December 15

The Future of Coffee is Strong

Metrics used for measuring coffee consumption vary from study to study, but the consensus indicates an increase in dollars spent in the coffee industry. A cup of Joe could be a product brewed at home, in the office, a local gas station, or a gourmet coffee house. The industry uses marketing information including Arabica, top 2%, rich, bold, blonde, rainforest, shade grown, organic, plantation grown, local roast, sustainable, and others as differentiators of the brew. Consumers continue to desire various brews, and are savvier about their personal experience with a cup of Joe. The future of coffee is strong.

National chain shops continue to seek the magic bullet to achieve growth. The consumer expects a high-quality product in a friendly environment to have the ultimate experience. Creating trendy drink names, and adding pastries or other meals help improve the experience, and boost sales. The coffee house experience may also include live music, art displays, and coffee tastings.  Additionally, the major brand coffee shops indicate they are adding more stores in the future. Howard Schultz of Starbucks mentions the chain added more than 1500 stores in the annual letter to shareholders, and intends to nearly double sales in the next five years.

Quick-Serve Restaurants (QSR), and convenience stores (C-store) also work to attract coffee drinkers realizing the need for quality coffee to increase sales. These channels may entice the consumers with a value concept coffee, but realize high-quality increases repeat sales, and impulse purchases. Some QSR, and C-store chains are now offering single-cup products for purchase, and use at home. Additionally, some chains brew coffee in a single-serve format to ensure freshness, consistency, variety, and quality in every cup. These innovations are being driven by consumers willing to pay for quality.

Consumers are using many methods to brew coffee at home, and some have purchased small roasting units to achieve the best possible experience. The various brewing methods may include the French press, Aeropress, Chemex, automatic drip, stove top units, and single-cup products. Single-cup growth has a direct correlation to a decline in automatic drip use. Some methods may seem to be fringe, but others have a following because of the convenience. The relevance of the single-cup concept cannot be ignored as it continues to gain market share.

The concept of a nickel cup of coffee in the 1970’s has been trumped by a $0.65 cent single-cup product in 2015, and consumers want more! The single-cup format reduces wasted coffee, allows a consumer to enjoy exactly what they want when they want it, is fast, and convenient. Although, recent surveys mention the consumer is looking for a higher quality coffee in their single-cup experience. Some formats use clever marketing to entice the consumer such as products named Donut Shop, or Jet Fuel, and others use industry standards for extraction. Regardless of the marketing method, coffee is a subjective product, and the consumer will select something they enjoy.

Consistency may be the reason consumers choose various coffee outlets, or products. Consumers know what to expect when they select a Coca-Cola product, a double espresso made in a super-automatic machine, their favorite latte, or a particular adult beverage. Some would argue the consumers appreciate a craft roasted coffee with subtle differences from roast to roast, but sales data may show the consumer relying on a consistent brew. Single-cup brewing continues to grow, and product leaders have emerged from once-humble beginnings.  These products are not only convenient, but offer consistency.

Maintaining the quality of the brew requires an understanding of the process used, and differs among methods. Quality may also be subjective, so some may believe certain products are better than others for no scientific reason. Experts may provide guidance for developing a quality product based on varying concepts such as product strain, elevation of the growing region, annual moisture, soil content, processing of the cherry, washing, roasting, grinding, dosing, and maintaining freshness after the roast. The variables within the variables also effect the product, so developing standards or baselines within the industry help create the ultimate experience. Many sources are available to increase a consumer’s knowledge base, and quality is playing a role in coffee industry growth.

Local roasters are trending up, and some consumers are paying attention to product sourcing. Some roasters offer a farm-to-cup story, and provide information about farmers. The information may include sustainable farming processes, benefits to a farm or village including digging wells, building clinics, and schools, to mention a few. Some consumers require an understanding of the socio-economic benefits to the farmer, and are willing to pay a higher price to support the cause. Large or national brand roasters may also have sustainable programs, but the purchasing volumes may exceed the volume an independent farm can produce.

The popularity of cold brew coffee continues to improve, making the industry more diverse. Consumers are enjoying coffee in many formats, and the industry continues to respond by producing new and different items. The cold brew products are offered on tap in many outlets, and are bottled for convenience or grocery chains. These products may or may not be pre-sweetened depending on the consumer requirement. As the industry provides new products the consumer base will respond, and help determine the market strategy.

Mark Moser - Dan Ragan - Dan_Ragan-To conclude, the coffee house continues to have an aggressive growth strategy. Quick-serve, and convenience stores are responding with higher quality offerings. At-home brewing is moving quickly to a single-cup convenience format. Consistency and quality will help grow coffee revenue as consumers depend on particular items to meet their needs. Consumers will continue to have options using national branded products, local roasts, and an understanding of sustainable processes. Also, consumers are looking for the next great coffee experience. The future of coffee is strong!

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