GUEST BLOG / By the
National Coffee Association USA--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 jump 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.
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.
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.
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.
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.
How can coffee
companies reach new consumers in a changing market?
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 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.
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.
Many
new preparation gadgets have been wildly successful on crowdfunding sites such
as Kickstarter.
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