Consumers Shifting to Espresso-Based Options
Millennial Tastes Contribute to a Changing Market
America’s love affair with coffee is
more complicated than ever before.
Millennials are changing the world of coffee – one
purchase (or app) at a time. And it’s more than just the mason jars in the
local coffee house, as shown by the data in the National Coffee Association’s
2016 National Coffee Drinking Trends (NCDT) report, which has followed America’s
evolving relationship with the beverage for the past 67 years.
From the latest preparation techniques to sourcing the
beans themselves, the new generation of coffee lovers isn’t satisfied with
their parent’s drip brew.
Daily consumption of espresso-based beverages has nearly
tripled since 2008, according to the latest data from the 2016 NCDT.
Between 2008 and 2016, past-day consumption of gourmet
coffee beverages soared from 13% to 36% among 18-24 year olds, and from 19% to
41% for those 25-39.
For espresso-based beverages alone, the jumps become 9%
to 22% for the 18-24 group and 8% to 29% for those 25-39.
Against this backdrop, for the first time in NCDT
history, the prevalence of drip coffee brewers among-past day consumers
declined to only half of all coffee drinkers. Taken as a whole, the data
reflects a generational transition: a slight decrease in overall consumption
(2%, or slightly more than the report’s margin of error), even as younger
consumers have become more invested in their coffee than ever before, through
espresso and gourmet beverage choices.
In fact, the market share of “gourmet coffee beverages”
(GCB) continued to increase in 2016 – particularly among younger audiences. The
GCB category includes what we think of as “specialty coffee,” featuring gourmet
traditional coffee, espresso-based beverages, and iced or frozen drinks.
Older Millennials, between the ages of 25-39, are the
most likely age group to drink espresso based beverages, cappuccino, mocha,
espresso, gourmet coffee, caffè Americano, flat white, cold brew, and nitrogen
infused in the past week – according to new NCDT data.
Quality,
not quality
Premium coffee comes at a premium cost – and consumers
have shown that they’re willing to pay.
While the number of cups consumed in the U.S. may have
declined slightly in 2016, the retail earnings have continued to increase. The
food service coffee market alone increased 14.2% over the past 4 years,
according to research from Packaged Facts.
Historically, coffee sales remained strong even after
the 2008 recession, when economists predicted that retail profits would
plummet. Coffee has always been important (soldiers even tried brewing it from
chicory during the civil war), but purchasing behavior during the downturn
proved that coffee today is truly a priority among Millennials.
As many marketers have realized, Millennials, whose
purchasing power is growing (with about $200 billion in purchasing power each
year) are conscientious shoppers, and want to feel good about where they spend
money. They prefer to support companies that reflect their own values on an
organizational level, and products and services which add value to their lives.
According to 2015 research from Nielsen, 66% of surveyed
consumers say they will pay more for products and services that come from
companies that are committed to positive social and environmental impact, up
from approximately half from the previous year.
For example: The average retail price that select
specialty roasters charged for lots that included growers’ names was an average
of $9.95 higher per pound than the average retail price of those that didn’t,
according to December 2015 research from Transparent Trade Coffee (TTC).
Yet 28% of the 2016 NCDT respondents say that they don’t
know if coffee is grown in a sustainable way. This suggests an untapped
communication opportunity for the industry.
The
Value of Value
This 2016 NCDT data shows that the factors driving
coffee consumption are fundamentally changing. The next generation of consumers
has a more personal relationship to the products and brands they support. The
things they use reflect their larger worldview.
“Value” is not always a question of price per ounce, nor
is it a static proposition. Today, value can mean many things, depending upon
customer demographics. For some consumers, “value” may be more about a brand’s
philosophy, authenticity, and commitment than anything measured in dollars and
sense.
More than 50% of Millennials make an effort to buy
products from companies that support the causes they care about, according to
research from Barkley, an independent advertising agency.
These expanding and diverging definitions of value are
driving the third, and now fourth, wave of coffee consumers who bring a whole
new perspective to the coffee drinking experience – creating ongoing
opportunity for coffee suppliers.
Single-Cup
Brewing
Over the last five years, single-cup brewer ownership
(read Kehrig type devices) has more than quadrupled, reaching 29% of American
consumers, While the growth pace has slowed, with a two percent increase over
2015, the category remains strong, doubling over the last two years alone,
Single-cup brewing is also quickly gaining on the drip
method(read pour over) in coffee preparation. In 2016, 28% of daily coffee
drinkers used a single-cup brewer, up from 25% from last year and just 9% five
years ago. At the same time, drip preparation has fallen to 50% from 54% last
year and 70% in 2011.
Day-to-Day
Differences
What Millennials are drinking is also influenced by
where they’re drinking it.
Coffee used to be brewed primarily at-home (and still
is, among older demographics). It was a private ritual. And no frills – a cup
of coffee was a cup of coffee.
However, more Millennials are drinking coffee
out-of-home, turning coffee consumption into a public expression of
individuality. In the age of Instagram, every detail needs to be on-brand –
nothing is really private.
