Issue link: https://read.dmtmag.com/i/491350
44 STiR tea & coffee industry international capital (ROIC) with an operating profit per cup of as little as 1-3 cents compared to GMCR which needs to generate 8-11 cents profit per cup to achieve the same ROIC. DeMuth estimates GMCR's competitors can enter the game with a capi- tal investment of $17 per 1000 annual cup capacity versus a capital investment of approximately $36 for 1000 cup annual production that GMCR has spent histori- cally. Equipment is now scaled for the task at hand, easier to clean and no longer requires a $2 million per machine investment and a 10,000 sq. ft. per filler line. See page 52: Extraordinary Demand Challenges Manufacturers Given this advantage firms like Rogers and Mother Parkers are closing deals on their flexibility, sourcing ability, long-term relationships and availability. Non-woven fi- ber filters means coffee flowing through the cup retains richer flavor, color and aroma, according to VandenBygaart. Shelf life is 15 months for capsules sealed with inert gas. The great advantage to a closed system is consistency, he said. Roasters fix the dose, grind and blend and brewers control temperature, water volume, contact time and pattern of spray. "There are so many variables, attention to every detail is crucial. The process is fully integrated, a marriage between the ingredient in the cup," he said. VandenBygaart would not disclose minimums other than to say "there are defi- nitely benefits to scale." In 2013 a common run on GMCR licensed-equipment was 300,000 units using machines that produced 450 K-Cups per minute, a job that took 12 hours including setup. Order guarantees of 1 million units per year are outside the reach of most regional grocers. Minimums at competing co-packers have since fallen to below 25,000 which is inviting to firms roasting less than a million pounds a year. UpShot™ LBP Manufacturing is an 80-year-old packaging venture that saw the potential of single serve early and moved quickly to create a patented filter-sided Keurig-compatible cup. The UpShot™ Solution "levels the playing field" for small and medium-sized roast- ers, according to LBP. Customers see and smell coffee packed in these cups which are 100% recyclable, a big advantage for coffee drinkers concerned that 400 million capsules are discarded daily. The company is marketing to roasters, office coffee services, food service and packaged goods retailers and brands. The cup is made of a BPA-free polypropylene and accommodates up to 13 grams of coffee or tea. Food service versions are packed in a Thermocell™ to insure fresh- ness for 12 months. Singles can be bagged, stacked in tubes or boxed for retail up to 24-ct or packed 25-30 in resealable pouches. "The greater capacity allows for optimal brew and the recyclability of the cup and packaging distinguishes UpShot™," according to Matt Cook, president of LBP. LBP does not sell packaging equipment. It assists companies in selecting hardware suppliers who can install or retrofit existing machines to accommodate UpShot™ fil- ters and supplies co-packers who sell their services to regional roasters. "In addition, LBP will assist with equipment configuration plans, set up and testing as a value-added service," said Cook. "If roasters prefer to purchase capacity from businesses that have already installed UpShot™ packaging equipment, LBP will help make connections – then step aside and let them negotiate their own pay-per-use agreement," he said. Food service coffee and tea supplier Red Diamond praised UpShot™ for its "flexibil- ity and customization," said e.v.p. Dave Burke, "it lays the groundwork for new oppor- tunities and is a solution that can really grow with us as a company." A single-serve 100% Colombian in 24-ct boxes sells for 49 cents per unit. Red Diamond introduced five flavors in April 2013 and plans to expand its offerings to include iced tea and 3-in-1 special blends. Intelligent Blends "The real opportunity in 2014 is in the premium market and going upstream like Peet's (Peet's Coffee & Tea) did, there is a ton of room for new premium brands to make some waves in the marketplace" said Michael Ishayik, president of San Diego-based Intelligent Blends. A new 50,000 sq. ft. roasting facility capable of producing 120 million single serve cups a year along with the lowest minimum runs in the industry makes Intelligent Hand operated single cup filling equip- ment from PBideas. New Brewers Mother Parkers RealCup™ RC 400 (pictured above) is a Keurig-compatible brewer designed for the office coffee market.Several other manufacturers including Starbucks (Verismo ™), Kraft (Tassimo™) and Keurig (Vue™) have also introduced closed systems for home use with cup designs incompat- ible with Keurig brewers. Keurig and Keurig-licensed machines currently dominate the single serve home and office market. In January Keurig an- nounced a Keurig 2.0 brewer that makes either a single cup or 28 oz. carafe from a large capacity capsule. The new brewer goes on sale this fall.