January 20, 2022

How can roasters diversify into the coffee capsule market?


There’s no denying that the coffee capsule market is growing exponentially. According to Mordor Intelligence, the capsule & pod market was valued at over US $25 billion in 2020, and is expected to increase to over US $29 billion by 2025.

This reflects the opportunity in the segment. Alongside the growing focus on improving the quality and freshness of capsule coffee, as well as a growing focus on sustainability, there is plenty of room for brands to innovate. One of the biggest developments has been in materials: for example, today, aluminium capsules are a market-leading solution.

However, entering the market can be difficult for roasters. It requires specialised knowledge and access to professional grinding and packaging equipment. If you’re doing it yourself, this requires no small investment, as well as a lot of specific, niche knowledge.

But what about other ways to start offering coffee capsules? Do you have to manage it yourself, or can you work with a partner? And what are the benefits for roasters looking to diversify into the capsule market and broaden their product range? I spoke with the CEO of Novocapsule, Yuval Weinshtock, to learn more.

You may also like our article on coffee freshness in pods.

roasted coffee

Exploring the capsule market

Although coffee capsules are immensely popular today, the method was actually launched as far back as the late 1980s

Its success in the years since can mainly be attributed to former Nespresso CEO Jean-Paul Gaillard, who shifted the company’s branding around the same time. While the brand had historically focused on convenience and targeted the office segment, he switched things to focus on “coffee as a lifestyle” and convey a sense of luxury.

More than 30 years on, billions of capsules are produced every single year. In 2018, it’s believed this figure reached around 59 billion, and there’s no reason to believe that it’s declined since then. 

Today, Europe claims the majority of the global capsule market share, but the fastest-growing market by far is Asia. Here, convenience and quality are becoming increasingly prominent trends for coffee consumers.

Sales of capsules and capsule machines have also risen in the US in recent years. The number of capsule machines in households across the country hit 20.7 million in 2018, according to market research firm Euromonitor.

In more recent times, we’ve also seen growth driven by the Covid-19 pandemic as more people stay at home. In September 2021, the National Coffee Association reported that coffee consumption for people aged between 25 and 39 was at a record high, with 65% of those surveyed having drunk at least one coffee in the previous day. 

During the pandemic, the convenience of single-serve capsules – alongside the growing quality of the coffee used in them – made them a popular choice for home consumers looking to emulate café-style beverages.

coffee capsules

Annual global sales of coffee capsules have been steadily rising by around 9% year-on-year – a significantly higher rate than other segments in the coffee industry. It’s estimated that in 2016, one-third of all consumer coffee sales in Western Europe were capsules.

So, what is it that makes capsules so popular among consumers? 

Well, as the demand for both convenience and coffee quality continues to grow, capsules present a simple, accessible, and clean option. 

Capsule machines reach brewing temperature within seconds, and operation is simple. The user is only required to fill the reservoir with water and place a capsule in the chamber.

Alongside this, the quality of coffee used in capsules continues to improve. The growing market for specialty coffee pods allows for better coffee to be experienced in a convenient way, but with the same focus on freshness and flavour.

Yuval explains that the process of manufacturing each capsule plays a key role in guaranteeing freshness. He says that Novocapsule’s unique process and design have helped to maintain this.

“We developed our patented design to optimise the most important parameters in capsule filling,” he says. “A larger sealing area helps to create a tighter seal, which preserves freshness, while a larger welding area allows for quicker filling and sealing processes.”

Mandatory quality control checks are also commonplace in the capsule segment. For example, market leader Nespresso conducts over 70 separate quality inspections for capsules on its manufacturing line.

“Novocapsule’s production facility has an in-line quality laboratory, which tests capsules in real time,” Yuval tells me. “The lab measures key parameters, such as seal strength and capsule shape.”

coffee roaster on show

Why is it so difficult for roasters to manufacture capsules?

Although entering the capsule market can be profitable for roasters, doing so is often a challenge. 

The roasting, grinding, and packaging process for capsules is unlike anything else in the coffee sector, and requires professional-grade equipment which is typically unique to capsule manufacture.

“First of all, roasters need to invest in a capsule filling machine,” Yuval explains. “For roasters who already fill plastic capsules, the expenditure for investing in an aluminium filling machine is much lower, since most machines can be converted from plastic to aluminum.”

However, without an existing filling machine, roasters will likely need to make a significant investment in commercial-grade equipment. 

Sourcing capsules from private label manufacturers allows smaller roasters to diversify their product ranges while also minimising costs.

Yuval also notes that it’s not just a question of equipment, but also of expertise. 

