Coffee Titans Clash Over Espresso Centric Market

66Two loosely allied US coffee giants, Starbucks and Green Mountain Coffee Roasters, started taunting each other over who can project dominance in the espresso home market emerging in North America. In dueling press releases, CEO’s of both giants leveled their espresso centric ambitions publicly on March 9, 2012.

On that date, Seattle, WA based Starbucks revealed its plans for a new home café’ brewing system called Verismo scheduled to debut this fall. This new machine focuses on production of espresso, rather than a traditional American brew made popular by the Keurig k cup system. Green Mountain owns Keurig, and Starbucks has its own stake in k cups sold with the Keurig system. Patents on k cup technology expire later this year leading to a reshuffling by market players.

While there is still a sense of collaboration on the k cup platform, the relationship between the two allies may have been strained by the recent market launch of the new Keurig Vue brewing system that is incompatible with k-type capsules. This shift by Green Mountain has opened a window for Starbucks to make the first move into a new espresso turf. Some potential vulnerabilities of the new Keurig Vue system include a machine price increase to $250, up from around $150 for previous models, and Vue capsule unit cost to $0.75 versus around $0.40 for a k cup.

For many years, US consumers have eyed espresso-based brewers for home café. One of the main buyer obstacles in choosing espresso machines was its price listing well beyond $300. Recent price drops, however, have brought the cost of home espresso machine close to the level of the Vue system. Starbucks sees the same price point for Verismo and is now vying to lead into the nascent espresso market in US.

Eager to defend its dominant position in the coffee single cup business on the very day of the Verismo pronouncement, the Waterbury, VT headquartered Green Mountain, immediately, fueled speculations of coming out with its own semblance of an espresso machine that uses Lavazza espresso capsules. Its public statement did not convey the time for roll out and product details.

Neither openly sparring party has offered specifics of its respective espresso machine design. These open-ended assertions suggest that both products are still in the development phase. Naturally, either camp also wants to keep design and commercial secrets close to the vest.

In the meantime, world food giant Nestle, displayed its Nespresso Zenius, which uses a proprietary espresso disk, in a recent New York trade show. Its market focus is, oddly, on the hospitality industry where their machines are placed in luxurious hotel suites for in-room service.

Posturing over the evolving home espresso market in US may be vital to each coffee behemoth. Consumer views published recently by Mintel, a global supplier of market intelligence, show the growing preference for single servings available in espresso pods by a margin of 55%. Another 35% of those surveyed noted that pod-style machines produce consistent taste each time.

The case can be made that single cup consumers will embrace the espresso brewing process over the regular coffee made from k and Vue type portions. Europeans, especially Italians, know that it requires a high-pressure pump and optimum temperature control to extract the best oils from coffee. This culture is resolute on seeing a top layer of golden crema, or creamy foam, which renders proof of a good extraction of coffee nectar. Keurig devices typically use low-pressure means, which can result in a less complete oil pull out.

While US coffee goliaths duel in speculative terms over who can cross over to the home espresso sector first, HealthCafe, whose relative stature is that of a “david” in home espresso solutions based Northern New Jersey, has a head start. Its sales representatives are calling on retailers across the nation to market the miniBarista S-1600 espresso/cappuccino pod system poised for prompt distribution.

HealthCafe has chosen the pod format in single cup brewing for numerous reasons. One is its inherent ability to filter out an LDL cholesterol inducer called cafestol from the beverage. Another is coffee freshness is preserved longer with nitrogen displacement. Most importantly for consumers, the pod follows the ESE industry standard adhered to by a multitude of pod machine and coffee pod manufactures. Capsules, on the other hand, have little cross-compatibility, none is known to have nitrogen-displaced packaging and none in this class is known to be effective in blocking cafestol.