of single-serve coffee in households is a driving force behind this market's growth in the region.

Rapid Growth of Specialty and Organic Coffee Pods and Capsules

The surge in coffee machine installations and the proliferation of coffee bars across the United States are fueling the demand for coffee capsules and pods. In light of the rapidly evolving coffee shop culture, fresh-ground coffee pods are poised to witness significant growth both in terms of volume and value in the foreseeable future. However, sustainability has become a non-negotiable requirement for consumers and retailers alike, with organic certification being a must.

Discerning consumers, well-versed in the industry, are increasingly seeking traceability throughout the value chain. The emergence of signature blends is a notable trend within the coffee capsule market, involving the careful selection of coffee from diverse origins. These blends cater to specific consumer preferences, emphasizing a harmonious balance and exceptional quality.

Furthermore, health-conscious consumers, particularly those with strong taste preferences, are driving the demand for K-cup pods and capsules from specialty stores. Major coffee chains like Starbucks have been expanding their coffee culture by increasing the number of regional specialty outlets. These expansions not only help meet the demand for specialty coffee among consumers but also bolster the market presence of these players.

For instance, Starbucks has been steadily growing its presence in the United States. According to Starbucks, the number of its stores increased from 15,444 in 2021 to 15,873 by the year 2023. Additionally, the demand for organic food and beverages has experienced substantial growth in recent years.

According to the Organic Trade Association, retail sales of organic beverages, including coffee, reached a value of USD 2 billion in 2021. As a result, the market for organic and specialty coffee is expected to be a driving force during the forecast period. Another noteworthy innovation is the introduction of biocompostable material (PLA) for manufacturing compostable coffee capsules, offering a viable solution to the growing environmental concerns. These innovative, organic, and specialty coffee offerings are anticipated to boost premium coffee and pod sales in the coming years.

Size of the Coffee Pods and Capsules Market in the United States

The coffee pods and capsules market in the United States is projected to experience substantial growth, expanding from USD 8.40 billion in 2023 to USD 10.1 billion by 2028, with a compound annual growth rate (CAGR) of 3.76% during the forecast period from 2023 to 2028.

These coffee pods and capsules are designed to preserve the coffee's freshness and quality as they come prepackaged in sealed containers, protecting the contents from elements such as light, moisture, and air. They have gained popularity among those seeking a flavorful coffee experience without the need for traditional brewing methods, offering a personalized coffee experience with flexibility and customization options. The strong coffee flavor and freshness play a significant role in driving market growth.

Continual advancements in product offerings, such as the introduction of environmentally friendly, biodegradable, and compostable coffee pods, have been driving demand. For instance, in July 2021, NEXE, a Canadian packaging solutions provider, introduced a range of sustainable coffee pods in the United States and Canada. Their fully compostable Espresso pods were made available on nexecoffee.com.

Furthermore, the industry is expanding due to ongoing technological innovations, including the development of sophisticated, user-friendly coffee pod and capsule machines equipped with one-touch operation, programmable settings, auto-shutoff features, and built-in milk frothers. The market also benefits from the ease of access to coffee capsules and pods through structured online and offline retail channels. According to Allegra World Coffee Portal and Reuters, there were approximately 38.4 thousand coffee shops in the United States in 2022.

Additionally, the long-term demand for coffee pods in the country is on the rise due to the convenience they offer. However, as this market for pods and capsules has matured in the United States, it is expected to experience a slowdown in its growth rate during the forecast period. Private-label brands are striving to gain a significant foothold in the U.S. market, driven by the increasing popularity of pod-based, single-serve coffee offered at competitive prices in a growing discount-oriented retail environment.

The main driving force behind the industry is the increasing demand for instant coffee with unique and specialized flavor combinations. Coffee consumption has seen a significant uptick among the general public, primarily due to their busy lifestyles. These factors collectively contribute to the growth of the coffee pods and capsules market in the United States.