Rivals try to loosen Keurig’s grip on single-serve coffee market

Posted March 01, 2011, at 4:06 p.m.

Waterbury, Vt.-based Green Mountain Coffee Roasters dominates the single-serve coffee segment in the United States.

The company owns Keurig, which holds about 70 percent of the single-serve brewer market, estimates Janney Montgomery Scott LLC, a financial services firm.

Keurig also holds a patent on K-cups, the plastic pods used to make drinks in about 40 seconds. Last week Green Mountain seemed to strengthen its position with an agreement to make K-cups with Dunkin’ Donuts coffee. In some locations, Dunkin’ also will sell Keurig machines.

But Keurig’s K-cup patents are expected to expire next year, and a slew of companies are brewing up their own versions. Others are touting different machines.

Single serve is widely viewed as the fastest-growing segment of coffee made at home. It accounts for about 7 percent of U.S. consumption, and the market has doubled every year for the last three years and is expected to reach 11 percent of consumption by 2012, according to Euromonitor. It’s an even hotter market in Europe. More than half of French households have a single-serve machine.

Single-serve coffee is appealing to consumers, who perceive it as a higher-quality cup of coffee. It also brews faster and members of a household don’t have to have the same beverage.

Manufacturers like the segment because pods sell for 50 cents to $1 apiece, which is a significant premium over drip coffee. The higher margins are particularly desirable for coffee, a volatile commodity.

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