Onecup's departure does not signal the end of capsule coffee maker , There is still room

Would you buy a coffee machine to drink coffee every day?

As we all know, coffee, as an imported product, is very popular abroad. Many people cannot live without coffee. From breakfast to afternoon tea, coffee appears. However, there are not many people drink coffee in China, and they are generally concentrated in the first-tier cities, especially Shanghai. When coffee first arrived in China, it was labeled as a "high-end drink". In addition to the relatively expensive price, which costs tens of yuan per cup, another reason is that consumers are basically white collars and coffee has become a way for them to show their Social status and enhance personal charisma.

Six or seven years ago, when coffee wasn't popular in China, many white-collars would often hold their laptops, order a Starbucks, and then sit for a whole afternoon. Maybe they work really hard, or maybe they just use the Starbucks atmosphere to stand themselves out. However, it cannot be denied that it is precisely this trend that position coffee as a "high-end drink" higher and higher and then distance coffee from consumers. As a result, many consumers who simply like to drink coffee and do not have such high taste requirements gradually turned their eyes towards products such as instant coffee and coffee capsules, which fueled the explosion of capsule machines for a long time.

However, in recent years, many coffee shops have sprung up in China, and a group of brands led by Ruixing have reduced the price of coffee to less than 20 yuan（USD3）, which has threatened the development of capsule coffee makers and other products to some extent. Recently, the withdrawal from the market was announced by the independent sub-brand Joyoung Onecup, which focuses on the research and development of capsule coffee makers and drinks.  The brand have been on market for nearly 10 years and launched 4 popular models of capsule coffee maker, while now it has to exit the market. Does this mean the end of the era of capsule coffee maker and what’s next?

The capsule coffee maker market is shrinking

Before coffee became popular in China, there were not so many coffee shops in the market, mainly Starbucks, Shangdao Coffee and other brands. The store's relatively high-end decor, combined with the fact that the price of coffee itself is not cheap, has made coffee popular primarily with upper-class people, a scene where many white-collars drink coffee at Starbucks with laptops in their hands. However, with the deepening of consumers' awareness of coffee and the emergence of coffee beverages on the market, more and more people want to try this "foreign Chinese medicine". Therefore, in order for mass consumers to drink coffee at a lower cost, capsule coffee makers were created.

Capsule coffee makers were also flowing into China from overseas, with brands such as Nespresso of Nestlé  being the first to bring products to China. All of a sudden, many brands such as Xiaomi Sub brand Xinxiang and Joyoung's Onecup joined one after another, sparking the capsule coffee craze in China. In 1H 2019, the sales volume of the domestic coffee machine market was 630,000 units, with sales of 700 million yuan(USD70M), of which retail sales units and retail sales value of capsule coffee makers increased by 23% and 27.1% year-on-year, respectively . In the first 10 months of 2021, capsule coffee makers accounted for 28.2% of the online coffee machine market and 35.6% of the offline market, which shows great development potential.

The reason capsule coffee is so popular and growing so quickly is mainly due to the following three reasons: First, the making cost is quite low. Compared with the price of about 40 yuan(USD5.7) per cup of Starbucks, coffee pods cost only 4~6 yuan (USD0.7 )per cup; Second the process is very simple and convenient. For example, the capsule coffee maker launched by Joyoung Onecup supports one-button making, 30-second drinking, automatic cleaning and other functions, which is almost a no-brainer operation; Third, there are many coffee taste options, which meets different needs of consumers. For example, Nespresso has over a dozen types like Apezio, Casa and Rivanto with many flavors to choose from.

However, the development of capsule coffee makers has not gone smoothly. With the gradual lowering of the price of automatic high-pressure coffee machines and semi-automatic high-pressure coffee machines, these high-end coffee machine that can make pure taste are gradually replacing the market share of capsule coffee makers. The market share in 1H this year shows that, thanks to convenience and stability, fully automatic high-pressure extraction machines accounted for nearly 60% of sales, and semi automatic high-pressure extraction machines and capsule machines for about 20% each. The data shows that high-end coffee machines have seriously threatened the living space of capsule coffee makers, which may be why Onecup decided to pull out of the market at this time.

