Coffeemaking Pod Revolution's A Bit Diluted

When single-serve "pod" coffeemakers were introduced in the U.S. two years ago, marketers had robust hopes for the futuristic machines and their circular packets of joe. But despite strong ad spending, sales are mild for brands such as Senseo, Tassimo, Flavia and their ilk.

"It seemed like an obvious winning product because it's so big in Europe. But there are issues in the U.S.," said David Lockwood, director of research reports at Mintel International, Chicago.

Why are sales so cold? Research from NPD Group indicates pod customers are dissatisfied with unreliable machines, pricey refills, the limited selection of blends, and lack of availability of the pods. Since many refills are not compatible with other machines, and supermarket shelf space is so competitive, it's hard to find a wide selection of pod brands in grocery stores.

On top of all that, many consumers complain the beverages violate the creed of American coffee consumption: the drinks are too cold and the serving sizes too small. (Do marketers not realize Americans like things super hot and extra grande?)



According to TNS Media Intelligence, Philips spent $25.3 million from January 2005 through August 2006 to market the Senseo appliance, while Braun spent $15 million on the Tassimo Hot Beverage system during that same time period. These figures are likely to increase after this year's fourth-quarter holiday push.

At this time of year, ads for the appliances are as ubiquitous as inflatable Grinches, and several Web sites have sprouted to sell the machines and their pods. Tassimo even contracted with Harris International to do a survey on the issue of regifting, a common occurrence among the givers and recipients of kitchen appliances. In fact, the NPD study found that 17 percent of single-serve machines were either returned, thrown out, or given away.

While the appliance makers are putting out ads for the machines, food marketers are trying to enlighten consumers to the actual beverages, which come in plastic "pods" that are about the size of a single-serve package of cream cheese. Mintel found that ad spending in 2005 came to about $100 million for just two of the pod brands, Sara Lee Corp.'s Senseo and Kraft Foods' Tassimo.

"The year it started, 2004, Senseo had $1.7 million in sales. In 2005, it went to $10.3 million, which sounds like a great bump, but for the amount of marketing they put into it, it would need to go to $100 million this year to be considered a success," Lockwood says.

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