Consumption shifts to home-brewing as cafes revamp operations.
With millions of consumers working from home for much of 2020, coffee consumption has shifted away from cafes and restaurants toward people’s kitchens and dining rooms.
Commuters who had been buying coffee on the way to work in the morning and office workers who had been taking midday coffee breaks were instead stocking up on coffee online and in retail stores for home brewing. The pandemic also disrupted the coffee market in myriad other ways throughout the supply chain, from the farms to the point of sale, and the wholesalers and roasters in between.
The shift in consumption patterns has forced consumers to take a fresh look at the way they buy coffee, as well as the way they make their coffee at home, says Madeleine Longoria-Garcia, a partner in Pacific Coffee Research, a Kailua-Kona, Hawaii-based provider of coffee education classes and other services. “I noticed a lot of people on social media have been saying, ‘Wow, I do not know how to make good coffee, and I appreciate my local barista a lot more,’” she says.
Madeleine Longoria-Garcia pours cold brew coffee. Photo credit: Pacific Coffee Research
Home-brewing drove strong retail sales gains of whole bean and ground coffee, as well as an 11 percent increase in sales of home coffee-making equipment such as presses, kettles, and grinders during the first weeks of the pandemic, according to research from the Specialty Coffee Association and payment technology platform Square.
Many consumers have sought out retail versions of their local cafe brands, while others have explored new brands outside their local areas, either online or through subscription services, says Longoria-Garcia. In fact, the Square/SCA research showed that during the early weeks of the pandemic, coffee shops that remained open saw their subscription-based sales increase an average of 109 percent.
Cafe operators also saw a massive shift toward pickup and curbside delivery. Coffee cafes reported a combined sales increase of 5,380 percent through those off-premises consumption channels, and the number of cafes adding pickup and curbside delivery increased 521 percent, the report found.
Overall, however, global coffee consumption in terms of raw coffee product is expected to decline slightly for the 2019/2020 coffee production year, according to the International Coffee Organization.
The outlook is rosier for packaged coffee. According to the Specialty Food Association’s recently released State of the Specialty Food Industry research, the Specialty Coffee and Hot Cocoa (non RTD) category hit retail sales of $3.6 billion in 2019 and is projected to grow 4.9 percent by 2024. From January to April 2020, during the surge of the COVID-19 spread, specialty products in this category grew 13.8 percent versus a year ago, higher than the 8.9 percent growth for all products in the total category during the same timeframe.
Cafe Operators Adapt
Roasters and cafe operators reported that coffee sales shifted toward retail and online sales of their products during the pandemic, with a sharp drop-off in brewed coffee sales. Many operators managed to run takeout offerings with limited staffing and new safety guidelines in place.
“We’ve had to pivot many aspects of our business to adapt during this challenging time,” says Lori Haughey, vp of retail at Intelligentsia, which as of July had 10 of its 14 coffee bars open for pickup. “We’ve continued to adjust operations and simplify processes to ensure a safe and efficient experience for our team and customers.”
Photo credit: Intelligentsia
The Chicago-based chain, known for its carefully curated selection of high-quality coffees, has been operating limited hours, opening later in the morning, and closing much earlier in the day, she says. Intelligentsia has also eliminated items from its coffee and food menus, and is only accepting contactless payments such as credit cards and Apple Pay.
The company has also rolled out online ordering at all locations through Intelligentsia’s own website or through the Toast takeout app, both of which allow customers to order and pay ahead for contactless pickup. In addition, it relaunched its website on June 11 with a subscription service, says Britt Berg, director of brand and e-commerce.
“Improving our digital customer experience will be critical as we look ahead,” she says. “When we had to close our coffee bars back in March, we knew it was important to keep our customers engaged, so we reimagined the coffee bar experience and shifted our efforts to focus on virtual community engagement to stay connected.”
Intelligentsia launched “Intelli Celly”—through which customers can call or text coffee educators to ask for home-brewing advice. It also launched an Instagram Live series called “Connecting Over Coffee,” through which Intelligentsia has invited people from a variety of fields to participate in a virtual coffee break.
“It’s creative ideas like these, that foster a sense of community, that will keep us moving forward,” says Berg.
New York-based Café Grumpy, which operates 11 cafes and a roastery, saw a shift toward retail sales at the start of the pandemic, according to Caroline Bell, founder and CEO. As a result, the company began making ground beans available for retail sale for the first time, assuming many consumers might not have grinders at home. “We definitely got a good response,” says Bell. “We saw a big increase, and we’ve had some customers continue to order even after the cafes have started to reopen. But online sales went up, and grocery sales went up.”
Café Grumpy also launched a Tetra Pak line of its cold brew coffee, which previously had only been available in bottles. The product is available online and through Café Grumpy’s grocery retail partners.
Photo credit: Café Grumpy
Bell says the company received several calls from consumers asking about how to make cold brew coffee at home when they were under stay-at-home orders. Cold-brew is normally Café Grumpy’s top-selling item in its shops, she says.
Specialty Brands See Retail Shift
Some specialty coffee brands saw large gains in online sales during the pandemic. Darron Burke, founder and CEO of Burke Brands LLC, parent of the Don Pablo coffee brand and others, says his online sales rose to a peak of about 400 percent, year-over-year, in March, and then leveled off to an average of about a 100 percent increase during the following months.
The company also sells whole beans, and a very limited assortment of ground coffee, through Costco Wholesale, Sam’s Club, and other retailers and wholesalers, including KeHE Distributors. Its foodservice accounts slowed down considerably, however, with many asking the company for longer payment terms and reduced pricing, Burke says. That business has since rebounded somewhat, but has remained below pre-pandemic levels, he says.
