Product Purity And Sustainability
Product purity is a stable trend in the food and beverage industry, and movements toward more “natural” and “organic” products manifest this trend. According to Google Trends, consumer interest in “organic coffee” has increased steadily over time.
Consumer interest in product purity influences coffee labelling. For example, some coffee brands use minimalistic labels; these clear and straightforward labels visually allude to product purity.
Single Origin Coffee
Single-origin coffee, grown in a specific locality, is receiving steady and growing interest from coffee consumers.
Single-origin coffees are associated with high quality and uniqueness, as the terroir of the particular locality influences the coffee's flavour profile.
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Examples of single-origin coffees include:
- Jamaican Blue Mountain
- Hawaii Kona
- Kenya AA
- Guatemala Antigua
The major producers of single-origin specialty coffee are Brazil and Colombia, accounting for over one-third of global coffee production. Brazil produces 2.6M metric tons of coffee annually, and Colombia produces 810,000 metric tons.
Single-origin coffee also allows coffee consumers to feel connected to the producer. Brands selling single-origin coffee can more easily showcase the farmers involved in the coffee cultivation, and communicate the working conditions through third-party verification (e.g., Fairtrade).
"Single estate coffee is becoming more popular because it offers full transparency and traceability of the crop, all the way down to the single farm."
"Marketing single-origin coffee requires different tactics than blended, conventional coffee. Storytelling, premiumization, and content marketing should work to highlight and differentiate single-origin coffee."
Consumers are increasingly interested in organic coffee, and this trend is expected to continue.
The organic coffee market was valued at USD $6.23 B in 2020 and is projected to reach USD $9.5 B by 2025, registering a CAGR of 10%. Increasing consumer demand for healthy and organic products accelerates growth in this organic coffee segment.
Sustainable coffee is grown and marketed for its sustainability. It includes coffee certified as Organic, Fairtrade, and Rainforest Alliance.
The market share of sustainable coffee has grown to represent 8% of the global coffee industry, suggesting that sustainable coffee is no longer small, reflecting the increase in consumer interest.
Transparency And Traceability
A growing number of coffee consumers expect more product transparency. They are interested in learning about the coffee’s origin, production, and flavour profile. Increasingly, consumers are also invested in the social responsibility of the producer and are willing to allow their purchasing decisions to be swayed by the perceived virtue (or vice) of a coffee brand.
Some brands are early movers in promoting a transparent supply chain. Unilever revealed its supply chain, making its direct suppliers publicly available.
Some smaller players in the coffee industry embrace product transparency to differentiate their brands in a competitive market. For example, brands like Level Ground make their suppliers prominent, a key part of their marketing efforts.
“It seems like consumers are valuing traceability and quality more and more. This can be seen in our growth and the uptick in small roasteries and cafes across the world.”
QR codes can show the people involved in the cultivation and processing of coffee, reinforcing the product's sense of premium craftsmanship. For example, Ethical Bean Coffee uses QR codes to invite consumers to form a deeper relationship with their product.
Blockchain technology allows consumers to have a line of sight into a coffee product's origin, processing, and handling. Such technology can verify product purity, further premiumizing the coffee. For example, Folgers uses the IBM platform to connect producers to customers.
Health And Wellness
Consumers have growing expectations on how products should support their health and wellness goals. The USD $1.5 trillion wellness market reflects the value consumers place on protecting their wellness and health. Consumers also increasingly expect added ingredients (e.g., vitamins, protein, collagen, and superfoods) that offer real or perceived health benefits.
In addition, beverage consumers increasingly expect brands to offer products that reduce or eliminate unwanted ingredients (e.g., sugar, sulphates). Coca-Cola, which owns coffee brands Georgia and Costa Coffee, has reduced sugar content in over 1,000 beverages.
Some coffee brands like Bullet Coffee and Super Coffee have built businesses on specific diets (e.g., the keto diet). Other companies like VitiCup add vitamins and superfoods to coffee capsules, appealing to the broader market.
Adaptogens are natural ingredients that help a person's mind and body adapt to physical, mental, and emotional stressors.
An adaptogen coffee incorporates the inclusion of a beneficial ingredient (e.g., medicinal mushroom) which is ground with coffee beans during the blending process. Such adaptogenic coffees may be positioned to benefit consumers' immune systems, gut health, and metabolism.
Adaptogenic coffee is a new area of consumer interest and has shown significant growth in consumer interest since 2019.
The adaptogens market is expected to grow at a CAGR of 8.55% to reach USD $3.99M in 2025 from USD $2.44M in 2019.
Healthy Coffee Additives
Consumers want healthy coffee.
Savvy coffee brands cater their products to consumer interest in healthy coffee by adding beneficial ingredients. Such ingredients may include MCT oil, collagen, and vitamins. The introduction of beneficial ingredients can enable coffee brands to premiumize their products, connect with a specific segment of coffee drinkers (e.g., keto coffee drinkers), and differentiate their product line. Introducing healthy additives to coffee can allow brands to justify higher price points and capture more profit.
