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Coffee machines, particularly pod coffee machines, have been one of the best performing categories in small appliances across the world in recent years. Euromonitor predicted that worldwide over 29 million pod coffee machines will be sold in 2014, up 11% from the year before. The pod coffee machine category has grown so large, and so fast, that it is now having an impact upon other categories, most notably kettles.
Prior to the launch of Nespresso and other pod coffee machines, the market for coffee machines across the world was largely a replacement market. You were either a household who used a coffee machine, or one that didn’t. If you didn’t have a coffee machine you probably felt that those who did were insufferable coffee snobs, not an ideal environment for increasing penetration rates of coffee machines.
The launch of Nespresso and other pod coffee machines has transformed this dynamic however, attracting consumers who would not have previously considered purchasing a coffee machine. The exact dynamics vary depending on the pre-existing hot drinks culture in each market, but the general trend is away from hot drink formats that require the use of kettles, an appliance that is consequently becoming less and less essential.
This has been particularly obvious in Australia where consumers have traditionally been more inclined to drink instant coffee, for which they need a kettle. Although instant coffee still outsells fresh coffee in Australia by more than 2-to-1, off-trade volume sales of instant coffee have been negative since peaking in 2011. Many previous instant coffee consumers have now shifted to fresh ground pod coffee, attracted by the convenience it offers
A similar trend has also been notable in the UK, where there is a well-known preference for drinking tea, which also requires a kettle. Off-trade volume sales of tea in the UK have been negative for most of the last decade, at a CAGR of -2% between 2009 and 2014. Off-trade volume sales of coffee on the other hand have experienced a CAGR of 5%, with fresh ground pod coffee growing at a CAGR of 26%.
As consumers shift from drinking instant coffee to drinking pod coffee in Australia, or from drinking tea to drinking pod coffee in the UK, such consumers are finding that they no longer require a kettle. Many younger consumers no longer regard a kettle as one of the essential appliances when moving into a new home. Also, since the kettle is no longer used as frequently, the appliance no longer needs to be replaced as regularly. Both Australia and the UK have consequently begun to experience negative unit growth in kettles.
Pod coffee machines reached critical mass in the UK market around 2010, the same year that the number of kettles sold began to decline. Unit volume sales of kettles fell from just over 12 million a year in 2010 to just over 11 million a year in 2014. Euromonitor does not anticipate that kettle sales will exceed 11 million again in any year between 2014 and 2019. The same trend has occurred in Australia, where the boom in sales of pod coffee machines has also led to negative growth in kettles in both 2013 and 2014.
This is not exclusive to the Anglosphere. France has long had a coffee culture, and yet it too is seeing the popularity of pod coffee machines leading to a decline in kettle sales after peaking in 2012.
Coffee mills, a popular accessory appliance amongst standard coffee machine owners has also witnessed a decline in France, as pod coffee machines take over a market previously held by standard coffee machines. Sales of standard coffee machines in France have also fallen sharply since 2012.
The big question is, will this occur elsewhere, particularly in the United States, which has also seen an increase in pod coffee machine sales in recent years? Well, no actually, since consumers are not switching from kettle-related beverages such as instant coffee or tea, but from filter-coffee machines. Kettle sales in the United States are already only 2 million a year, about the same as Australia, with about one-tenth of the United States population. Unit sales of filter coffee machines in the United States are however on the decline, after peaking in 2006, about the same time that pod coffee machines passed the million unit sales point.
With pod coffee machines even eating into the American tradition of “a cup of joe”, it seems as though their popularity is swallowing up all other substitute categories in its path. And kettles are likely to be just one of the casualties.