New Coffee Pod Innovations from Nespresso and Keurig Aim to Minimize Waste

Nespresso and Keurig have introduced new coffee pod innovations designed to minimize waste. These advancements demonstrate the companies' commitments to sustainability by improving the environmental footprint of their popular products. This move is part of a broader industry trend towards more eco-friendly packaging and product design.

‍KEY POINTS‍

• In-home coffee brewing trends show a notable rise in the popularity of single-cup brewers, marking them as the second most favored method after drip coffee makers. Since 2017, there has been a significant surge, with a 45% increase in American households owning single-cup brewers.
• The U.S. coffee pods and capsules market, primarily dominated by industry giants Keurig and Nespresso, is poised for substantial growth. Projections indicate a surge to $10.1 billion by 2028, a considerable uptick from the $8 billion reported just last year.
• However, amidst this growth, both Keurig and Nespresso are addressing environmental concerns associated with their traditional plastic and aluminum pods, notorious for their low recycling rates. Both companies are rolling out innovative alternatives to mitigate environmental impact. Keurig, in particular, is introducing new brewing methods that eliminate reliance on conventional pods, albeit requiring consumers to invest in new brewing machines.

The rise in popularity of single-brew home coffee systems such as Nespresso and Keurig has undoubtedly revolutionized the convenience of at-home caffeine consumption. However, alongside this convenience comes a pressing concern: sustainability.

In response to growing environmental apprehensions, companies like Keurig Dr. Pepper and Nestle-owned Nespresso are actively seeking solutions to mitigate the waste generated by the pod-centric approach to coffee brewing. Their efforts are focused on introducing plant- and paper-based pods that are compostable, thereby offering a more environmentally friendly alternative. These sustainable pods are gradually becoming available in more markets, providing consumers with options to reduce their ecological footprint while enjoying their daily cup of Joe.

Efforts to promote sustainability in coffee consumption are particularly crucial given the robust coffee culture prevalent among Americans. According to the latest National Coffee Data Trends report from the National Coffee Association, more American adults opt for a daily cup of coffee than any other beverage, surpassing even tap or bottled water.

Single-cup brewers have emerged as the second most favored method for at-home coffee preparation, trailing only traditional drip coffee makers. Notably, ownership of single-cup brewers among Americans has surged by 45% since 2017, as highlighted by the National Coffee Association.

In terms of market performance, Keurig's coffee sales in the U.S. soared to over $4 billion last year, while Nespresso's sales were estimated at approximately $1.5 billion, according to Wall Street analysis. Projections from market research firm Mordor Intelligence indicate significant growth in the U.S. coffee pods and capsules market, expecting it to reach $10.1 billion by 2028, up from $8.4 billion reported last year. These figures underscore the immense commercial significance and consumer demand driving the coffee pod industry.

The growing demand for environmentally friendly and sustainable coffee pods has spurred the introduction of biodegradable and compostable options in the market. One notable example is NEXE, a Canadian-based packaging solutions supplier, which launched a range of compostable coffee pods in the U.S. and Canada in 2021. Marketed as Keurig-compatible, NEXE also has plans to expand its offerings to include Nespresso-compatible pods in the near future.

However, despite these advancements, several challenges persist within the industry. In the United States, the recycling system remains disjointed, with only 73% of households having access to recycling facilities. Moreover, just 21% of household recyclables are effectively captured, according to findings from The Recycling Partnership's 2024 State of Recycling Report. Additionally, strained supply chains and lengthy development cycles from product conception to market launch present obstacles for companies. Furthermore, garnering customer acceptance for new sustainable products poses a significant challenge for businesses aiming to produce eco-friendly coffee pods. Addressing these challenges will be critical for the widespread adoption of sustainable alternatives in the coffee pod market.

Dillon Baxter, the founder and chief executive of PlantSwitch, a material-science company specializing in plant-based alternatives for coffee pod manufacturers, highlighted the challenges companies face in ensuring the environmental sustainability of their products. "I think these companies are trying to find something that if they don’t end up getting recycled — which a lot of them don’t unfortunately — what happens then," Baxter noted. "It takes time and it’s something that is typically an additional cost and so it can impact their bottom line. It’s not as easy as some people might think to transition."

Despite these obstacles, both Keurig and Nespresso, the leading makers of at-home coffee pod systems, are actively pursuing initiatives to address environmental concerns and reduce waste. Let's take a closer look at their strategies aimed at ensuring that coffee pods do not end up contributing to overflowing landfills.

Keurig Dr Pepper’s new plastic-free pod is coming

In a significant move towards greater sustainability, Keurig Dr. Pepper unveiled its latest innovation in March: the K-Rounds pods. These pods mark a departure from traditional plastic pods, instead incorporating a plastic-free design wrapped in a plant-based coating. This innovative approach eliminates the need for recycling, addressing a longstanding challenge for the company in its sustainability efforts.

Monique Oxender, the Chief Corporate Affairs Officer at Keurig Dr. Pepper, emphasized the rationale behind this initiative, stating, "Where recycling happens, it’s a great solution," acknowledging the effectiveness of recycling where feasible. However, she noted the inconsistency in recycling practices, underscoring that it does not entirely solve the problem. With the introduction of K-Rounds pods, Keurig Dr. Pepper aims to offer a sustainable alternative that circumvents the challenges associated with recycling, furthering its commitment to environmental stewardship.

