IN 1934, in the
Italian city of Trieste, Francesco Illy came up with a way to package coffee in
pressurised containers that kept it fresh. In 1935 he invented the first
automatic coffee machine. In 1974 Illy, the company he founded, became the
first to sell a kind of coffee pod that produced espresso anywhere, any time.
Aluminium capsules, the successors of those pods, have become a battleground for the world’s biggest coffee companies, notably Nestlé, a Swiss food-and-drink giant, and JAB Holdings, an investment firm intent on building a coffee empire. On October 8th Illy signed a licensing deal for capsules with JAB, blending Illy’s coffee and cachet with JAB’s commercial clout.
Two decades ago as many as 20 substantial companies competed in the
retail-coffee trade. Today JAB and Nestlé together control about a third of the
market for fresh and instant coffee, which Euromonitor International, a
research firm, estimates to be worth $83bn a year.
Capsules—an
expensive but convenient way of making coffee—have been the market’s
fastest-growing area in recent years. The pace has slowed recently, notably in
America where the market has matured, but Europe is still bubbling away.
Nespresso, owned
by Nestlé, leads in Europe but has failed to make inroads in America. Until
recently Nespresso only sold its products in its own shops and through its
website. Nestlé’s acquisition in 2017 of a majority stake in Blue Bottle
Coffee, a hip Californian brand, is a sign of its eagerness to boost its
presence in America.
Other companies
are keen to compete. Two months ago Coca-Cola bought British chain Costa for $5bn.
This month Lavazza, another Italian coffee-maker, bought Mars’s coffee business.
Sales of hot
drinks have been slow to take off online. As capsules’ popularity grows that
may change. Amazon’s purchase of Whole Foods, a trendy grocer, in 2017 brought
with it Allegro, another fancy coffee brand. A bigger
battle may be brewing.
