Transition towards aluminum shake up the capsules industry

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AMI Consulting has published a report mapping the global single-serve capsules industry. The report aims to support the development of robust participation strategies by equipping industry players and investors with a comprehensive understanding of the scale of potential for future development, growth dynamics per system, market drivers, and competitive pressures.

All compatible capsules (both plastic and aluminum variants) accounted for over a third of the single-serve capsules market worldwide in 2020, a staggering increase of over 9 billion units compared with 2018. The report highlights a clear trend towards the rationalization of systems, with a clear focus on Nespresso and Dolce Gusto in Europe and K-cup in the US. Those three systems account for 81% of the global market.

Smaller systems may still offer reasonable returns but have limited growth potential beyond home markets. To this end, virtually all proprietary systems fillers have now diversified their brand presence to accommodate Nespresso and Dolce Gusto compatible variants, either in-house or via contract-packing agreements, it said.

Nespresso system is the most significant global capsule platform. The report said in 2020, the production of original Nespresso (including VertuoLine and Starbucks Nespresso) was almost matched with the magnitude of Nespresso compatibles. The compatible Nespresso system was the main contributor to growth, most via aluminum packaged variants. The original Nespresso platform is struggling to sustain its previous dynamics. The deal with Starbucks, whereby Nestlé now fills and markets Starbucks branded Nespresso capsules, opened the door for global mainstream retail rollout platform to mitigate the risks.

The compatibles’ need for differentiation resulted in capsule material and barrier specification adjustments, impacting positioning. The (Nespresso) market is now in the process of transition from plastic to aluminum. As a result, the industry has been gearing up to accommodate the change, both on the filling side – with investment in aluminum filling lines and retrofits; and on the empty capsule supply side, whereby compatibles suppliers have to diversify their portfolio to include aluminum. There are very high entry barriers with aluminum, so the competitive context has been intense, and the ‘aluminum game’ will determine new winners and losers.

Nespresso has put all the efforts in establishing the collection and recycling infrastructure for its used capsules. Following Nespresso’s open invitation in March 2019 to join forces in its recycling scheme. Further milestone announced by Nespresso is an increase in material circularity with using 80% recycled aluminum content.

Meanwhile, innovation in plastic capsules focuses on recycling-ready PP solutions, including polyolefin-based lidding films. Provided that other materials in the multilayer structure do not exceed 5%, used capsules can, in theory, be recyclable in the PP stream.

In parallel, bio-resins have developed a meaningful presence in the value chain. Albeit their penetration is still small considering global volumes, the current market context is attractive and facilitating further developments.

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