Food companies brew up single-serve machines

New percolators haven't hurt Starbucks sales - yet

Phil Timberman believes his single-serve coffeemaker is the greatest improvement in brewing since the percolator was invented in 1865.

“No more trying to figure out how many beans to grind or measure out. Pop in a pod, hit a button and get a great cup of joe,” the coffee lover said.

Rolled out last year, the first generation of single-serve machines makes little more than coffee. The next-generation machines, which are being introduced in time for the holiday season, do a bit more.

They claim to make coffee-shop-quality coffee, lattes, cappuccino, hot chocolate and tea. And some of the nation’s biggest food and candy companies, including Kraft Foods Inc., Sara Lee Corp., Mars Inc. and Procter & Gamble Co. are staking millions in marketing dollars on a product they hope could emulate the success of bottled water.

Suddenly Starbucks, which has been facing growing competition from the likes of McDonald’s, Burger King, Dunkin’ Donuts, 7Eleven and White Hen, all of which are introducing premium coffees, may be wearing a bull’s-eye on its back.

Given the choice, will consumers continue to shell out $3 for a Starbucks?

Kenneth C. Herbst, a food marketing expert at the College of William and Mary in Williamsburg, Va., believes Starbucks has little to fear – for now.

Eric Warren demonstrates a new coffee maker for his wife, Leslie, at their home in Evanston, Ill. The Flavia machine has programmed modes for making various hot beverages, from cappuccino to hot chocolate.

“There is something unique about Starbucks,” he said. “Starbucks is a product experience as well as an emotional experience. What Starbucks offers the consumer is that other stop that is part of your daily trek. It is part of the joy of getting up in the morning.”

Still, Herbst believes single-serve machines could change the coffee consumption habits of American consumers.

That’s what the food companies are hoping, even though first-year sales of the machines and the needed coffee totaled less than $100 million.

Rather than using the common brewing method that consists of a drip coffeemaker producing anywhere from a single cup to a food-service-style 60-cup machine, the new systems rely on a pod into which the ground coffee is sealed. Water sufficient to make one cup is forced through the pod. The pods are tossed out once the coffee is brewed.

Coffee pods cost 21 cents each on the low end to as much as 99 cents for a latte or cappuccino. Pods for the first-generation machines can be purchased in most grocery stores and cost as little as $15 for a 72-pod package.

However, pods for the new machines, which have a more restrictive technology, are not as widely available. They must be obtained from the store where the machine was purchased or online. They cost up to $10 for an 18-pod package.

“This is a new concept, and consumers need to be educated,” said Brenda Barnes, chairman and chief executive of Sara Lee, who was part of the effort by PepsiCo Inc. to introduce Aquafina bottled water.

There are two first-generation, single-serve coffeemakers. Sara Lee’s Senseo costs $69. Procter & Gamble’s Home Cafe machine, made by three companies, costs as much as $120.

There are two second-generation machines. Kraft’s, called the Tassimo, costs $169, while the Mars machine, marketed under the Flavia brand, costs $119.

Sara Lee is backing its Senseo brand, now in its second year in the U.S. market, with a $60 million marketing budget. Kraft has budgeted about $75 million for its effort.

Sara Lee is hoping that America will emulate Europeans, who have purchased more than 5 million Senseo machines since they were introduced in 2001.