Leading coffee chain Starbucks is entering the single-serve coffee market with the introduction of its new home-brewing, single-cup coffee machine called Verismo.
The Verismo machine will be sold online and in Starbucks cafes in September, with external retail locations added later this year.
Single-serve coffee makers use K-Cups, which are small, sealed plastic pods that contain coffee plus a filter. The patent on K-Cup technology was held by Vermont-based Green Mountain Coffee Roasters Inc., but the patent has since expired.
One-Cup Coffee Market
Less than a year ago, Starbucks signed a deal to begin making coffee for Green Mountain’s Keurig machines. Starbucks CEO Howard Schultz told The Associated Press this relationship will continue.
While the Green Mountain Keurig machines offer only brewed coffee, the new Starbucks Verismo also makes espressos and lattes, and should attract a different type of customer.
Since entering into the deal, Starbucks has captured 15% of the market. Before the partnership with Green Mountain, Starbucks made coffee for Kraft Foods Inc.’s Tassimo machine.
The coffee chain leader plans to launch a multimillion-dollar marketing campaign to market the Verismo. In 2011, worldwide $8 billion in single-serve machines and cups were sold. In the US alone, sales grew 143%.
Currently, one in three coffee makers being sold is a single-serve machine.
Single-Serve Leader: Green Mountain
Green Mountain is the current leader in the single-serve market. In 2006, Green Mountain became a pioneer in the market after it acquired the Keurig machine. After the company’s patent on K-cups expired in September, copycat pods are now on the market.
Since Starbucks announced its plans in March to launch the single-serve Verismo machine, Green Mountain stock has lost 51% of its value.
The Keurig line has 200 coffees, teas and other drinks plus some 30 brands, and Green Mountain says it expects sales to grow by 15%-20% in 2013.
Meanwhile, Green Mountain is being investigated by the Securities and Exchange Commission.
Key Statistics - Global Hot Drinks Industry (source: MarketLine)
- The world hot drinks market is forecast to be worth $105 billion in 2015 for a 20.5% increase since 2010.
- The largest segment of the global hot drinks market is coffee, which accounts for over 57% of the total market value.
- Among the North American Free Trade Agreement (NAFTA) countries, the US is expected to lead the hot drinks market, with a value of nearly $11 billion predicted for 2014.
- For the five-year period 2010-2015, the hot drinks market in Europe is predicted to accelerate, with a compound annual growth rate of 3.5%. By the end of 2015, the market is expected to have a value of more than $36 billion.