The coffee capsule market is likely to be key battleground for the major coffee companies

The big-money merger between Mondelez International and DE Master Blenders is set to shake up the coffee industry at a corporate level and whilst Jacobs Douwe Egberts (JDE), won’t come into existence officially until next year, current market leaders Nestle are already beginning to acknowledge that life is going to be that little bit more difficult with another superpower around.

JDE will harbour a number of high profile brands under its umbrella, and that is causing Nestle to look ahead with what appears to be a worried tone. Speaking about the merger, Nestle’s chief executive Paul Bulcke admitted that the market going to get tougher with the introduction of this new competitor.

However, according to Bart Bect, the co-head of JAB Holdings, the deal that will bring about the formation of JDE might not be the last big-money deal the industry sees in the short-term, admitting that such a proposition was “very possible.” The consensus is that historic coffee brands such as Lavazza and Illycaffe could be the first to be targeted, with good reason.

The battle over coffee real estate is predicted, by analysts, to be focused around coffee capsules and loading up on brands represents a sound investment strategy.

Euromonitor states that sales of coffee capsules have trebled over the past five years, and further increases are more than likely.

America is Keurig’s – at the moment, but Nestle’s traditional European dominance could be on the wane – providing the perfect opportunity for JDE to steal some ground from their Swiss based rival.

The patents used by Nestle on their Nespresso machines began to expiring some eighteen months ago which has eaten into their profits. With the advent of these cheaper, non-licensed pods popping up on the shelves of retailers, some think that an eventual transposition of the Nespresso brand could happen. One such person who believes that is Lawrence Hutter, of the services firm Alvarez & Marsal: “They (Nestle) will promote Nespresso as a luxury brand with a premium positioning and a focus on boutiques,” he says.

Currently, the array of Nespresso machines does include an option to meet most budgets but if they are to align themselves as a high-end brand JDE’s Tassimo line could inherit a large customer base by default.

With Coca Cola increasing their stake in Keurig Green Mountain to 16% and Tata’s acquisition of Bronski Eleven, no matter where you are in the world some of the most interesting battles in the coffee sector will be concerned with coffee capsules, whether purists like that or not.