Upscale Coffee Makers Drive Segment But Overall It's Flat

Several appliance makers have bowed single-serve coffee makers in recent years. A new study from Port Washington, N.Y.-based NPD Group, however, shows that the premium end of the single-serve coffee market is driving the market, while sliding sales of value brands are keeping the overall market flat.

The study, based on NPD's retail tracking of monthly point-of-sale information from most of the nation's retailers, shows that sales of single-serve makers priced at $100 or more grew by over 90% in the study period.

The average price of a single-serve machine purchased last year was $85 versus $54 in 2004, a 25% increase. The report also suggests the machines are primarily gift purchases. Thirty-six percent of all single-serve coffee machines sales last year were made in December, versus only 22% of drip coffee makers.

The segment has exploded in recent years, following a general increase of coffee products, cafes and niche offerings during the past decade.

Harry Balzer, executive vice president of the consultancy, says that although the in-home coffee market is shrinking because of more convenient out-of-home options, it's so massive that there's room for a broad array of niches.



"Thirty-two percent of all breakfasts include a cup of coffee," he says. "And that's the lowest we've seen it in twenty years. But it is the number-one thing Americans do in the morning; it is so big that it allows for a lot of segmentation. There's enough room for niche business because the frequency of use is so great."

Balzer suggests that closed-coffee, single-serve systems like Tassimo, Senseo, Flavia Fusion and Keurig, which use coffee "pods" and require no cleaning between serves, are vying, in terms of convenience, with the booming coffee bar market. "A machine that merely requires one to insert the pod, add water and put a coffee cup beneath the spout--if consumers believe that it makes their lives easier--will find a place. That's the driving force in all of our consumption: how to make it easier," says Balzer.

Peter Goldman, president of NPD Group's home business unit, says the overall market is flat in single-serve because the lower end of the market has seen negative sales over the past two years. That, he says, is because the premium machines are obtainable and the lower-end makers launched the single-serve category.

"They came out into the marketplace and had some general quality issues, and because they were first to market, it drove consumers up-market. For less than $200, you can have coffee-house quality, a café experience in your home and a conversation piece that's a novelty."

The findings parallel an earlier NPD study on pod coffeemakers.

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