A wave of new single-serve coffee brewers is coming to market in the United States, offering consumers more choices and stepping up pressure on market leader Keurig and its parent company, Green Mountain Coffee Roasters Inc .
This month, Bunn, maker of commercial beverage equipment, will launch a home version of its single-serve coffee machine. The machine, called MyCafe, will work with Keurig’s K-Cups, even though it is not licensed to do so.
Also later this month, about two-thirds of U.S. Walmart stores will start selling a machine made by Esio Beverage Co that makes both hot and cold drinks. While that machine does not use K-Cups, it does expand well beyond the capabilities of existing popular brewers.
These machines come fast on the heels of Starbucks Corp’s Verismo, a single-serve brewer that makes coffee and espresso drinks. It is now available online, and will be sold at select stores early this month.
Single-serve coffee, which emerged in the United States in the late 1990s, originally centered largely around a few proprietary systems backed by the likes of Nestle SA , Green Mountain and Kraft. The machines were found mostly in offices and upscale homes.
But with the advent of cheaper machines that can make different kinds of drinks and operate with open-source platforms, the market is now getting a jolt.
For its part, Green Mountain says it will continue to be the leader in the small-but-growing retail market, due to its quality, customer loyalty and range of drinks under 30 brands marketed by companies including Dunkin’ Brands Group Inc , Caribou Coffee Co Inc and Starbucks Corp .
«Since the early days of single-serve coffee, we have successfully competed against well-resourced companies like Mars and Kraft, many of which offered systems of brewers and beverages,» said Green Mountain spokeswoman Suzanne DuLong.
Still, investors are not convinced. Green Mountain stock is down 80 percent from last year’s high, after investors began questioning its growth prospects and accounting practices. The shares gained 1 percent to close at $23.63 on Thursday.
PRICING PRESSURE
Green Mountain sells machines at cost to drive adoption, and makes money off the K-Cups. But a wave of unlicensed cups, including private-label offerings from Supervalu Inc and Safeway Inc , is pressuring prices in the overall category.
Chief Executive Larry Blanford told an investor conference in June that Keurig could raise prices on its machines, in order to boost margins. But so far, the opposite is happening.
Green Mountain lowered the price of its new higher-end Vue brewer to $229.99 from $249.99 and said it would launch a less-expensive model for $209.99.
Keurigs range from about $90 to about $200.
Marc Riddick, an analyst with Williams Capital Group who covers Green Mountain, said the pricing environment only stands to grow worse toward year-end.
«As you approach the holiday season, I wouldn’t depend on holding so firm on pricing because you’ve got retail partners and you’ve got a lot of competition out there,» Riddick said.
Single-serve coffee pods are expected to reach $959.1 million in retail sales this year, up 32 percent, according to Euromonitor International. That would account for about 10 percent of the overall coffee market, which is expected to grow by only 6 percent this year.
Excluding the coffee sold to offices, Green Mountain’s share of the retail market was 54 percent last year, down from about 60 percent in 2010 and 63 percent in 2009, Euromonitor said.
Coffee brewers — single-serve, espresso and drip machines — are expected to reach $34.6 billion this year, it said.
Source: chicagotribune.com/business/sns-rt-us-coffee-machinesbre8931lr-20121004,0,6650179.story