According to Monique Oxender, the Chief Corporate Affairs Officer at Keurig Dr. Pepper, the decision to eliminate plastic from its pods has been in the works for approximately five years. While beta testing for the new plastic-free pods is scheduled to commence in the fall, there is no definitive timeline for their widespread availability. Oxender emphasized the company's commitment to ensuring the effectiveness of this sustainability initiative before scaling it up. "We feel confident that this is the future of the Keurig system, we just want to make sure, before we take it to scale, we have it right," she stated.

The transition to the new plastic-free pods will require consumers to purchase a new brewer. However, they will still retain the option to brew existing K-Cup pods, providing a broader variety of flavors. Keurig Dr. Pepper anticipates that its new pods will receive certification as compostable and is currently navigating through the certification process to validate their environmental credentials.

Keurig's journey towards sustainability continues to evolve. In a significant step towards improving recyclability, the company transitioned its K-Cup pods from No. 7 plastic to recyclable polypropylene (also known as No. 5 plastic) by the end of 2020. However, this change, while enhancing recyclability options, did not fully address the issue at hand.

Despite No. 5 plastic being widely accepted in curbside recycling systems across North America, certain polypropylene containers, including coffee pods, still face limited acceptance in many communities. Keurig is actively collaborating with individual communities and recyclers to expand the accessibility of pod recycling in local areas. However, as Monique Oxender noted, this process requires time and ongoing efforts.

In addition to enhancing recyclability, Keurig is dedicated to reducing its overall plastic footprint and integrating recycled plastic into select brewers. Looking ahead, the company plans to introduce a mail-back recycling program for K-Cup pods via Keurig.com later this year. This initiative will provide consumers with an alternative recycling option for their pods if they are unable to recycle them in their local communities. Through these multifaceted approaches, Keurig remains committed to advancing sustainability initiatives while addressing the complexities of plastic waste management.

Nespresso’s paper-based compostable pod in Europe

Nespresso takes a distinct approach to sustainability with its use of aluminum capsules, which offer excellent recyclability. Jessica Padula, Nespresso's U.S. head of sustainability, emphasizes the unique properties of aluminum in preserving the flavor and taste of coffee. "It’s really unlike any other material today to protect the flavor and taste of coffee," Padula notes.

The company's reliance on aluminum for over three decades underscores its commitment to maintaining the quality of its coffee products while prioritizing environmental considerations. Padula highlights the challenges associated with plastics, noting that not all types are recyclable.

To facilitate recycling, Nespresso provides consumers with the option to recycle their capsules through pre-paid shipping labels. This service is accessible at approximately 88,000 UPS drop-off locations across the United States. By offering convenient recycling solutions, Nespresso aims to encourage responsible disposal practices among its consumers while promoting sustainability throughout its supply chain.

Tom Szaky, the chief executive of TerraCycle, a U.S.-based recycling business that includes coffee capsule recycling, advocates for making recycling efforts easily accessible to consumers. "When companies invest money to make the effort easy and accessible to consumers through mail-in programs, local store drop-off, or curbside pickup, it raises the likelihood that consumers will recycle," Szaky asserts.

According to Szaky, curbside pickup stands out as the most efficient method for recycling. In New York City, Nespresso has collaborated with the city's recycling contractor to develop special equipment, enabling consumers to recycle their capsules directly from their at-home bins. Jessica Padula, Nespresso's U.S. head of sustainability, mentioned that Nespresso recently expanded its curbside recycling program to Jersey City, New Jersey, commencing this month. This proactive approach by Nespresso aligns with the company's commitment to promoting sustainable practices and making recycling more accessible for consumers across different regions.

"It's about making a meaningful investment so that it's something that's convenient and accessible for consumers, even if it's not curbside recyclable or cannot be designed to be curbside recyclable," emphasizes Tom Szaky, whose company works with both Keurig and Nespresso.

Presently, recycling participation rates in the United States paint a concerning picture: only 43% of households actively participate in recycling. Among those with access to recycling services, only 59% utilize them, and of those who do, just 57% correctly dispose of recyclable materials in recycling containers. These figures fall significantly short of the 90% efficiency benchmark advocated by The Recycling Partnership for an effective recycling system.

For Nespresso, the recycling numbers are even lower. A spokesperson for the company revealed that approximately 36% of U.S.-based Nespresso drinkers recycle their capsules. This disparity underscores the need for concerted efforts to enhance recycling accessibility and awareness among consumers, ensuring that sustainable practices are adopted on a broader scale.

The challenges surrounding recycling have prompted Nespresso to explore alternative sustainable options for its pods. The company initiated pilot programs for compostable paper capsules in France and Switzerland, where its coffee is produced. These capsules, designed to be home compostable, have received positive feedback, according to Jessica Padula.

However, replicating this success in the U.S. presents its own set of hurdles. The considerable time it takes to ship coffee from Switzerland to the U.S. poses logistical challenges. Additionally, while aluminum effectively preserves coffee quality over extended periods, transitioning to alternative materials must not compromise taste. Padula emphasized Nespresso's commitment to maintaining the quality and taste of its coffee products. "We are actively looking to bring a paper option to the U.S., but it has to preserve the coffee quality and taste," she stated. Nespresso's pursuit of sustainable alternatives underscores its dedication to environmental stewardship without compromising on coffee excellence.

Correction: NEXE introduced a range of compostable coffee pods in the U.S. and Canada in 2021, which are compatible with Keurig machines. An earlier version of this article incorrectly stated the current product compatibility. We regret the error.

Source: CNBC