The popularity of coffee shop style coffee in the home led by brands such as Tassimo, Nespresso and Dolce Gusto is leading to a rise in sales of coffee pods, according to IRI.
In 2014, sales revenue from coffee pod products grew by 52% to £102m and volumes by 54% to more than 310 million cups sold.
Coffee pods are fuelling growth for the entire ground coffee segment which is up 14.1% in sales value to £267m and 4.8% in volume.
Increased promotional activity around direct to consumer coffee machines, particularly around events such as Black Friday and Christmas, are also helping to drive growth of coffee pods since they lock buyers in to specific brands. In 2014, promotions in the run up to Christmas drove as much as 23% of the annual sales for coffee pods.
IRI analyst Jen Ayling explained: “The coffee menu in supermarkets has expanded rapidly with coffee shop favourites such as cappuccino, latte and macchiato.
As a result the average in-store range now at 23 items compared to 14 items five years ago. This has increased the drinking occasions and made it more relevant for the under 35’s who shun traditional hot drinks in favour of water and soft drinks.”
Premium coffee pod varieties such as Cappuccino, Latte and Macchiato dominate sales with a 62% share, Black coffee makes up 31% and Espresso 7%.
Ayling warned: “Supermarkets that are focusing on reducing ranges for both bigger stores as well as smaller, convenience store formats, may struggle to find sufficient shelf space since packs of coffee pods tend to take up more space than a 100g jar of coffee.
We expect to see more stores stocking just bestselling products. Brands get around this by selling pods through their own websites; which is possible because they have a customer base that tends to remain loyal to the brand of their purchased coffee machine. We expect this sector to continue its growth trajectory.”
IRI found that pods is not the only premium sector to be winning in coffee; Super Premium Instant has also seen strong growth up 27% to £63m this year driven by brands such as Azera and Millicano.
However, as people switch to these premium coffee products, there has been a decline in sales of standard instant coffee products with Regular Instant down 10% to £198m and Premium Instant down 4% to £244m.
