The launch comes just as the European Commission drafts a new packaging regulation which could see capsules made of standard aluminium and plastics disappear from shelves.
First announced back in October, the launch of home-compostable pods became live in France and Switzerland this week, as the result of 3 years of R&D for Nespresso. The company, which reported more than CHF6 billion in revenue in FY2022, has been actively working towards its sustainability efforts, through the “Positive Cup” initiative. The release of these compostable cups represents a key milestone for the brand, especially in the context of increased scrutiny regarding the environmental impact of its single-use products.
Following a needed market innovation
With an estimated market size of $25.9 billion in 2022 and a +7.3% CAGR in the next 5 years, the coffee pods and capsules segment is a lucrative part of the coffee category, whose growth has been driven by a rise in at-home coffee consumption and appreciation for convenient, high-quality coffee-making options that recreate the café experience. Around 14 billion Nespresso capsules are sold every year, making the brand a dominant leader with the brand equity of a luxury brand. However, both the rise in competition in the segment as well as increased scrutiny of the impact of single-use capsules drove the company to take action.
The fact that third-party capsules can be used for Nespresso machines, that smaller players started launching biodegradable capsules and that scrutiny is rising in regards to packaging waste and pollution definitely drove Nespresso to explore more sustainable packaging options. After three years of research, the brand is now releasing a collection of paper-based home-compostable pods first available in France and Switzerland as a pilot to gather customer feedback. This follows the footsteps of dozens of smaller brands and retailers that launched compostable capsules in an effort to minimize the negative impact of single-use products.
Compostable pods are part of a wider vision of Nespresso’s sustainability commitments
As shared in its latest report, Nespresso has made circularity a pillar of its supply chain, from using 80% of recycled aluminium in home capsules to offering refurbished coffee machines through the RELOVE program, available in ten countries so far. The company puts in efforts to facilitate the recycling of home pods, however as of today only 32% of consumers recycle theirs. The aim is to reach 50% by 2025, following efforts to drive consumer awareness around recycling while facilitating collections and drop-offs with local municipalities. In Switzerland, 65% of users recycle thanks to high awareness and strong behavior towards recycling and higher collection capacities.
In addition to these consumer offerings, Nespresso is actively focused on its environmental impact and more recently on its carbon footprint, with the goal to reach net zero in green coffee emissions by 2030. This objective is part of its bigger positive impact ambitions, rooted in supporting regenerative agriculture, empowering communities, promoting circularity and decarbonizing the value chain through clear actions mentioned its its sustainability report.
The company also achieved the B Corp label in 2022, which didn’t come without controversy. Having just passed the minimum score of 80 across five business criteria – respectively governance, workers, community, environment and customers – with a score of 84, the business did face some backlash, mainly from the Fair World Project, which casted doubt on the validity of this certification given allegations of human rights violations in coffee beans farms.
Releasing a home-compostable pod is a worthy innovation that could mitigate the environmental impact of single-use aluminium pods ending up in landfills, while still providing the same benefits to consumers. However, how big is the actual impact of this initiative? While a market like France, where food compost will likely be mandatory in 2024, seems like a good match, the reality is that in most countries, a very small minority of households – and municipalities – compost food waste. So while developing these types of products is a step in the right direction, could a more impactful initiative be to focus on drastically accelerating the recycling of aluminium pods? And could the next step be reusable capsules?