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October 02, 2014 02:00 AM

Battle brewing over single-use coffee pods

Michael Lauzon
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    Club Coffee LP
    Club Coffee LP plans to bring a fully compostable single use coffee pod to the market next year.

    UPDATED — A battle is brewing in the world of single-service coffee pods. A major Canadian roaster of the beverage beans is suing North America's leading manufacturer and supplier of the pods and single-serve coffee machines.

    Toronto-based Club Coffee LP announced Sept. 30 that has filed a suit against Keurig Green Mountain Inc. of Waterbury, Vt., alleging anti-competitive activity. Club Coffee is seeking C$600 million (US$540 million) in damages in the suit filed in Ontario Superior Court in Toronto.

    Club Coffee alleges Keurig's next generation of coffee machines, Keurig 2.0, is designed to reject coffee pods that aren't the K-Cup pods supplied by Keurig or pods licensed by Keurig. The Toronto company also states in a news release that Keurig “spreads baseless and disparaging lies about competitors' coffee pods to mislead consumers and coerce third parties into exclusive agreements.”

    “We knew consumers would be staring at a virtual Keurig monopoly unless we took action,” noted Club Coffee CEO John Pigott in a news release. “Keurig should welcome healthy competition and the innovation it creates instead of trying to block us.”

    “Consumers must be able to access value, choice and innovation,” stated Rob Russell, chair of the competition law and antitrust group at Toronto law firm Borden Ladner Gervais LLP.

    At stake is a North American market of 10 billion pods a year, most of which contain plastics in a multi-material construction. Polypropylene is one of the dominant plastic materials.

    The single-serve coffee market has grown to a reported $3 billion per year business accounting for some 40 percent of what North American consumers spend on the beverage. Five years ago its market share was only 4 percent. Single-serve's rapid growth has led to piles of waste cups and suppliers are trying to find ways to cut back on the garbage.

    Club Coffee is on the verge of offering coffee in pods produced from bioresin that it claims makes the cups completely compostable. Keurig says it wants to make its pods fully recyclable by 2020. Some municipalities will recycle the plastic potion of pods but consumers must separate parts such as filters and aluminum foil from the plastic before putting it a recycling bin.

    Club Coffee has spent C$50 million (US$45 million) in the past two years on an 85,000-square-foot factory to make its pods. It is working with researchers, including at the University of Guelph, to access the latest in bioplastics technology. In its new pods the ring, filter and lid are made of certified compostable materials. It is working with municipalities in Canada to convince them to accept such pods in their organic waste programs.

    Keurig's patents on its K-Cup coffee machines expired in 2012, sparking a crush of new players in the market. Keurig has been trying to protect itself from entrants by forming partnerships. Still, Starbucks, Mr. Coffee, Bunn and others have come up with their own single-cup machines. Single-service coffee and other beverage makers are the the dominant appliance sold in housewares, according to Club Coffee. Already there are 25 million of the brewers in North America, the firm estimates.

    Keurig said in an Oct. 2 email to Plastics News that it had not seen Club Coffee's complaint and so it could not comment on it. The firm said its 2.0 system has interactive technology to assure good quality with each cup.

    Interactive features in the 2.0 system are “critical for performance and safety reasons that the system only brews Keurig brand licensed packs,” Keurig said.

    Keurig uses polypropylene in its Vue and K-Carafe packs, which account for about 5 percent of sales, but most of its K-Cup packs are made of multiple layers that are difficult to recycle. It eventually will convert all the multi-layer pods to PP to make them fully recyclable. It is working with recycling bodies in government and the private sector to help ensure “a robust recycling system” for PP.

    Early this year Mother Parkers Tea & Coffee debuted its EcoCups based on polystyrene. The new pods are being used for loose-leaf tea but in 2015 the Mississauga, Ontario, company will adopt them to contain coffee.

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