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Grounds for Growth: Coffee

Beverage Report
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As one of the world’s most popular beverages, coffee is a sure-fire seller in grocery, but despite its popularity, there have been notable shifts in consumer preferences, and retailers will need to adjust and strategize to maintain shopper interest.
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image of a Shilpa Khandelwal

One shift is a growing preference for high-quality, barista-style coffee at home. “This trend has subsequently taken on a new dimension, bringing greater diversity in flavours, credentials, and the holistic aspect of coffee consumption,” says Shilpa Khandelwal, director of insights and innovation for Keurig Dr Pepper (KDP), citing several reasons for the change, including convenience and price sensitivity.

“We see continued popularity of iced coffee products, especially among younger consumers. The instant coffee format benefits from its popularity among new Canadians and can answer the desire for easier ways to consume coffee.”

It’s no surprise that consumers are price sensitive, with many opting for more affordable coffee options, such as shopping in bulk or trading to different formats, says Khandelwal.

image of a Andrea Chiaramello

Andrea Chiaramello, senior vice president of North America retail sales for Lavazza Group, says the at-home shift “gained traction during the pandemic as consumers opted to create their own specialty drinks at home rather than frequenting coffee shops. The data shows consumers decreased coffee spending away-from-home in 2023 and invested in specialty coffee equipment for the home, with an increasing number owning or showing interest in purchasing espresso machines, French presses, or cold brew coffee makers. Social media has also played a part to encourage this, as many coffee content creators highlight experimentation with and enjoyment of barista-style drinks at home.”

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image of a Carm DaSilva

Carm DaSilva, vice president of Nestlé Coffee Brands Nescafé and Starbucks at Home, says the growing at-home consumption of specialty coffees is being driven by younger and multicultural consumers. “The appeal of these non-traditional cups can be attributed to more customization, greater versatility, the influence of social media and, for cold coffee, its dual benefit of delivering both stimulation and refreshment.”

image of a Stacey Toews

Suppliers concur that consumers are more educated about the coffee they drink. “They’re becoming more informed as to how to brew the best cup of coffee,” says Stacey Toews, co-founder of Level Ground Coffee Roasters. “We see more coffee drinkers looking for fresher product. Maintaining little backstock and ordering frequently will improve the freshness and cup quality for your customers.”

Khandelwal says that health-conscious consumers are paying more attention to the ingredients in the food and beverages and “coffee could leverage this opportunity as consumers’ consumption is already highly implemented” in their daily routine. “We also expect a growing demand for options like plant-based milk alternatives and reduced-sugar or sugar-free syrups to accompany coffee.”

Consumers are also more climate-aware, adds Khandelwal, and are considering the impact of their coffee choices. “In fact, 61% of consumers claim that being environmentally friendly or sustainable is now taking more importance in their purchase choices versus two years ago. This led to an increased demand for fair trade, organic, and sustainably sourced coffee beans.”

Strategies for success

Climate change and inflationary pressures will continue to impact the category in 2024, with consumers looking for ways to maximize the value of their spending. However, despite this, suppliers say they’re seeing growth in the specialty coffee market, “even in the face of tightened budgets,” says Chiaramello. “Despite economic challenges, consumers are still inclined to indulge in affordable luxuries and treat themselves to a high-quality bag of coffee.”

Khandelwal suggests retailers offer a diverse portfolio of products, be shopper focused and “unlock consumers’ discovery” by introducing innovative coffee products “that cater to new occasions, such as cold, flavoured or enhanced coffees to capitalize on the growing trend of at-home consumption throughout the day.” She also suggests that stores drive additional occasions with “limited time offers, new innovations and targeted promotions. Use secondary displays in-store to showcase new launches and encourage new trials and purchases.”

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Consumers will look to coffee brands and products that address sustainability concerns, adds Toews. “Consumers are searching for products produced in the most sustainable manner. This can include leading social programs and advanced production technologies. Level Ground has led the way in tackling both climate change and inflationary pressures. Five years ago, we installed patented heat recapture tech in our roasting operations. This lowered both VOCs and the cost of natural gas by 43 per cent.”

DaSilva advises retailers to ensure they’re providing value, format and brand assortment, and “retailers should be thinking about how they can broaden the coffee section from facilitating findability to helping educate, inspire and encourage discovery.”

Chiaramello suggests retailers employ “sharpened promotional strategies. Offering the right products on promotion at the right time and communicating it will help retain shoppers and keep them coming back to the store. Promotional tactics such as coupons and loyalty programs are another way to offer value and support loyal shoppers.”

Category innovation

Younger generations will drive innovation, say suppliers. For example, Chiaramello says Lavazza is seeing Gen Z “gravitate towards strong brand personalities, novel flavours, cold and convenience,” adding that consumption occasions are also changing, with younger consumers drinking coffee more for indulgence or as a treat. “So not only will the formats, blends and products evolve, but the marketing around it aiming to establish brand loyalty will also evolve.”

DaSilva says sustainability will be a growing consideration for consumers, in addition to personalization, customization and inspiration from other markets.

Khandelwal suggests several factors will drive innovation, including indulgent experiences, versatility with the ability to customize their beverages, ethnic experiences – “Vietnamese coffee and Turkish coffees are all trending” – functional beverage alternatives, such as the development of coffee-based drinks enhanced with superfoods, adaptogens or functional mushrooms, and packaging.

With indulgent experiences, she says innovations should focus on “sensorial platforms such as cold coffee and new flavours, as all coffee lovers are looking to elevate their everyday coffee experience.” 

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