P&G, Sara Lee and Kraft all plan to launch single brew coffee costing $0.22 per serving compared to $0.04 for normal home coffee generating an estimated new US $6 billion market.
February 20, 2004 (Press Release) --
P&G, Kraft and Sara Lee to create a $6 billion market
3 Titans are entering the US home coffee market. We expect (see below) they will generate about $6 billion per year in the home coffee market. Kraft, P&G, and Sara Lee soon will join Salton (SFP) who entered with Melitta brand in September 2003. Kraft (KFT) already has $125 mllion revenue per year in Europe and is growing fast. Sara Lee (SLE) pre-releases with Amazon.com on March 19th.
What coffee product can create a new and growing home coffee market? Single serving coffee brewed fresh in one minute rather than 5 or 6 minutes. Here in the Boston area offices, we have seen the such a product for years. From Green Mountain (GMCR) anyone in the office can grab a small cup with the grounds of their current whim, perhaps viena roast, or kenya aa.
The market impact could be exciting, for Folgers at P&G (PG), for Braun and for the Carte Noire coffee from Kraft, and for Sara Lee who has already 5 million cup-at-a-time coffee machines installed since their launch of Senseo in 2001. On February 19th Sara Lee announced that their product launch in the US will be made sooner. Advance orders are to be shipped on March 19.
So, let's consider the possible economics. $3.99 is the suggested price for 18 servings of the pods, the single serving cups.
One to One under the Melitta brand is from Salton the NYSE traded company that also sells George Foreman grills." Salton Chief Executive Leonhard Dreimann said in February the market for the coffee pods used in the machines could be worth billions if consumers here warm to the technology." [from 2/19 Chicago Tribune, by Delroy Alexander]
In that same article, Delroy points out, "A 34.5-ounce can of Maxwell House, which makes about 240 servings, retails for about $6.99." $3.99 for 18 is $0.221667 per serving. $6.99 for 240 is $0.029125. So, $1.00 spent at $6.95 for Maxwell House is (an aside $10.15 at Starbucks is $.04291666) $7.61 at $3.99 for P&G's Millstone brand's cup-at-a-time. [See P&G's new Home Cafe coffee maker.]
In a February 18th story, Paul Block, president of Sara Lee Coffee and Teas Consumer Brands. "Coffee consumers are demanding individual choice, convenience and premium quality on a cup-by-cup basis."
How big a market could it be, realistically? Sara Lee alone plans for $500 million in 2007. "One-quarter of the roast and ground coffee market" is what the Senseo company and brand to be launched here by Sara Lee is doing in the Netherlands.
1,000 servings per year per machine is an estimate as reported February 19th by Delroy Alexander. If penetration is 25% of our 108 million consumers, that's about 108 million, that 27 million times 1,000 servings divided by 18 servings for $3.99. Ka ching! Big. [$221.67 per 1,000. Times 27 million is 5,985 million, about $6 billion.]
"According to media reports, P&G's competing product will be in test markets later this month, in Boise, Idaho. Apparently the Applica from Black and Decker will be the first machine.
There is a lot we can all learn as we watch these companies battle in the cup-at-a-time market. Ask Exxel by email for cup-at-at-time updates if you want to stay apprised.
Bruce
Bruce W. Lynch
February 20th 2004
3 Titans are entering the US home coffee market. We expect (see below) they will generate about $6 billion per year in the home coffee market. Kraft, P&G, and Sara Lee soon will join Salton (SFP) who entered with Melitta brand in September 2003. Kraft (KFT) already has $125 mllion revenue per year in Europe and is growing fast. Sara Lee (SLE) pre-releases with Amazon.com on March 19th.
What coffee product can create a new and growing home coffee market? Single serving coffee brewed fresh in one minute rather than 5 or 6 minutes. Here in the Boston area offices, we have seen the such a product for years. From Green Mountain (GMCR) anyone in the office can grab a small cup with the grounds of their current whim, perhaps viena roast, or kenya aa.
The market impact could be exciting, for Folgers at P&G (PG), for Braun and for the Carte Noire coffee from Kraft, and for Sara Lee who has already 5 million cup-at-a-time coffee machines installed since their launch of Senseo in 2001. On February 19th Sara Lee announced that their product launch in the US will be made sooner. Advance orders are to be shipped on March 19.
So, let's consider the possible economics. $3.99 is the suggested price for 18 servings of the pods, the single serving cups.
One to One under the Melitta brand is from Salton the NYSE traded company that also sells George Foreman grills." Salton Chief Executive Leonhard Dreimann said in February the market for the coffee pods used in the machines could be worth billions if consumers here warm to the technology." [from 2/19 Chicago Tribune, by Delroy Alexander]
In that same article, Delroy points out, "A 34.5-ounce can of Maxwell House, which makes about 240 servings, retails for about $6.99." $3.99 for 18 is $0.221667 per serving. $6.99 for 240 is $0.029125. So, $1.00 spent at $6.95 for Maxwell House is (an aside $10.15 at Starbucks is $.04291666) $7.61 at $3.99 for P&G's Millstone brand's cup-at-a-time. [See P&G's new Home Cafe coffee maker.]
In a February 18th story, Paul Block, president of Sara Lee Coffee and Teas Consumer Brands. "Coffee consumers are demanding individual choice, convenience and premium quality on a cup-by-cup basis."
How big a market could it be, realistically? Sara Lee alone plans for $500 million in 2007. "One-quarter of the roast and ground coffee market" is what the Senseo company and brand to be launched here by Sara Lee is doing in the Netherlands.
1,000 servings per year per machine is an estimate as reported February 19th by Delroy Alexander. If penetration is 25% of our 108 million consumers, that's about 108 million, that 27 million times 1,000 servings divided by 18 servings for $3.99. Ka ching! Big. [$221.67 per 1,000. Times 27 million is 5,985 million, about $6 billion.]
"According to media reports, P&G's competing product will be in test markets later this month, in Boise, Idaho. Apparently the Applica from Black and Decker will be the first machine.
There is a lot we can all learn as we watch these companies battle in the cup-at-a-time market. Ask Exxel by email for cup-at-at-time updates if you want to stay apprised.
Bruce
Bruce W. Lynch
February 20th 2004
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