POD mania, POD money: despite the many obstacles and difficulties encountered, pods have taken...

THE POD BUSINESS WELL OVER 5 billion dollar annual business. As such, it means a great deal to the coffee industry. Particularly because, since pods shed their marginal status and moved into mainstream investments and sales, the coffee industry began to see its new flower of expansion--the international

Espresso consumption start to hit technical and cultural walls. It's been some time that the coffee industry had stalled in growth worldwide, after the brick pack boom matured and flattened.

Great promises have tagged the pod from its inception. Overcoming the manufacturing difficulties high speed forming and packaging of a new and relatively fragile consumer product--led to frenetic brewing development and the formulation of pod product lines. Pod mania hit the industry in full force.

Several packaging companies with a coffee focus soon had pod makers on the market. A few forward-looking roasters jumped for the machines, found brewer manufacturers to turn out conversion kits for existing espresso machine filter handles--and then, in time, pod dedicated brewers (relatively simple devices). These pioneering pod marketers began the labor of selling the new and, for coffee, quite alien product to the public--the home and out of home users. Initial success gave these businesses contract packaging links, which were business to business deals that filled their capacity to the full. The pod contract-packaging sector remains strong, for store brands and for numerous roasters either too small or too busy with their traditional coffee production to venture into a specialty area. Nevertheless, the sale of pod manufacturing/packaging machines steadily grew--now boom and suddenly one could see one sitting on countless coffee roasting factory floors.

As a result, espresso pods have held center stage in the coffee industry for the past few years. The pod market has already been fully segmented--from discount to gourmet quality pods, from complex blends to single origins and decaffeinated espressos. This is true also for the brewers. One has a wide choice of models from at least 50 brewing machine manufacturer’s traditional semi to fully automatic espresso machines dedicated pod brewers from the most basic plastic boxes to chrome and steel temples of design.

Pods, thus, stimulate investment in factory equipment, in brewing equipment and in the product itself, which necessarily is more costly even in the discount range on a per cup basis than regular loose R&G.

The vast new turnovers engendered have provoked a new age in design for coffee. The pod has given espresso a way out of its technical/cultural cage. It has also now spawned the pad, and given greater acceptability to other single service coffee systems, such as caps.

The development of pod-making machines with speed and enough quality control to make pod production profitable; the burst of imaginative pod product lines, packaging, displays; the incredible diversification in brewing devices and designs ... all this pod mania inside the industry has meant a historic infusion of enthusiasm and creativity that has now grown beyond the espresso sector itself.

The early hope for the pod was for the most dynamic demographic group in rich countries--young singles and couples--to all acquire a pod brewer for their kitchen counters. Then, they would all go shopping at the hypermarket for their pods of choice.

Out of home use was also targeted. Bar coffee service would be revolutionized in non-espresso-tradition nations. It would be accepted in time, even in the traditional heart of espresso Italy, France, Spain and Portugal.

A billion dollar-plus business has risen for coffee, some of it new business, some of it replacement business for other forms of coffee consumption--meaning that the industry has not actually gained a billion-plus in turnover (although huge increases in turnover are a fact, from machinery lines to the roasted product to the serving system). Pods are all "added value" to the industry, and this will be more and more so as spin-offs, such as pads and caps continue to gain.

But--and the "but" has been coming--the pod has its enemies. I am speaking of the detractions that have kept it from gaining a place as a household word, or a household product throughout the cash flow consumer cultures. The expensive equipment required to make the pod, the investment in a new brewer; the distribution and price of pods ... these elements have all worked against the product.

Recently, an acquaintance here in France heard me talk about pods, and told me she wanted a pod brewer for her husband's birthday. She asked for some advice, which I gave. My first bit of advice was to look for the pods of choice. She did--to no avail. She even called the roaster of choice, and one or two distant hypermarkets had some stocked, but in fact for her the only realistic means of getting the pods was to have them shipped to her door. The per cup price thereby soared, and her husband did not get a pod brewer for his birthday.

Cost has put the lid on pods, as well as the distribution. Also, the industry has added confusion, which in consumer marketing is considered bad news. And what is bad for consumerizing is bad for the distribution system. The industry's competing non-crossover pod style systems, competing non-crossover dedicated pod brewers: coffee had and still has too much choice in pods, too much variety, and too many technical conflicts.

And finally, the plain truth. What is relatively costly may gain a place on a shelf in an upscale shop or neighborhood, but it will not crowd out the standard brickpack or tin from the big store retail shelf.

The dilemma for the industry, thereby, is whether to make the pod a true mass market product--lower prices, reduce the level of confusion in consumers by reducing the dazzling array of choice--or keep it a high margin, specialty niche.

At present, it would seem that the espresso pod is being aimed at the latter. This has been reinforced by the advent of the pad--non-espresso coffee in a small paper filter bag. The pad already holds the promise of becoming a mass-market product, with the espresso pod as its high brow cousin.

