In 1934, in the Italian city of Trieste, Francesco Illy came up with a way to package coffee in pressurized containers that kept it fresh. In 1935, he invented the first automatic coffee machine. In 1974, his company Illy became the first to sell a kind of coffee pod.
Aluminum capsules, the successors of those pods, have become a fiercely contested battleground for the world's biggest coffee companies, notably Nestlé, a Swiss food-and-drink giant, and JAB Holdings, an investment firm intent on building a coffee empire and owner of Brooklyn Center-based Caribou Coffee.
On Oct. 8, in the latest sign that the coffee wars are heating up, Illy signed a licensing deal for capsules with JAB, blending Illy's coffee and cachet with JAB's commercial clout.
Two decades ago as many as 20 substantial companies competed in the retail-coffee trade, said Jeffrey Young of Allegra World Coffee Portal, a consulting firm. In the past few years, the market has consolidated — and at a faster pace in the past year or so.
In 2015, JAB bought Keurig, America's biggest coffee-pod system, for $13.9 billion. It also has swallowed Jacobs Douwe Egberts, Espresso House and Peet's Coffee.
Nestlé signed a $7 billion deal in May with Starbucks to distribute the ubiquitous chain's products.
Today, JAB and Nestlé together control about a third of the market for fresh and instant coffee, which Euromonitor International, a research firm, estimates to be worth $83 billion a year.
While Keurig has controlled the U.S. market — offering a variety of brands and selling them through supermarkets — Nestle's Nespresso leads in Europe. And while the U.S. market has matured, competition in Europe is still bubbling away. And Nestle's 2017 purchase of a majority stake in California's Blue Bottle Coffee is a sign of the company's eagerness to boost its U.S. presence.
