The Billion-Dollar Opportunity in Single-Serve Food

Imagine being able to buy one medallion of Kobe steak. Or perhaps two single servings of pasta, because you like angel hair and your significant other likes rigatoni?

As consumers, we want what we want, when we want it and how we want it — fueling the demand for personalization and customization. To our credit, we’re willing to pay a premium for it. This is no different than ordering one slice of pizza instead of an entire pie. Or buying a single song, instead of an entire record album. Or making a single cup of coffee–with the exact brand, roast, and flavoring you desire—instead of making an entire pot. That last example is extremely relevant to one of us (Michelle), since as president of Keurig from 2008 to 2014, she helped drive that concept to a $5 billion category.

The single-serve experience is a powerful intersection of great business (higher margins, incremental sales) and increased consumer benefits (more choice, more customization).  Technology enables unbundling that creates the single-serve revolution. Academics like Brian Wansink—a Cornell professor whose work helped create the 100 calorie snack pack—have written about this for years within food: people will often pay more for smaller quantities. Yet few categories truly have made this accessible in the right way for consumers.

For businesses, this is a huge opportunity for growth.

Wine provides a great example. The fact that wine degrades after a bottle is opened creates convenience problems on par with brewing a pot of coffee when you want a single cup. It creates an obligation to finish a bottle, and for everyone at the table to drink the same kind of wine, no matter what their individual preference. Most wineries do not offer a glass option (like a can of beer), as it would be a huge capital investment and very disruptive from a distribution perspective.  But what if you could just drink one glass of wine from a bottle, without a massive capital and or disruption?

Coravin makes that possible. It’s a product based on medical device technology that enables consumers to extract wine by the glass from a bottle via a needle without removing the cork, thus preserving the remaining wine in the bottle. It reduces the “commitment” of opening a bottle and feeling the need to finish it in one sitting. It helps make wine more appealing to people who are connoisseurs (who can try a single glass of a high-priced bottle) and more casual wine drinkers (who are unlikely to finish a bottle).

Our estimate is the single-serve revolution could grow the wine category by several billion dollars.

While some people might use Coravin at home, it’s a game-changer for restaurants and retailers. The prospect of spoilage limits the kinds of wines these establishments will sell by the glass; generally, they stick to low-cost or fast-selling bottles. But restaurants who use Coravin report selling expensive wines four to six times faster. Only a few people will spend $200 on a bottle of wine at a restaurant, but more might be willing to pay $75 for a single glass. We’ve seen Coravin prominently used on menus at steakhouses like Morton’s and at wineries in St. Emilion, in the Bordeaux region of France, to sample wines. Coravin could be the enabling technology to allow each shopper to have a glass of wine in-store, while adding significant value to the retailer’s bottom-line.

We did some what-if scenarios using super consumer analyses on Nielsen data and found the following that any single scenario below could grow the entire category 25%.

·                  Wine super-consumers are highly passionate consumers who represent 10% of current wine-buying households but 62% of wine spend ($6.6 billion). They love wine, buy often, spend a lot, and often. Interestingly, they don’t spend more per bottle than average—they simply buy many more bottles. Single-serve technology could encourage them to trade up to pricier bottles. Imagine if they started buying bottles that cost 40% more—say, $14 versus $10. Considering that single-serve coffee increased the cost per serving 194% vs. drip coffee, 40% is not unreasonable.

·                  Potential super-consumers are consumers who represent the remaining 90% of current wine-buying households, but only 38% of spend ($4.0 billion). They like wine, but buy less frequently. Interestingly, they pay the same price per bottle as super-consumers. Imagine if they increased their purchase frequency by 66%, or from 10 bottles per year to 18 bottles per year, since single-serve technology allows them to not worry about spoilage. It would grow the category 25%.

Total food and beverage spending in the US is $450 billion dollars within grocery. Single-serve coffee, which didn’t exist a few years ago, now accounts for about 30% of the total amount of coffee sold in grocery stores. It’s quite possible there is another $100 billion in single-serve business opportunities within just food alone. And likely there are several more $100 billion opportunities beyond food and beverage. As you plot your own innovation strategy, take close look at single-serve solutions.