As for the out of home market areas, the espresso pod so far has not found acceptance in the four traditional espresso coffee nations for bar/cafe service. But it has taken off in office coffee service, and too in the travel sector--in hotels, at airports, train stations, on trains and planes.

OCS, however, is becoming genuine pod/pad territory. This, to such an extent, that in Italy the pod actually created the nation's office coffee service sector or at least gave the sector a significant coffee economy. Before, at given times in the working day, Italian workers would troop down to the nearest or most favored bar for their quick gulps of espresso. With the pod appearing in more and more offices, the effect on Italy's bar/cafe coffee business has been dramatic some reporting a decline of almost 25% in bar/cafe espresso coffee sales.

This has not helped in making pods friendly in the bar/cafe sector. I have even encountered roasters who seek to keep their pod business shielded from their bar\care business.

So where does the pod go? I think that in time, it will become a young, single person's product for the home. A cup of coffee can be positioned as a gift to oneself, a pleasure like a nice piece of chocolate. Cost then is not the factor--pleasure and fashion replace it.

I also think the pod espresso or non-espresso--will become a replacement item in more and more fast food-service businesses. Coffee seems to gain some repositioning in the fast food sector, mirroring what will come with the young. Coffee is showing signs of escaping from soft-drink look-alike service, and to being elevated even to a real cup, even to a choice of coffees (made via pods).

Coffee has, for long, been a prized money earner for out-of-home service. It will be more so, even if volume dips, as it becomes a more expensive product (pod/pad influence) and a far more exotic one, due to the flourishes of espresso blends, single origins, cold coffee drinks What is brewing for all is a whole new coffee world to consumers--again, a coffee menu possibility made possible by the pod/pad.

SOME CONSIDERATIONS:

TERMINOLOGY--

One can refer to pods and pads, or more particularly to hard and soft pods.

MAKING AND PACKAGING--

Speeds range from 45 pods per minute to 1,000 per minute, and technology is now reaching up to 2,000 units per minute.

EQUIPMENT INVESTMENT--

This is a spreadsheet of possibilities and thus costs--depending on speed, on whether the pod is enveloped in the making process, or needs a stand-alone packaging unit of some kind at line end, with or without cartoner. A complete high-speed line can cost more than one million euros or about 1.25 million dollars at current exchange rate. Euros are quoted because the majority--but not all--pod machines are made in Italy and Germany.

PACKAGING POSSIBILITIES--

What choices: in sachets of varying barriers with or without vacuum, naked in bags of different sealing systems, or in tins. Sachets packed loose up to 150 per carton, or in boxes or tins of 18--literally "whatever."

POD SHAPES AND SIZES VARY, TOO-- Single or double serving sizes are the principle difference.

SOME MANUFACTURERS MAKE BOTH HARD AND SOFT PODS--

But these normally need to include the enveloping as an integrated function. In higher speed production, two separate packaging units are required as stand alone equipment. Other possibilities are separate, dedicated, hard and soft pod makers.

BRICK PACK LINES ARE SELLING--

However, at a flat rate, mainly as replacement equipment for older machines rather than to increase capacity.

Obviously this means that new capacity for roasters is going to hard and soft pod production. The sales of pod makers boomed rapidly, reaching a bonanza about two years ago. Entry of more companies into the field, plus a period of adjustment to the new capacities has meant that pod making machine sales are now less heroic, although the manufacturers are not frowning.

THERE ARE TWO MAJOR POD STYLE SYSTEMS--

The leading is based on the lily patents, but made open to any company joining the ESE Consortium. Both large and small roasters and brewing machine manufacturers have adopted this dominant, but by no means universal system. The second system is the 1-2-3 Spresso pod, with its characteristic cardboard collar and a gravity-based, coin-feed like pod brewer.

While these two very different systems have steadily expanded, a very large number of roasters do not conform to either.

POD CONSUMPTION IS NOT POSSIBLE TO FIGURE--

Due to the multitude of roasters producing their own brands, and the great number of contract pod manufacturers producing for marketers. Consumption figures that do appear are generally assumed to be inflated. One might accept an annual pod disappearance of between 6 and 8.5 billion units a year in recent times with a growth rate of 20% a year. Consumption grows, no doubt as to that, what ever the number might be.

BREWERS RANGE LIKE CATTLE IN OPEN RANGE--

And so widely it is impossible to categorize them other than by price, system, design, etc. The most expensive are those that crossover, are in essence traditional espresso brewers, but which can adapt to pods or are in fact pod dedicated despite their classic look. Some even have levers for decorative/market niche appeal.

But most pod brewers for home have taken off into new worlds of design, with very imaginative looks and in a rainbow of colors. Professional models maintain more traditional looks.

The ultimate consideration, however, is that pods hard, pods soft, are now driving the coffee industry.