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Single Cup Coffee...
Taste & Choice will Grow the Market

By Wes Dehn

Single cup pod brewed coffee is a concept whose time has clearly arrived. Both the large national branded coffee companies and national or regional specialty roasters are introducing product lines of pod coffees. Several retail brewer manufacturers, including Black & Decker, Mr. Coffee, and Krups have introduced pod brewers and others will follow in coming months. Commercial brewer manufacturers, including Bunn-O-Matic, Newco and Grindmaster, have introduced pod coffee and tea brewers for office and foodservice applications.

These introductions represent large investments in a new coffee market in North America. How is this investment going to turn into success and growth for the industry? What will make coffee and tea consumers switch to pod brewed products, and more importantly, what will tempt these consumers to consume more of the products we produce?

What Can We Learn from the Netherlands Experience?
Most of us in the coffee industry were somewhat amazed by the speed of growth in single cup pod-brewed coffee in the Netherlands during the early 2000’s. Visiting the Netherlands, one could observe coffee producers adding pod making equipment on a constant basis. In the beginning, grocers devoted a portion of one shelf to one or two brands of single cup coffee pods. Retail space quickly expanded. By the end of 2003, eight foot wide coffee pod sections containing three to six branded products were common in retail grocery outlets. And if you were to visit an Amsterdam grocer on a Monday morning, you would be lucky to see any product remaining on store shelves.

One leading retail grocer reported that they had seen the entire coffee market shift, with single cup pod coffees now approaching 40% of the total in-home market. This is a phenomenal shift in a large market seldom seen in the coffee industry. What fueled this growth and transformation? Marketing groups in the Netherlands report they isolated three key factors: choice, convenience and improved taste. Those of us in the North American specialty coffee business readily understand these first two growth factors, but hesitated to accept that the taste of the pod coffees offered in Northern Europe would drive increased volume. However, a closer look at this market reveals that many consumers switched from instant reeze dried and lower grade brick pack coffees to pod coffees. Tastings of these coffee offerings in the Amsterdam market reveal that the pod coffees are indeed the comparative taste winner.

Market Research in North America
Java Trading Co. began its development efforts toward what is now emerging as the single cup pod market in 2000 when it joined separate coffee brewer development efforts with Bunn-O-Matic, Newco and Grindmaster. Significant market research efforts were undertaken as part of these early efforts. Key questions were “what would interest users in single cup coffees?” and “what were the perceived key advantages which should guide development efforts?” Focus groups were gathered in statistically significant numbers in the U.S., spanning the West Coast, Midwest and the East Coast. The results were revealing then, and can guide us now.

When asked if or why this concept would be appealing, 50% of the respondents answered that two primary reasons would drive their interest. First, there was the belief that “this kind of a product would fit my lifestyle.” It would be fresh, fast and easy to make. It was the second reason that was more notable: the belief that single cup pod brewing would produce the best tasting…the perfect cup of coffee, “fresh”, “flavorful” and “robust”.

The potential of this market is linked to more than “no measuring, no filters, no staleness, no carafe, no grounds, no waste” as one newspaper writer recently stated. It is all these things, but it is also overwhelmingly “better taste.” While the first benefits are obvious, those of us in the coffee industry should pay careful attention to the taste of the products we deliver if we are to maximize the potential market impact as pod-brewed single cup coffee is introduced.

From all of the consumer research and commercial testing, one fact emerged: this is an enormous opportunity for market growth! In the “at-home” sector, consumers indicated they would increase their expected consumption per household by an average of almost one cup per day! This is the outcome of “my choice -- my coffee”, “fresh and fast” and “better taste.” Further, testing has now shown that if the concepts of “choice” and “taste” are correctly combined when single cup pod-brewed coffee is introduced into offices, the number of cups consumed per location can be increased by 30-50%. Both results show potentially greater growth than any previous opportunity most of us have seen in the coffee industry.

How to Grow the Market
Some of the important market drivers are just a natural outcome of the market. “One cup” and “fast & fresh” are obvious benefits. The simple emergence of single cup pod-brewed coffees and teas will create a certain amount of growth. However, how we in this industry implement our entrée into this market can determine both the ultimate size and certainly the rate of growth toward this potential. The varieties of coffees and teas we offer, and the qualities of products we offer to deliver the “ideal cup” are key factors we can control. The question before us is, “how can we deliver on consumer expectations to achieve these results?”

Gourmet Choice
Initial market tests have shown that the range of our product lines can influence the level of increase in consumption. This should really not surprise us. While we have seen a relatively flat overall coffee market, we have all watched the trend toward gourmet coffees and teas. Consumers are increasingly flocking to coffee houses across North America, where they are constantly exposed to large selections of gourmet varieties and blends. Gourmet variety is part of the “ideal cup” expected from single cup pod-brewed coffees and teas.

Coffees offered should include estate coffees, popular varieties and quality blends consumers prefer. Flavored coffees are now a part of this mix, providing they have as their basis both quality coffees and quality flavorings. Many have discovered that pod-brewed teas are an important part of the mix, if the pod brewer used offers an effective tea brewing cycle, and that the tea pods themselves contain high quality teas. The expectations surrounding the concept of the “ideal cup” have moved beyond the more traditional mixture of “light roast” and “dark roast” coffees. If we are going to fully capture the single cup market opportunity, we should develop product lines with this trend in mind.

