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Pod Invasion More Infusion

Coffee Compass Missing as Brewer Slow to Find Direction


June 12, 2008
By Tiffany Mayer

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They came. They saw. But coffee pods haven’t quite conquered, let alone invaded the office coffee industry.
Instead, pods have merely landed in the North American java world, trying desperately to get their bearings ever since.

They came. They saw. But coffee pods haven’t quite conquered, let alone invaded the office coffee industry.
Instead, pods have merely landed in the North American java world, trying desperately to get their bearings ever since.

But alas, all is not lost in the pod’s campaign. There are still some who hold out hope for them.
“The pod business is not dead,” Sandy McAlpine of the Coffee Association of Canada recently told a room full of his coffee comrades and pod skeptics at the Ontario Coffee and Vending Service Association annual conference in Niagara-on-the-Lake. “Ultimately, it still makes sense.”

Just in a slightly different capacity than only a year ago when it was predicted pods would obliterate bulk brew, especially at the office.

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invasion“I think people initially thought they may replace (conventional brewed coffee) but they shouldn’t replace it, they should be a complement to it,” said Fred Hodgson of BBC Sales and Service, also a speaker at the conference.

“Pods aren’t going to make you a fortune. They’re going to make you a little bit of extra money to put into your bank account … There’s no reason to say ‘No.’”

Still, some are saying ‘No’ and continuing to reach for a pot instead of a pod.   
So what happened?

It wasn’t long ago that the coffee pod was being touted as the saviour of office coffee. Employers everywhere were expected to raise cups of this new phenomenon because the high-quality pod brew was going to keep employees in the office and out of coffee shop drive-thru lines. Any supplier not offering pods would be missing the proverbial boat on a lucrative business opportunity. Offices that didn’t have a pod machine would be demanding one in no time.

However, for Heritage Coffee Company, it’s those machines that have kept them from jumping on any bandwagon with pod wheels. The company still has bigger cups to fill before offering pods to its customers, said Heritage’s Tony Gurski. The reason, he elaborated, was that equipment manufacturers haven’t decided on a standard pod size to run in their brewing machines.
 
“It would be foolish” for Heritage to invest in equipment to make pods, he said. “There’s no cohesion between the coffee manufacturers and the equipment manufacturers.”
 
Even if the technology and the roasters were drinking from the same cup, Gurski said there are too many unknowns about just who and how many will be reaching for pod brew instead of bulk brew.
No numbers, projected or solid, have been established for the Canadian, U.S. or European markets, he said. Until Heritage has that information, developing its own pod brand remains a “big question mark.”
If Gurski wants numbers, though, McAlpine is willing to spew them.

Six per cent of coffee consumed in the U.S. in 2004 was single cup or pod format, McAlpine said. That’s up from 1.5 per cent a year earlier.

Glenn Hodess, regional manager for Zavida Coffee, has his own ideas about that six per cent market share. The majority of that piece of the pie would belong to single cup formats other than the pod. Pods represent about one per cent of coffee sales in North America right now, he said.

“If anybody says it’s higher, they’re lying,” Hodess said.

Pods certainly haven’t usurped Zavida Coffee’s bulk brews since the company launched them a year and a half ago. Hodess wasn’t expecting them to. However, for the sake of customer satisfaction, the coffee company couldn’t ignore this new caffeinated trend, slow-growing as it’s been.

“You’re either in it or you’re not in it,” Hodess said. “It keeps our customers in our backyard because the minute you don’t have it, they go somewhere else.”

So far, Zavida Coffee has invested about $1 million to develop the perfect pod that will catch and keep its share of that one per cent, Hodess explained.

The hope is that pods will eventually represent 15 to 20 per cent of Zavida’s food service sales, including office coffee, but it could take as many years to reach that goal, he said. The reason will sound familiar. Someone needs to create a machine that will make the most of Zavida’s – or anyone else’s – pod.

“It’s been a slow start due to the equipment. It’s largely issues with education and equipment,” Hodess said. “The key is the machines. Once you have a good machine, you’ll have success.”

Moira Healy, Canadian marketing manager for Mother Parker’s, knows that. That’s why, with the company having just launched two of its own pod lines October 1, Mother Parker’s is working with manufacturers to develop the ideal pod machine. Admittedly, it was those equipment woes, in addition to taking the time to develop the perfect pod that kept Healy and crew from getting in the game any earlier.

“It’s just a matter of timing and we’re hoping to come together in the next few months,” Healy said optimistically.

Healy sees great potential for the pod in smaller applications. Still, that’s not keeping one of the largest private labellers from testing it in a “chain application.”

“We’re really excited,” Healy said. “There’s a lot of interest for sure and a lot more growing. There was a rough go last year but I feel it’s the wave of the future based on European stats.”

Pods have 30 per cent of the home consumption market in the Netherlands and have had similar success in eight western European countries.

“I think it’s here and it’s here to stay. We know single cup is growing. People want a good cup of coffee and people will pay for a good cup of coffee. There’s no turning back,” Healy said.

Mother Parker’s represents somewhat of an anomaly in the pod world, though. The zeal expressed by Healy is rare among the larger players, particularly in the office coffee world. In order for the status quo to change, the “small guys” need to step up to the hot plate because they represent the best chance for the pod to catch on, Hodgson said.
Still, the two entities have not allied.
“The little guys are waiting to see what the big guys are doing,” he said.
The pod, he explained, presents an excellent opportunity for the smaller industry players to stake their claim in the office coffee market and put pressure on the bigger players to follow suit.
“This offers the low volume entrepreneur the chance to sell a damn good cup of coffee on a cup-by-cup basis,” Hodgson said.
“There’s going to be somebody who will say ‘Yeah, I’m going to do something. I’m going to be an entrepreneur.’ But the majority of the people are going to sit back and see what happens.”
Not Gianni Spinazzola. Three years ago, Spinazzola launched PODhead.com, an online “one-stop-pod-shop” that
provides “alternative coffee pods to the ever-growing single-serve coffee pod movement.”
Unlike Gurski, Spinazzola didn’t need numbers to be convinced of the pod’s merit before diving wholeheartedly into online coffee sales. He relied on his
tastebuds.
A fashion photographer by trade from Milan, Italy, Spinazzola put down his camera and picked up a cup of pod-brewed java four years ago. It was at that moment he decided he’d never go back to conventional coffee brewed in a pot.
Opposite to his office coffee counterparts, Spinazzola could find the right machine to brew pods in his home, now in Rhode Island. He just couldn’t find the
coffee.
What was available was “awful, awful, awful,” Spinazzola said.
To combat the assault on his tastebuds, he developed Arabica Express, a line of 20 different pod varieties, specifically for the Melita One:One in-home pod brewer.

“I’m Italian. These are our priorities: food and sex … and family, of course,” he laughed.
On a more serious note, “A lot of people said ‘Thank you for the Arabica pods because the machines are in the garbage, the coffee was so bad,’” he said.

Spinazzola has taken the salvation of the pod so seriously that PODhead.com has launched two other lines, one for the Bunn My Café machine, the other for Senseo. Spinazzola was also the first to introduce the 10+ gram coffee pod, a concept he touted as becoming the new standard in the pod world.

Even though he’s catering to an at-home market, Spinazzola is ultimately raising the pod’s profile, regardless of where it’s brewed. That could very well be what the barrista ordered.
 
The pod may need to be a household name in order to serve up cups of hot, fresh victory everywhere – even the office.

“People will want to have one of these machines in their kitchen and in their office,” McAlpine said.
“There will be a real synergy to make it work.”