This makes personalization a high priority for this new
consumer. Fortunately, with the seemingly unlimited options available today,
there’s a beverage for every emoji. Whether it’s extra agave or an artisanal
glass cup, Millennials expect to get exactly what they want. (Boomers may
prefer the term “spoiled.”)
And as more startups and shared workspaces embrace high
quality coffee, more Millennials view the beverage as an office culture perk –
a trend that some larger organizations are starting to notice.
Workplace consumption has slowly trended up from a low
of 16% in 2013 to 21% in 2016, according to NCDT data. Yet 54% of coffee
drinkers reported that they are still less than “very satisfied” with their
workplace coffee situation.
More
Sophisticated Consumers
Millennials are
also increasingly sophisticated consumers. A few years ago, it was a lot harder
to learn about coffee. Now, all the information you could ever want available
with a click (or a tap). They know how to the technology at their fingertips to
hone on exactly the information that they want.
As a result, they’re also more open to innovations in
the coffee market. Younger audiences are generally more open to experimenting
with new beverages or preparation methods. This is reflected by the addition of
three new beverages in the 2016 NCDT: the flat white, cold brew, and
nitrogen-infused.
Trends
and Opportunities
How can coffee companies reach new consumers in a
changing market?
Technology
There’s an app for that. And if there isn’t yet, there
will be.
The best way to reach the next generation of consumers
is through their smartphone. To get (and keep) their attention, you need to
offer a service, product, or information – it has to be interesting, and it has
to be easy.
“Apps are changing the way that people are buying their
coffee,” said David Sprinkle, Research Director, Packaged Facts, during a
recent NCA webinar on food service coffee. But avoid a straight sales pitch, he
advices. “Don’t just hawk your product, but provide information and services
that are of interest to your consumer.”
Apps can also facilitate e-commerce opportunities.
Nearly 70% of U.S. online adults shop on the Internet at least monthly, with
33% shopping online every week. But don’t jump into the digital space before
you’re ready. Millenials expect technology to just work – and will become
quickly frustrated if they encounter friction.
Subscription
services
Subscription services are becoming increasingly popular,
for everything from makeup to produce. This format give coffee drinkers both a
customized experience and exposure to new options.
21% of coffee drinkers would be interested in having
readymade coffee delivered to their home or workplace and 16%would consider
having freshly roasted ground coffee sent to their home, according to the
research agency Mintel.
Door-to-door delivery opens the door to more intimate
interactions. By building relationships (and trust) over time, subscription
services are positioned to educate and inform consumers on key issues facing
the coffee industry.
Workplace
coffee
70% of the cups of coffee consumed at work come from the
office coffee area, according to 2016 NCDT data. Yet over half of the
respondents said that they weren’t happy with their OCS situation.
Part of this shift in consumption place is driven by the
changing day-to-day realities of younger professionals. With more millennials
working remote or sharing co-working spaces, they line between work and home
blurs, creating interesting opportunities for OCS coffee companies.
The startup culture has embraced specialty coffee
options, with many traditional organizations following the trend.
Brewing
gadgets
Younger audiences are immersed in technology, and are
open to change. They’re drawn to new ideas and innovative products. This can be
seen in the growing number of consumer-facing trade expos and new products hitting
the market.
Consumers are increasingly invested in their coffee. The
foodie-driven rise of online review culture intensifies consumer desire to have
the “best” equipment for their favorite beans.
Statistic
Sources
About
the National Coffee Drinking Trends Report
The NCDT has been conducted annually by the NCA since
1950. It is the longest available statistical series tracking consumer
attitudes and behaviors, and has become an industry- standard reference tool.
The study engages a nationally representative sample of about 3,000 people aged
18 and older. Respondents are selected from an online panel with ethnic
breakouts aligned proportionately with the makeup of the U.S. population.
Respondents complete the survey online in English or Spanish at their choosing.
NCDT data, some of which is previewed above, include
extensive statistical information on consumer attitudes and behaviors related
to coffee consumption in the United States. Variables explored in the report
include consumption patterns by frequency, coffee type, age, gender, ethnicity,
daypart and region, along with attitudes that impede or encourage coffee
consumption. Other data include associations with coffee quality by origins,
knowledge of coffee certifications, and extensive historic demographic tables. NCA's
2016 NCA National Coffee Drinking Trends (NCDT)
About
the National Coffee Association
The National Coffee Association of U.S.A, Inc. (NCA),
established in 1911, is the leading trade organization for the coffee industry
in the United States. The NCA is the only trade association that serves all
segments of the U.S. coffee industry, including traditional and specialty
companies. A majority of NCA membership, which accounts for over 90% of U.S.
coffee commerce, is comprised of small and mid-sized companies and includes
growers, roasters, retailers, importer/exporters, wholesaler/suppliers and
allied industry businesses. The NCA offers a wide array of services, focusing
on market and scientific research, domestic and international government
relations, issues management and public relations, and education. The NCA's
core purpose is to champion the well-being of the U.S. coffee industry within
the context of the world coffee community.
Visit www.ncausa.org for additional information about the
NCA and the world of coffee.
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