Keurig® brand pods along with Starbucks, Folgers, Maxwell House, Gevalia, Yuban and Dunkin’ Donuts to raise pricing on single-serve coffee by 9%.
Keurig Green Mountain (GMCR) recently announced it plans to hike prices by 9% for the pod packets used in its signature brewing system, as well as other single serve packets, bulk coffee and other products beginning in November.
It’s the latest in a string of price hikes this year as coffee producers pass along higher costs, but the single-serve market had been spared until now. A drought in Brazil dried up the harvest of Arabica coffee beans, driving coffee prices up by 58% in the past year. Starbucks said that they would increase prices by 5-20¢, depending on the order and where the purchase is made. J.M. Smucker also raised prices by 9% for the Folgers and Dunkin’ Donuts (DNKN) brand coffee that it makes for sale in grocery stores. Kraft will raise the price of its Maxwell House, Gevalia, McCafe and Yuban pod packs by about 9 percent, effective Dec. 28, due to sustained price increases in associated raw materials, a company spokeswoman said.
These large brands that automatically pass along rising commodity costs to the consumer are losing part of the market because prices never come down when coffee costs fall. The issue is giving single-serve coffee drinkers a choice on pricing and variety. Everything in the licensed Green Mountain world is gravitating from 62¢-65¢ per cup on the low end to 75¢-85¢ on the higher end offerings. With high pricing on what’s often not the best coffee, shoppers are looking for better ways to enjoy single-cup beverages, and that’s where custom pods come in.
Thanks to a small number of companies like Intelligent Blends with advanced production capabilities and substantial capacity, custom single-serve pods are quickly emerging in the marketplace. It’s exciting to see a growing and diverse range of coffees, teas and other beverages becoming available in k cups. The diversification is not just on roast and flavor or blend, but also on price. Shoppers are paying attention to other innovations in the single-serve market including sustainability as private label brands with access to eco-friendly capsules offer recyclable options.
Keurig®-only prices and all of the endless waste from wrapping every cup of coffee or tea in non recyclable plastic will only continue to drive demand for single-serve pods. In 2015, we will also see the latest wave in private label capsule compatibility as manufacturers introduce 2.0 solutions.