Has the EU put single serve capsules at a crossroads?

Market overview
Single-serve capsules are a dynamic market segment with a complex value chain. The changes in this industry are fast and driven by growing sustainability pressures and end-of-life scenarios, brand positioning as well as organic consumption trends.

Over 80 billion capsules were filled in 2022 globally: 27 billion in Aluminium and 53 billion in plastic formats1. Europe accounts for three-quarters of global single-serve capsule supply and has been a true catalyst for material innovation.

The three main systems: Nespresso, K-cup and Dolce Gusto accounted for a vast majority of the market globally in 2022, with a clear trend towards rationalisation of systems supported on the market.

Over the years, plastic capsules have grown rapidly (with branded and compatible offering), claiming the lion’s share of the global single-serve capsules market. The tables had recently turned in favour of Aluminium for the Nespresso compatible designs. Drive towards higher returns has triggered positioning adjustment initiatives amongst brand-owners and retailers. Premium image and quality delivered and communicated with Aluminium. Both leading brands and retailers strategically switched from plastic into Aluminium in the past couple of years.

Sustainability and recycling
With the growing number of capsules in landfills, the industry is under pressure from environmentalists as well as more conscientious consumers. There is an urgent need to review the materials used for capsules conversion in search for more sustainable options, as well as to explore ways to facilitate acceptance of used capsules into composting and recycling sites. Nespresso has put all the efforts in establishing the collection and recycling infrastructure for its used capsules. Following Nespresso’s open invitation in March 2019 to join in forces in its recycling scheme, several alliances were formed to collect and recycle capsules. These are typically brand-funded initiatives facilitated by Extended Producer Responsibility. Since Nespresso’s initial offer to join forces to facilitate Aluminium capsules collection and recycling, several alliances have been formed across Europe.

Meanwhile, plastic capsules designs must be adjusted to present a recycling-ready PP solution, which includes polyolefin based lidding film. Provided that other materials in the multilayer structure do not exceed 5%, the capsules can be recyclable in the PP stream. In the context of challenging end-of-life scenarios for PP capsules, the industry has turned to more sustainable start-of-life and a number of big customers now specified the use of PP with renewable content.

Composting is a relevant end-of-life option for single serve capsules, given the weight of the organic matter packaged vs. the weight of packaging. After initial technical challenges to do with compatibility of the capsule body, lidding films and barrier function have been overcome. Fillers and brand owners have struggled to commit to compostables due to disjointed and unclear legislative framework for bio-resins.

Paradoxically, compliance with EN13432 may not guarantee ready acceptance of used capsules in industrial composting facilities. While the standard certifies 90% disintegration in 12 weeks, the reality of composting facilities stipulates the need for 6-8 weeks cycle. In the meantime, the industry has focussed on advancing solutions for home composting. A holy grail product from end-customer communications perspective is a versatile solution that is certified for both home and industrial composting. In context, only 4% of the global capsules market is using compostable solutions. There are high growth prospects for this segment to develop, particularly with the legislative context around the new PPWR in Europe.

The potential impact of the revised PPWR
Regulatory context had been unclear for single serve capsules as for the moment packaging rules have not applied to this application. At the same time, any positive sentiment towards adopting compostable solutions has been dampened by the lack of robust legislative framework around biodegradable materials.

Proposed changes to PPWD, as per released draft of November 30th have a potentially profound impact on the future of the single serve capsules market. Legislative framework for bio-plastics is also subject of revision, both in terms of accommodating organic recycling in the definition of recycling and also in terms of harmonising definitions and labelling approaches.

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