"There was a growing group of people who loved the idea of it but refused to get the machine because of its impact on the environment," Mr Klinac said.
Traditional pods could take more than 500 years to decompose, and had to be emptied of coffee grounds, have their aluminium lids removed and in some cases taken to a store to be recycled.
"We wanted to start educating people about the waste and let them know there is an option out there ... and you don't need to feel bad throwing these away, you can even put them straight into your worm farm."
The pair contacted Mr Gaillard's firm, which has successfully fought Nespresso in court over the product, and secured the New Zealand rights in February - a considerable feat for young men with no business experience.
"Because we had worked so hard trying to do our own capsules, when it came down to it they threw us some pretty hard questions. But because we had put so much time and effort in we could answer everything," Mr Klinac said.
Mr Cole said the products were available on their website, honestcoffee.co.nz, and will also be appearing on the shelves of New World Mt Wellington in the coming weeks. They were increasingly popular with Australian customers as well, he said.
Nespresso, along with other coffee pod manufacturers, were named third in New Zealand's Unpackit Worst Packaging Awards last year.
Unpackit spokeswoman Gina Dempster welcomed news of the new pods, but warned it was important customers knew how to dispose of them correctly.
"If it's certified to the European standard that's fantastic, I think it is really important to get those Nespresso-like pods out of the waste stream. People just need to make sure they know which pods can be disposed of where."
Nespresso New Zealand Country Manager Guillaume Chesneau said he could not comment on competitors' products but said customers could return pods so they could be recycled in Auckland. "We take sustainability and recycling very seriously and have put in place global and local policies and systems to ensure the proper disposal of used capsules."
Pod wars
Pod wars Ethical Coffee Company pods
• Made from plant fibres and starch
• Adhere to European environmental standards
• Can be composted and will decompose in 180 days
• Fit any Nespresso machine
• Exclusive rights secured by two young Kiwi entrepreneurs
Other single-serve coffee pods
• Made of plastic and/or aluminium
• Criticised for unnecessary waste
• Can take between 150 and 500-plus years to decompose
• Can only be recycled if coffee grounds and aluminium removed
• Development of multibillion dollar single-serve coffee industry credited to Nespresso
