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Single-Serve Coffee Hits Seasonal Stride

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Walk into any large supermarket, mass merchandiser or home store these days and at some point — guaranteed — you’ll be hit with a huge display of coffee pods and the brewers that utilize them. Retailers and consumers alike love the appliances, which have jolted sales in an otherwise mature category.

Even better, sales are hitting their peak right about now, as the products top many a holiday wish list. New statistics out from Packaged Facts found that 21% of households surveyed have a single-cup brewing system, and sales of the pods and cups now account for 7.5% of coffee sales, up from almost nothing five short years ago.

The shift in the way coffee is brewed at home is changing the look of the supermarket coffee shelf. Where cans and bags of ground and whole bean coffees once dominated, boxes of k-cups and pods are now the preferred product, and for good reason. Single-serve is expensive. The Packaged Facts report points out that single-serve portion packs typically cost 65-cents to $1.00 each, “making them considerably more expensive than brewing the same brand of coffee from loose grounds.”

This doesn’t seem to be a deterrent to purchase, however — nor to market entry. This year’s outlook is even brighter since both Starbucks and Dunkin’ Donuts have entered the single-serve market with a line of proprietary products made expressly for Green Mountain Coffee Roaster’s Keurig K-cup line. The availability of these popular coffees in such a convenient home-brewed version holds more promise than a regular pot to recreate the in-store brand experience. And that is precisely what marketers are hoping.

Scott Van Winkle, an analyst with Boston-based Canaccord Genuity who follows Green Mountain Coffee Roasters, noted that early-season sales were looking better than prior years despite the absence of any real price promotions. Shelf space is up 50% in some cases, compared to last year, he added in a recent note to investors.

“We still believe that the sales velocity is more important as the Christmas holiday approaches and husbands begin to shop. We would expect some retailer price promotion to materialize as the holiday approaches as well, which should add to the sales velocity,” Van Winkle wrote.

Dunkin’ and Starbucks are selling over the top, with Dunkin’ running over double Van Winkle’s estimate, while the more recent Starbucks line is expected to be incremental to brewer sales this holiday.

Now, why isn’t there a private label pod or cup yet? Just wait… The Packaged Facts report found that store-brand coffee introductions from retailers like A&P, Dollar General, Trader Joe’s and Wegmans resonated with consumers this past year, though these were of the whole bean and ground varieties. What could sales be like right now if there were single-serve private label SKUs on the shelf as well?

[Photo credit: Cannaccord Genuity]

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