Taste
The taste of the single cup coffees and teas we offer is influenced by several factors. It is of course unlikely that bad tasting water will produce great tasting beverages. Pod brewing techniques can dramatically affect taste. Is hot water evenly dispersed through the coffee or tea pod? Are the brew cycles designed for optimal brewing? Is the water temperature precisely controlled from the first ounce to the final once of the brew cycle? Is there absolute consistency between the first, the second, the third or the fourth cup of consecutively brewed beverage? As we offer or recommend pod brewers, we should take care that these factors are adequately addressed in the brewer design so that our products will result in the best tasting coffee and tea in the cup.

But the pod products will themselves dramatically affect the quality of the taste of the brewed beverages. Pod quality is therefore vital to our success. Let’s examine four factors that can influence the quality, or taste in the cup of the products we offer:

The making of a single cup coffee pod.
Pod Engineering and Design
Consider establishing two goals when launching the process of developing the coffee and tea pods you intended to offer. First, set a goal to make the taste in the cup from pod brewing to be true to the expected taste in the cup for that same product using traditional brewing techniques. Sumatra Madheling pod coffee should taste like your Sumatra drip brewed coffee; citrus green pod-brewed teas should taste like citrus green steeped teas, etc. Second, challenge yourselves to develop your pod coffees and teas so that they are equal or better in taste than their drip brewed counterparts.

Achieving these results requires far more effort than commonly assumed. Simply repeating the normal “recipes” offered in other packaging forms, grinding, putting the coffees in the shape of a pod, and enclosing them in filter paper will not achieve the two goals described above. Pod brewing is, after all, a different technique than drip brewing. The grind of pod packed coffees is different for different coffees. Developing a variety of different coffee products requires extensive experimentation for each coffee. Through this process, individual grind settings will be discovered on the path to the achievement of a “true” tasting and great tasting cup for each variety. The level of compaction (“hardness”) of the pod will need to be individually determined for each product developed.

What may be most surprising is that the way coffee is roasted and the actual composition of non-varietal blends may themselves need to be re-evaluated and specialized for pod coffees. The characteristics of different coffee bean varieties react differently in pod brewing cycles than when drip brewed. Only through a careful, though sometimes arduous, development process can these subtleties be discovered, and the best tasting cup actually achieved with pod brewing.

Pod Manufacturing
Naturally, if we take this level of care to develop our pod products, the exact specifications must be duplicated during pod manufacturing. We at Java Trading went through an extensive process of evaluating the pod making equipment available today. While we found two to three competent suppliers, we ultimately chose pod machines offered by IMA (Industria Macchine Automatiche, Bologna). IMA is a long-time leading supplier of tea packaging equipment. Their precision engineering and manufacturing history demonstrate an overall capability to design, deliver and continue to enhance a line of single cup pod making machinery. After the installation of several machines, we have not been disappointed.

A key consideration should be the ability to produce pods with absolute precision in controlling coffee grind, weight, and pressure, since these elements will affect the taste of the products offered. The pod manufacturing process must not only deliver the best possible taste, but each cup, each variety, must be consistent, cup-by-cup, and month-by month.

Taste and Freshness in Pod Packaging
We all know that oxygen and time are primary enemies to the ultimate taste in the cup. Production techniques must minimize or eliminate oxygen. IMA equipment produces pods in a controlled nitrogen atmosphere, without reliance on nitrogen flushing after production. Further, this atmosphere is temperature controlled, so that the pods produced at the beginning of a shift will taste the same as those at the end of a production shift. But our examination of freshness should not end when we place our products in cases for shipment.

Since choice is one of the foundations of the single cup market, we must examine the implications of allowing users to make coffee choices over extended periods of time while protecting freshness and taste. Having multiple varieties available for use requires that each coffee pod be protected from oxygen until use. Certainly in office and foodservice applications few would argue that each pod must be individually sealed and packed in a nitrogen environment until use. But also consider in-home use. Market studies show that households with two or more coffee drinkers are most likely to become early adapters of single cup pod-brewed coffees and teas. While most will likely have two regular “favorites,” they will also be inclined to have “occasional use” coffees and teas, as well as “guest” varieties, which may include flavored and decaf beverages. If coffee pods are not individually protected, multiple bags of unwrapped pods will be exposed to oxygen for extended periods. In these circumstances, taste and freshness will have been sacrificed.

We All Start with Green Coffee and Tea Leaves
In the saying “you can’t make a silk purse out of a sow’s ear.” This principle applies to pod-brewed coffees and teas even more than to the other versions of the same products we currently deliver. High density, high grade Arabica beans grown at higher altitudes reap significant taste benefits in pod-brewed coffees. Similarly, hand picked tea leaves, properly processed and screened, will distinguish themselves in pod-brewed tea. These choices, while increasing our coffee and tea pod costs by only fractions of a cent, can reap large dividends in meeting user expectations that single cup pod-brewed beverages will have a better taste.

In the end, it is by paying careful attention to the way we develop and deliver single cup pod-brewed beverages that we will be able to meet the often-voiced expectation of prospective consumers that “these coffees and teas should deliver an ideal cup.” Together, we can grow our industry while we achieve the hope of one early user, who said, “this can be a simple way to make my day better.”

Wes Dehn is in charge of corporate development at Java Trading, Renton, WA. Tel: (1)(425) 917-2952, E-mail: wesd@javatradingco.com.


Tea & Coffee - January/February, 2005
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