Will Starbucks burn Colombia with its single-serve brewer?

Coffee giant Starbucks on Tuesday introduced its new single-serve machine, but could this brew trouble for Colombia’s already struggling coffee trade?

Analysts have warned that although the in-home coffee-capsule business is growing, that the lack of waste could reduce demand for coffee beans by up to 5%, especially the high quality arabica coffee beans of which which Colombia is the biggest producer.

The single-cup coffee market last year made up about 8% of worldwide coffee sales, with half of this coming from brewed coffee systems and half from espresso systems, largely dominated by Nespresso, according to Reuters.

The idea of the coffee-capsule is not a new one and was first developed in Switzerland in 1986, however the capsule market is the fastest growing in the coffee industry, rapidly over-taking beans, grinds and instant. This is in part do with more discerning consumers using more expensive options such as the coffee-pod, instead of instant coffee products. Analysts expect the market to grow another 25% by 2014, according to the Financial Times.

The in-home coffee market has grown by 17% in the past five years reflecting that consumers, who are more cash-strapped due to the global financial crisis, still want to have a good cup of coffee but would prefer to do it for a fifth of the price in their own homes.

More than $8 billion worth of single-cup machines and pods were sold worldwide last year, and more than a third of coffee machines sold today is a single-cup machine, said a representative of Starbucks according to the New York Times.

In the U.S. sales of single-cup machines grew by 143% last year, which could be in part to do with the country’s coffee mogul Starbucks introducing pods to be used with Green Mountain’s Keurig machines.

Now, however, the coffee overlord has introduced its own machine which will not only make brewed coffee, but will also make more lavish types of coffee such as lattes and cappuccinos.

Traders and investors had hoped that the growth of the coffee capsule would result in an increase in market prices, however it seems now that it will in fact hurt demand for beans as the greater efficiency and reduction in waste means less coffee usage reported the Financial Times.

Arabica has been the worst performing agricultural commodity this year, down almost 20% since the start of the year.

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Written by Rico


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