Nespresso is brewing up competition in the U.S. coffee pod market.
Keurig has dominated the segment in the U.S. The company's U.S. coffee sales were about $4.3 billion at the end of last year, and it says it had machines installed in more than 38 million households.
Nestlé's Nespresso, meanwhile, has had more success around the world, in a global retail coffee market that the Swiss food and beverage giant says is valued at about $100 billion. Now, it's gaining a bigger share of the U.S. market.
"Nespresso has always been a very minority pod system in the United States. If you look globally, Keurig has almost no presence outside of North America. So the U.S. is a very anomalous market overall because of that," said Matthew Barry, food and beverage insights manager at Euromonitor International.
Nestlé declined to give CNBC its current household penetration for Nespresso, but JPMorgan estimates that Nespresso posted $1.5 billion in U.S. sales last year.
It's a far cry from the brand's origins in the country. It took about seven years for Nespresso's U.S. business to become profitable after Nestlé introduced it in the early 1990s, said Jean-Paul Gaillard, Nespresso's CEO from 1988 to 1998.
The brand struggled to gain traction with U.S. consumers until 2014, when it changed its approach with the Vertuo machine. It brews full-size coffees in addition to the brand's signature espresso options. Before it rolled out the machine, Nespresso's sales were $300 million in 2013.
"I think that's where you saw this tremendous shift," said Alfonso Gonzalez Loeschen, Nespresso's CEO for North America.
Nespresso's rise comes after the Keurig system took the U.S. by storm a decade ago. The company grew its domestic coffee sales by nearly $3 billion in the four-year span between 2009 and 2013.
Nespresso's gain may not necessarily be Keurig's loss. Euromonitor's Barry said the brand may be aiming for a different part of the market than its rival and is "not really trying to dethrone Keurig."
Keurig also thinks it still has room to grow.
"There's still over 50 million households left in the U.S. coffee market that we look at and say, 'how do we meet the needs of those users?'" said Patrick Minogue, president of U.S. coffee for Keurig Dr Pepper.
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