Nespresso Taps Into Explosion in U.S. Single-Cup Coffee Market

Nestle appears to be right on trend with Nespresso, a single-cup espresso machine that is breaking out with its first U.S. television advertising breaking today. It'll have competition from a new single-cup espresso machine from Starbucks in the fall, under the Verismo brand, and from others.

But according to Larry Levin of SymphonyIRI, there's likely to be plenty of room for Nestle, Starbucks and more as the single-coffee-cup market continues to explode in America. Nine coffee and tea innovations, including six manufacturers of single-cup pods for Keurig and other machines, were among the most successful packaged-goods brands of last year as identified by Symphony IRI in its recently released 2011 New Product Pacesetters.

"Everyone is trying to get on the single-cup wagon," Levin, EVP of consumer and shopper marketing for the Chicago-based market-research outfit, told brandchannel. "That's because, even in a down economy, consumers want to indulge, and coffee is a great form of indulgence and even entertainment. [Single] cups allow you to do both.

About 19 percent of U.S. households now have a Keurig machine, up from 11 percent a year earlier, Levin said. "And when you think about the cost per serving, it's not really a cheap alternative. It's quite expensive. But it offers so much variety and enhances our ability to enjoy coffee."

Nespresso can expand in the single-cup market, he said, because although espresso "is a narrower niche" than coffee, "it's also a very upscale niche, and that will help continue to reposition [Nestle] coffee' in a higher echelon."

Nespresso has sold its machines and coffee capsules in the U.S. for about a decade, online, at its own handful of boutiques in major cities (including a large "cafe" in the heart of New York's Soho), and through other retail chains such as Crate & Barrel and Sur La Table. Even without TV advertising, Nespresso sales in America jumped 20 to 25 percent in each of the last two years.

And globally, according to the New York Times, Nespresso generated 20 percent of parent company Nestle's total sales growth in the 2011 fiscal year.

That's one strong cup of coffee.