“Roasters often also need to develop the knowledge and skills to roast and grind coffee for capsules,” he says. “This is important for capturing the best flavour profile and optimal freshness for capsules.”

As we know, freshness is a growing priority for many coffee consumers, especially in the specialty coffee market. Once ground, coffee’s surface area increases immediately, and it begins to lose its distinctive volatile flavour notes and aromas in a matter of minutes.

When capsules are filled, Yuval says that they need to be flushed with nitrogen and sealed hermetically to maximise freshness, with little-to-no contact with oxygen throughout this process.

“Coffee flavour and freshness are affected mainly by oxygen,” Yuval explains. “Even miniscule levels of oxygen coming into contact with the ground coffee will have a huge impact on flavour.”

Managing this risk is therefore especially important for coffee capsule manufacturers. He says that without access to high-quality packaging and sealing equipment, capsules will end up yielding flat or stale coffee.

“Good packaging systems and quality capsules ensure perfect sealing, and can preserve the freshness of the coffee for 18 months or longer,” he concludes.

Ultimately, managing the roasting, grinding, and sealing processes is especially important when manufacturing capsules. This is because the ultra fine grind size creates a tiny margin for error – much more so than with other brewing methods.

This is why roast profiles for capsules tend to be on the darker side, as the higher solubility of darker roasts allows for more stable extraction.

“In addition, as with all high-volume automated lines, roasters need to know how to operate to reach production efficiency,” Yuval adds. “This is key in turning a capsule business into a profitable one.”

roasting coffee

How can roasters enter the capsule market?

Capsules present a unique opportunity for roasters to cater to a broad range of consumers. While specialty-grade capsules can satisfy more discerning coffee drinkers, there is a significant crossover with consumers who want convenience and efficiency. 

However, to be successful in the capsule market, roasters need to have the right materials, equipment, and expertise at their disposal. This allows them to maximise freshness and make sure the coffee’s original characteristics are unimpaired when the consumer drinks it. 

Doing this is easier said than done, which is why many roasters work with private label suppliers like Novocapsule. 

Yuval explains that the company’s proprietary capsule design starts with choosing the right material – in this case, aluminium.

“We use aluminium, because it is the best material for preserving freshness and flavour over a longer period of time,” says Yuval. “High-quality aluminum capsules perform well in home capsule machines, and cause fewer leaks and jamming issues.”

Research found that using aluminium for both the cover and body of capsules is the best way to protect coffee from oxygen and prevent it from going stale. A test conducted by Dr. Chahan Yeretzian from ZHAW found that over a period of 46 weeks, aluminium retained the highest levels of the two flavour compounds most associated with freshness.

“Novocapsule uses only virgin aluminium materials from global certified suppliers,” Yuval tells me. “Our automated production facility is located in Switzerland, and is fully ISO and BRC (British Retail Council, a food-grade certification system)-certified.

“In addition, the capsules’ aluminum walls don’t deform when the capsules are shipped to the retailer, or from the retailer to the consumer.”

However, he also says that using aluminium packaging also allows roasters to offer more sustainable capsule options – something which is a growing priority for coffee roasters.

“Aluminum is recyclable – in fact, it can be recycled an infinite number of times, so it’s a more sustainable material than plastic,” Yuval explains. “Our capsules are 100% PVC-free, meaning that they have a much lower carbon footprint than plastic alternatives.”

The recycling infrastructure for used capsules is continually improving and developing. For instance, market leader Nespresso operates 100,000 recycling points across 33 countries, which specialise in removing the silicone lining of its aluminium capsules so they can be recycled.

Yuval concludes by emphasising that using the right capsule material can lead to the best – and safest – consumer experience.

“Some plastic capsules have also been shown to release bisphenol-A (BPA) into coffee, which is considered harmful to human health,” he says. “We’ve also found that it can damage capsule machines.”

coffee roasting equipment

Innovation is an integral part of today’s coffee sector, and the coffee capsule market segment is no exception. It’s no surprise, then, that gaining access to this thriving market is an appealing prospect for a number of roasters.

However, leveraging the right equipment and expertise is important, as Yuval has explained. Working with an external capsule manufacturer may help some brands in this regard. Whatever option roasters choose, however, one thing is clear: a focus on high-quality materials, manufacturing, and packaging processes is essential to continued success.

Enjoyed this? Then read our article on why specialty coffee capsules are growing in popularity.

Photo credits: Novocapsule

Perfect Daily Grind

Please note: Novocapsule is a sponsor of Perfect Daily Grind.

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