MARKET STRUCTURE ANALYSIS:

COFFEE MAKER MACHINE

Submitted by:
Sudhanshu Agarwal
PGP38367
Section G
Coffee Machine is a consumer durable goods which has seen exponential market growth in recent past years
and even higher growth is expected in future years. They can be differentiated based on different types,
technologies, end users, geographies among others. To further determine the market structure of coffee
machines, let’s look into different market parameters

1. Number of Sellers: Large but controlled by few

- Coffee making machine industry has large number of manufacturers present globally but pre-
dominantly, some key players have controlled the majority share in the market due to their
established presence for long tenure and large amount of resources they possess.
- Also, since the number of sellers are few, they charge comparatively higher prices and are generally
the price setter in the industry
- Some of the key players are Breville Group, Starbucks, Nespresso, Thermoplan, Franke
Kaffeemaschinen, among others

2. Number of buyers: Large

- There are large number of buyers in the market ranging from different end use cases of the machine.
- Based on the end-user, it can be segmented broadly into residential, offices, hotels & restaurants, and
others wherein the residential segment is expected to hold majority share of the market owing to the
large consumption of coffee bags among households which results in the large domestic coffee
machine consumption volume

3. Type of Product: Homogenous with certain level of variability

- Coffee Machine in itself can be differentiated based on different type, technology and end-user.
Within each case, manufacturers are constantly trying to upgrade their product and incorporate latest
technologies to improve their product from competitors.
- Manufacturers are continuously aiming to differentiate their products to bring convenience,
affordability, time saving, and elegance through its designs therefore focusing on product launches
with advanced features besides adopting expansion strategies.
- For eg, portable coffee machines are the new trend in the industry and major players are trying to
capitalize by providing superior quality portable machines
- A fully automatic coffee machine, called Next Touch Coffee was recently launched by Swiss brand –
Ergo. Features like IoT innovations configuration and add-on options, with a wide range of payment
systems, along with a self-adjusting grinder.
 4. Entry / Exit Barriers: High

- Coffee making machine is a capital intensive industry and hence requires a lot of fixed resources
which makes it economically non feasible for majority players to enter and provide same quality of
product at competitive prices
- Since there are a lot of B2B buyers involved in terms of hotels, restaurants, cafes, they have a long
trusted relationship with existing players and hence it becomes very difficult for any new player to
enter the industry
- Also, most of the existing players have a strong foothold in consumer durables market as well and
enjoy higher economies of scale due to that, allowing them to achieve higher profits and making it
tough for new entrants

5. Flow of Information: Low

- Major players in the industry have gained tremendous know how of the product and have the latest
technology information and access to resources allowing them to be at forefront of the market.
Certain companies have also patented their products hence stopping any duplicating issues
- These technologies and information is not quite easily available in the market to new players or
existing small players making information highly concentrated and it’s flow restricted

6. Factor Mobility: Low

Since, the industry involves specific skilled labour, highly technologically advanced niche machinery
and capital, it’s very difficult to move any one factor of production in other either other type of work
or production purpose and hence making factor mobility quite low. However, they can be moved
within similar firms only

CONCLUSION – Based on large but few sellers controlling the industry normally engaged in non-price
wars, large number of buyers, high entry & exit barriers within industry and low flow of information as well
as low factor mobility, we can fairly conclude that current market structure of the industry closely represents
Oligopoly