Transition towards aluminum shakes up the capsules industry

Single-serve capsules, from plastics to aluminum

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Aluminum
Penetration of compatible capsules. Photo - AMI

AMI Consulting has published a report mapping the global single-serve capsules industry. The report aims to support the development of robust participation strategies by equipping industry players and investors with a comprehensive understanding of the scale of potential for future development, growth dynamics per system, market drivers, and competitive pressures.

All compatible capsules (both plastic and aluminum variants) accounted for over a third of the single-serve capsules market worldwide in 2020, a staggering increase of over 9 billion units compared with 2018. The report highlights a clear trend towards the rationalization of systems, with a clear focus on Nespresso and Dolce Gusto in Europe and K-cup in the US. Those three systems account for 81% of the global market.

Smaller systems may still offer reasonable returns but have limited growth potential beyond home markets. To this end, virtually all proprietary systems fillers have now diversified their brand presence to accommodate Nespresso and Dolce Gusto compatible variants, either in-house or via contract-packing agreements, it said.

Nespresso system is the most significant global capsule platform. The report said in 2020, the production of original Nespresso (including VertuoLine and Starbucks Nespresso) was almost matched with the magnitude of Nespresso compatibles. The compatible Nespresso system was the main contributor to growth, most via aluminum packaged variants. The original Nespresso platform is struggling to sustain its previous dynamics. The deal with Starbucks, whereby Nestlé now fills and markets Starbucks branded Nespresso capsules, opened the door for global mainstream retail rollout platform to mitigate the risks.

The compatibles’ need for differentiation resulted in capsule material and barrier specification adjustments, impacting positioning. The (Nespresso) market is now in the process of transition from plastic to aluminum. As a result, the industry has been gearing up to accommodate the change, both on the filling side – with investment in aluminum filling lines and retrofits; and on the empty capsule supply side, whereby compatibles suppliers have to diversify their portfolio to include aluminum. There are very high entry barriers with aluminum, so the competitive context has been intense, and the ‘aluminum game’ will determine new winners and losers.

Nespresso has put all the efforts in establishing the collection and recycling infrastructure for its used capsules. Following Nespresso’s open invitation in March 2019 to join forces in its recycling scheme. Further milestone announced by Nespresso is an increase in material circularity with using 80% recycled aluminum content.

Meanwhile, innovation in plastic capsules focuses on recycling-ready PP solutions, including polyolefin-based lidding films. Provided that other materials in the multilayer structure do not exceed 5%, used capsules can, in theory, be recyclable in the PP stream.

In parallel, bio-resins have developed a meaningful presence in the value chain. Albeit their penetration is still small considering global volumes, the current market context is attractive and facilitating further developments.

The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.

The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future.

Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.

As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.

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– Naresh Khanna

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