Semi-Automatic Bean To Cup Espresso Machine Coffee Maker With Grinder & Steam Wand

The reason why the capsule coffee maker will be replaced by other products so quickly, Xiaolei believes that there are two reasons as follows. First, though coffee capsules are rich in flavor, tastes are fixed, which may not suit most people's preferences. Moreover, the taste of espresso and extracted coffee are completely different, and people who are used to extractive drinking generally do not like espresso. Therefore, capsule coffee makers can only meet the needs of a small number of people and are not a popular choice.

Secondly, the emergence of Lucking Coffee and other coffee brands has brought coffee from luxury beverages to the ranks of main stream beverages, most of which are priced around 20 yuan(USD3). In addition, stores and convenient take-away platforms make drinking coffee more convenient and cheaper than before, and the flavors are quite rich and diverse. The popularity of cheaper coffee has made consumers less demanding of capsule machines, which is also an important reason for the gradual decline in sales.

Third, Defects in the product itself and changes in consumer demand led to a gradual decline in sales and market share of the capsule coffee makers. This may not have much impact on the development of the entire coffee machine market, after all, high-end machines are still in a period of growth. However, time left for capsule coffee makers is really short. If you want to get out of the slump and achieve growth, you may need to make major changes to the products.

How shall the capsule coffee maker develops?

In fact, the biggest difference between capsule coffee makers and traditional and high-pressure coffee makers is the taste. Therefore, if you want to increase the sales of capsule machines, you may need to improve the taste or experience.

Xiaolei believes that the capsule coffee maker brand can understand the popular flavors on the current market through market research and launch several models to make them popular. As long as there are one or two flavors that consumers can successfully pay for, it can easily increase the machine's sales. Like Green Mountain Coffee in the United States, it started out as an old-fashioned maker of espresso machines, and its sales were pretty poor. Later, they switched to selling coffee only, while the coffee machine was free, and focused on brewing specialty coffee. The sale of coffee capsules saw the market value increase 150 times in 6 years, and at one point even surpassed Starbucks.

Coffee makers are not consumables, but those who like to drink coffee can consume 2 to 3 coffee capsules a day. You can't rely on coffee machine sales to drive capsule sales. Instead, you should reverse your thinking and introduce some coffee capsules with popular flavors or good reputation to attract consumers to buy capsules and coffee machines. Like Lucking Coffee, the launched Velvet Latte and Raw Coconut Latte have successfully become popular drinks and remain the top-selling flavors. To support the survival of coffee maker brands, the choice of coffee capsule flavor is really important.

Of course, there is another way to improve the taste of coffee capsules, and that is to partner with coffee brands such as Starbucks, Maxwell, Nestle. They have profound marketing experience and consumer base and know how to make coffee flavors people like. Therefore, cooperation between coffee machine brands and traditional coffee brands is also one of the effective ways for them to survive. Joyoung Onecup once collaborated with the Costa brand, but the collaboration came too late and failed to resurrect the brand. But this should be a more feasible approach, and perhaps coffee maker brands need to keep trying.

In addition, the brand can also start with the coffee machine itself and equip the capsule coffee maker with more intelligent and automatic functions, making the product more advanced and easy to use, and brew coffee with a milder taste. The market orientation of the capsule coffee maker is affordable and convenient. It is difficult for a product function to be as perfect and thoughtful as a high-end coffee machine, but can it further improve the product function, such as the milk frothing function to add sense of ceremony for consumers and allows consumers to precisely refine the taste of coffee by adding milk.

Regarding the current market situation, there is still some demand for capsule coffee makers, but this share is steadily being eroded by high-end coffee machines. The capsule coffee maker should therefore look for an effective way to break the situation early to avoid the fate of being marginalized.

Source: www.tmtpost.com/6332390.html