As sales through Amazon soared and the e-commerce retailer became the coffee company’s biggest seller, Burke says he began to wonder if his supply would be able to satisfy the rapidly escalating demand.
“I enjoyed [seeing Amazon sales rise] for about a millisecond, and then fear struck my heart, and I thought, ‘Oh my God, we’re going to run out of product,’” he says.
However, the company’s in-house buyer was able to secure green (unroasted) coffee beans through the company’s existing relationships and has also been able to secure some additional beans from suppliers whose high-end foodservice business had disappeared.
Darron Burke, founder and CEO, Burke Brands. Photo credit: Burke Brands
Burke Brands in July was preparing to release some of the new varieties under its Don Pablo and Subtle Earth Organic brand, which both offer a range of coffees of different origins. In addition, the company was preparing to launch a new brand, Goodness and Light, which features a lighter roast, as opposed to the medium-dark roast of its typical product. “The trend is that people are going from ground Folgers to whole bean coffee, and from basic whole bean coffee to more exotic, more expensive origins,” says Burke. “There’s an opportunity there, for sure.”
Longoria-Garcia of Pacific Coffee Research says she sees two basic types of coffee consumers in the specialty coffee market: those who want a high-quality coffee but with a familiar coffee flavor, and those who want to stretch their sensory experiences with coffees that have strong fruity or acidic notes, for example. “Those two sectors of the consumer market exist in every specialty coffee or high-quality cafe setting,” she says.
Sourcing Is a Challenge
Sourcing has remained a challenge for coffee sellers, in part because predicting sales during an ongoing pandemic has proven difficult. Cafe operators aren’t sure whether they should be planning for business as usual by year-end, or if perhaps a second wave of the virus will bring their operations to a halt again. In addition, growers who are often dependent on migrant workers have been unsure about whether or not they would be able to find enough labor.
“It’s been a little stressful for me,” says Bell of Café Grumpy, who buys the green coffee that her company roasts at its Brooklyn facility. “You want to continue working with the same producers and buying the same amount of coffee and not going back on any agreements that you made. So, you just hope that things will turn around.”
The company sources most of its green coffee from Central and South America, along with some from Ethiopia. Many suppliers are concerned not only about the coronavirus’ impact on their own countries, but are also worried about their loss of sales to foodservice accounts.
Samuel Sabori, director of coffee at Intelligentsia, says the pandemic has had a broad impact on buying and sourcing coffee. “For us as buyers, the biggest change is not visiting coffee producers for the foreseeable future,” he says. “We managed to visit most producers within our Northern Hemisphere portfolio just before quarantine began, so the real challenge is on the horizon. We will have to navigate how to determine quality, working conditions and overall potential, remotely.”
Intelligentsia has longstanding relationships with producers that will help it navigate the sourcing challenges ahead, he says. “For companies that don’t have relationships like this, there is a risk of potentially not knowing what you are purchasing, who the coffee is coming from, the working conditions of the workers, or the state of the farm,” Sabori says.
He says coffee producers have been struggling with many aspects of their farm operations, such as the logistics involved in transporting workers to and from the farms for such tasks as pruning, replanting, weed mitigation, or picking.
One Guatemalan producer that Intelligentsia works with, for example, says its staff is about 85 percent what it normally would be because those who typically travel for work are choosing to stay home. “These decisions are keeping people safe, but how this will impact coffee quality will be determined at harvest time,” Sabori says.
Q&A with Scott Owen, PCC Community Markets
Photo: PCC Community Markets
Specialty Food recently asked Scott Owen, senior grocery merchandiser at Seattle-based PCC Community Markets, about retail coffee trends at the 15-store co-op chain.
What specific types of whole bean and ground coffees have your customers been most interested in? How about ready-to-drink coffee beverages?
We have seen a growing trend towards lighter roasts in both whole bean and ground coffee. This growth started well before the pandemic but remains strong. Seattle consumers want to taste the coffee’s nuances, and that tends to be easier with lighter roasts. In RTD, unsweetened cold brew and larger concentrated bottles for take-home are seeing large surges. We find that if shoppers want a sweeter coffee, they want to control how much and what type of sweetener is used.
Are you seeing a lot of innovation from smaller/local producers, and can you cite some examples?
Without the support of our local distribution chain getting products to our stores during the start of the stay-at-home order and continuing even now, it would have been impossible to keep up with customer demand. Several of our local partners added second and even third shifts to produce and ship coffee, milk, eggs, bread, and numerous other essentials for daily life in Seattle. It was truly inspiring to see.
How has the pandemic influenced demand for coffee (beans/ground and RTD)?
As PCC is located in the greater Seattle area, our coffee supply is heavily influenced by an educated coffee consumer. Ninety percent of our coffee sales are in whole-bean coffee, and sales of whole-bean coffee have risen substantially (50-70 percent). PCC’s private-label coffee has been our best seller for many years, and shoppers tend to prefer beans in the medium roast ranges. Of our top 10 best sellers, eight are PCC’s private label. Sales of our 24-ounce bags have been popular, most likely due to the same “bigger equals better” trend we’ve seen in snacks and beverages.
What are some key trends in this category you see going forward?
Consumers are looking to have more fun in the kitchen while staying at home, and that includes knowing how to make a good cup of coffee. Customers will continue to have favorite everyday beans but will be willing to branch out to try single origins or lighter roasts as they look to expand their coffee-making skills.
Mark Hamstra is a regular contributor to Specialty Food and SFA News Daily.