Pod of Gold

Nespresso's capsule coffee is lushly profitable. Competitors are smelling the aroma

Guido Krizikowski / Bloombers / Getty Images

A wall of capsules in a Munich shop. Each color represents a different brew.

Mike Radlauer stumbled across the Nespresso machine during a demonstration in a gourmet shop in SoHo in New York City. The customer next to him was rhapsodizing. "She said, 'Toms just loves the crema,'" he recalls. "I had no idea what she was talking about, but I said to myself, Hell, if the crema is good enough for Toms, it's good enough for me." (Crema, by the way, is the tan foam that floats atop a well-made espresso.)

Count Radlauer as another Nespresso convert. He now pops at least one 55 single-serving espresso pod into his machine every day. "The price...

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