A mistake in the single-serve coffee market?

Approximately 42% of American households own a Keurig, and consumption is expected to surpass 30 billion K-Cups® annually. The single-serve coffee maker is primarily consolidated with the presence of a few prominent players. Now comes a new player called Xbloom from some people who left Apple. It will retail for almost $800 at a time when most consumers are cutting back.

Peaking at $5.7 billion in sales in 2016, demand for single-serve capsules has leveled off after capturing a significant portion of the US coffee market. Household penetration of single-portion brewers continues to inch upward, but the only significant sales gains in the segment are private-label compatibles and capsules featuring select, better-tasting coffee.

The retail value of fresh ground roast in capsules grew 4.3% last year, according to Euromonitor International, a global market research provider. Retail value growth is forecast at just over $600 million during 2018-23. In contrast, according to Euromonitor, the retail value of ready-to-drink (RTD) coffee is projected to grow by almost $1.5 billion during that same period.

Once Keurig and Nespresso demonstrated the convenience of single-serve machines, manufacturers rushed to produce less expensive compatible-capsule brewers and small-portion WiFi-enabled drip brewers capable of delivering a commuter-sized mug of coffee on demand. As a result, the retail value from sales of capsule brewers fell 5.4% in the US in 2018, with unit sales down 5.1%, according to Euromonitor.

According to a leading market research firm, about 75% of consumer packaged goods and retail products fail to earn even $7.5 million during their first year. This is in part because of the intransigence of consumer shopping habits.

The new Xbloom model is also a single-serve system. It’s a unique system that reads the coffee pods and sets the right temperature and pressure for brewing. Customers then open the pod and dump the beans into a grinder, ground, and position for brewing. As lovely as it looks, I’m not sure there is a huge market for an $800 coffee maker.

When your product is incorrectly priced, it becomes impossible to reach an average customer. Therefore, you won’t be able to sell much, and most people won’t be able to recognize your product or be familiar with it.

Xbloom uses “craft” bean roasters for their coffee, and there is a good but not a great selection. Competitors like Nespresso and Keurig have well-known brands like Starbucks, which are sold in stores like Target and Wal*Mart and online. Xbloom doesn’t ship until March of next year and is a Kickstarter project.

I’m sure they did market research, but at $800, the reviews had better be outstanding. If the buzz is anything but significant, the product will fail. I love a good cup of coffee, but t $800, I’m not about to place an order for a nice-looking new product. I’ll stick with my $129 Nespresso and recycle the pods.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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