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Pods and K-Cup Costs Higher Than Best SOs: New York Times Article

Postby Anvan on Wed Feb 08, 2012 4:26 pm

There's an interesting analysis in the February 8, 2012 New York Times about the relative costs of Nespresso and K-Cup pod coffee compared to consumer brands, specialty and "artisinal" coffee.
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Postby tekomino on Wed Feb 08, 2012 4:48 pm

Yes, James also posted note about this on his blog.

I think comparison is somewhat flawed. The single serve coffees have a lot more "built" into the product than "simple" roasted coffee beans. They have convenience and usability engineered into the product and all you need is relatively inexpensive brewer to use them. Is it really a surprise that people are willing to pay more for convenience, ease of use and time savings?

In James's post he tries to draw parallel between price point of single serve coffee and what specialty roaster are selling and he imagines what could specialty roasters do if they had that price point. But products are different and unless specialty roasters provide convenience, ease of use and time savings that single serve coffees do, I don't see how they could reach that price point. These are two different products really.
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Postby Beezer on Wed Feb 08, 2012 6:29 pm

Obviously people are willing to spend more for convenience, but I wonder if they realize just how much more they're really spending. $50 a pound is quite a bit for a little added convenience. Even if you factor in the cost of buying a decent French press or drip coffee maker and competent grinder, which is around $100 - $400 depending on what you buy, it's still going to be much cheaper in the long run than buying a Nespresso or Keurig and all the associated pods. Of course, even pods are cheaper than going to Starbucks every day for your frappacuccino.
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Postby SlowRain on Wed Feb 08, 2012 9:23 pm

Very few people look at the whole cost anymore. Just look at all the cell phones sold on 2-year contracts, buy-now-pay-later schemes, credit card debt, etc. Marketing departments have convinced us not to look at the total cost of ownership, just to look at the per-unit cost and the monthly payment.

As was mentioned, convenience is the biggest selling feature. Never underestimate how much people are willing to spend for something mediocre so long as it's simple. Nespresso also has the added bonus of being endorsed by the classy Mr Clooney, another win for Marketing and Brand Management over common sense.

I felt James's blog article was as much a rallying call to justify increased prices as anything. Sort of a why-should-average-tasting-coffee-be-priced-so-expensively-while-our-great-coffee-is-fairly-priced and our-customers-are-more-sophisticated-so-they-should-pay-more. He's always had an unhealthy love of Marketing. If he wants to compete with Nespresso, then a consortium of roasters is going to have to hire either Johnny Depp or else Leonardo DiCaprio. And we all know what impact that will have on the price of our coffee without impacting taste.

I'm grateful for that price comparison. I think it shows the cost of being lazy and how companies are able to hose consumers by talking up per-unit cost.
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Postby King Seven on Thu Feb 09, 2012 8:19 am

I said that I don't think coffee from genuine speciality roasters now is incorrectly/unfairly priced. My point is that we're terrified of pushing forward on price, despite being excited about what being able to pay producers 2-3 times what we do now could do for quality and sustainability. I'm interested in coffee getting better, and the rate of this improvement is inevitably linked to the economics of its retail.

It is possible to create a value proposition where coffee at $50/lb doesn't seem ludicrous. Nespresso/Keurig have done this through convenience - a route we don't want to take. Is it not worth thinking about what would be necessary create a sufficient value while maintaining quality? It may not be possible. Great coffee may never be truly worth more than $30 per pound of whole bean. Of course I hope this isn't the case.

He's always had an unhealthy love of Marketing.


This is an interesting assertion. I'd enjoy an explanation of this.
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Postby Bluecold on Thu Feb 09, 2012 8:40 am

King Seven wrote: My point is that we're terrified of pushing forward on price, despite being excited about what being able to pay producers 2-3 times what we do now could do for quality and sustainability. I'm interested in coffee getting better, and the rate of this improvement is inevitably linked to the economics of its retail.

There have been multiple coffees such as the Geisha Esmeralda and other very exclusive coffees that were very expensive, at well over $50 per pound (eg) I have no idea on how well such a coffee sells, but it seems that roasters at least try to raise the bar to very high levels at very high prices and that market for those coffees at those prices exists, albeit very small.

I personally feel that the only thing you really can do is educate people on really great coffee. But some people just don't care and will happily pay for convenience and there is no option than to accept that and try to convince the next person. The last 80 years has mostly been a decrease in quality and an increase in convenience, brew method wise. It's a monumental task to reverse that trend. The same way some people are happy with horribly overpriced Bose audio systems whereas in the seventies, everybody had shiny amplifiers that even now stomp all over any contemporary consumer Bose product.

PS. I enjoy reading your blog and like that you ended your digital sabbatical :)
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Postby farmroast on Thu Feb 09, 2012 12:43 pm

Reminds me of discussion I had with a young woman at a nice cafe. I told her I roast, brew and make my espresso at home. The first word out of her mouth was "WOW". Followed by "how is it possible for you to do that and is it any good"? Then followed by, "you must have worked for a coffee co. at one time". She then explained how it takes highly trained professionals and very expensive machines to make good coffee. And that was why she had a k-cup type machine at home. "It keeps me from screwing things up". "They make things as fool proof as possible".

I mentioned the option of a Clever Dripper and a modest priced burr grinder and the fresh whole beans sold at the cafe but it was soon clear that her trust was narrowed to the magic that happened in her machine and in the sealed k-cup and with the professionals and fancy equipment at the cafe. Convenience of the home machine was actually not as much of a factor to her as the magic the high priced machine and pro's do. She said that she actually likes when she can DIY.

I left thinking about what we had created. It reminded me of my hobby as a coffee/espresso amateur and roaster. Where so many Pro's and assoc. have refused to recognize us and put down our abilities for years.
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Postby Bluecold on Thu Feb 09, 2012 1:11 pm

farmroast wrote: "you must have worked for a coffee co. at one time". She then explained how it takes highly trained professionals and very expensive machines to make good coffee.

That is basically the exact same false rhetoric used by nespresso. And it works.
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Postby Randy G. on Thu Feb 09, 2012 1:39 pm

The cost of convenience, indeed. The tradeoff goes beyond that, because with many of the conveniences we pay dearly for there is also a quality tradeoff. I would surmise that most people do not ever realize it. I didn't think much about some of these until recently. We have begun watching finances more closely looking for ways to save, but it has led us to eat much better. A lot of my friends think we are fairly out there anyway, being vegetarians for about the last 33 years or so along with no artificial ingredients and no transfats in our diet.. But lately we have been making our own peanut butter, grinding our own wheat for our home-baked bread, making our own tahini from home-roasted sesame, homemade hummus, re-fried beans from scratch, and I made tzatziki last week, and more. All these take a little bit of time, but all are less expensive, and more importantly, have superior taste and nutrition.

So the point is that it is no surprise that our culture buys into the convenience factor above and beyond other considerations (Wonder bread, skippy peanut butter, Oscar Meyer Lunchables, etc.). So as long as coffee is seen as a drug over and above a beverage to enjoy, the trend will continue.

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Postby Beezer on Thu Feb 09, 2012 2:17 pm

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