Like Illy machines, Nespresso espresso machines use capsules that are expensive, starting at 70 cents per shot. Some limited-edition single origin offerings cost as much as $2 per capsule.

Illy Chief Executive Officer Massimiliano Pogliani said the segment is growing by about 20 percent every year as Nespresso’s pods have created a new standard for the industry.

Illycaffe SpA is teaming up with one of Europe’s richest families and Mondelez International Inc. to sell branded capsules that work in Nespresso machines worldwide, seeking a boost that will ...