The global dairy alternatives market amounted to USD $20.5 billion in 2020. The market is expected to expand at a CAGR of 12.5% between 2021 to 2028.
Increasing occurrences of lactose intolerance will likely drive further growth in the dairy alternatives market. Plant-based dairy alternatives (e.g., soy, oat, almond milk) are viewed as more sustainable, with a lower carbon footprint. And some plant-based dairy alternatives, like almond milk, meet specific diet requirements (e.g. keto diet).
Embracing plant-based dairy alternatives affects many coffee businesses (e.g. cafes, RTD, e-commerce) and will be an option consumers increasingly demand.
Premiumization And Sensualization
Specialty coffee represents the very best of the world's coffee yield, accounting for around 3% of global production. The global specialty coffee market is expected to grow from USD $53.7 B in 2021 to USD $152.7 B by 2030, at a CAGR of 12% during the forecast period, 2022-2030.
Premiumization heightens a product's appeal to consumers by emphasising superior quality and exclusivity.
A certain sub-segment of coffee consumers seek to differentiate themselves from others. One means of doing so is by becoming coffee sophisticates, gaining product knowledge and seeking customised beverages (e.g. low-fat milk, triple shot latte, with extra foam). Retailers that cater to this trend of premium customization can grow.
Sensualization, the gratification of pleasure through the senses, is impacting the coffee industry.
Coffee consumers are paying attention to the product's sensory experience; taste, smell, and appearance are receiving more attention. Coffee retailers are increasingly considering the multisensory experience of their products.
Coffee tastings are an important means of educating general coffee drinkers on the sensory dimensions of quality. Such tasting programs also allow brands and organisations to inform consumers of the quality markers of good coffee. Consumers are starting to embrace coffee tastings; interest has grown noticeably over the last few years.
"Coffee tasting" is searched 9.2K per month globally, and the United States accounts for around 39% of this interest, with 3.6K monthly searches. Millennials in particular, often express interest in coffee tasting or coffee cupping.
During coffee cupping, tasters will measure and discuss critical elements of the coffee's body:
- Mouthfeel: the texture of the coffee
- Sweetness: the natural sweetness of the coffee is assessed
- Acidity: determine if there's bitterness or a sharp delivery
- Flavour: flavour profiles of coffee often have notes of fruit, wood, nut, or spice
- Aftertaste: how does the taste or mouthfeel linger after the coffee is swallowed
Coffee tasting or coffee cupping, are experiences offered by cafés, specialty coffee shops, or premium coffee stores.
Flavoured Coffee Beans
Flavoured coffee beans reflect the continued sensualization of coffee.
Manufacturers add oils to their coffee beans to create flavoured coffee before roasting. These flavoured oils imitate the taste of nuts, spices, and fruits without sugar.
The flexibility of flavoured coffee allows craft roasters to create specialty products by using premium beans to create imaginative flavours, including chocolate, vanilla, caramel, and fruit. Coffee roasters can create unique and distinctive blends by combining flavoured coffee beans.
Many coffee drinkers enjoy the added sweetness and richness that flavouring can add to their coffee. The trend of flavoured coffee beans will continue to gain traction in 2022.
Dalgona or Whipped Coffee
Dalgona coffee, or whipped coffee, originated in Korea and went viral in 2020. Whipped coffee became one of the top TikTok coffee trends, with some videos reaching over 5 million views.
Dalgona coffee is perfect for coffee lovers looking for something new and exciting. Dalgona coffee is made with decadent coffee foam, which offers a richness and flavour depth that traditional coffee cannot match. The foam is then spooned over milk, creating a unique and delicious beverage.
Whipped coffee’s unique texture and sweet flavour helped drive the popularity of this beverage. Dalgona coffee offers an Instagram-worthy appearance and unique flavour.
Coffee influencers shared content showcasing whipped coffee across different social media platforms, showing how to prepare the frothy drink. For example, James Hoffmann covered whipped coffee in a YouTube video.
Coffee is expanding into other food products, including confectionery products (e.g., ice cream, candy, cocktails), and different beverage categories.
Coffee consumers are seeking variety in flavour and experience. Coffee treats like macchiatos and Bailey's, combine espresso, non-alcoholic cream liqueur, and creamy foam. A recent embodiment of this trend was Coke Coffee.
Digitization is affecting the coffee market, impacting producers and retailers.
Coffee buyers are becoming more interested about the origin of coffee products. Consumers are seeking assurance that their coffee is ethically and sustainably sourced, opening up a place in the market for sustainable coffee brands.
Many of the best coffee brands recognize that coffee consumers co-create a brand's perception in the market. Social media and influencer marketing represent tools and tactics that can strengthen a brand's relationship with customers.
Smart Vending Machines
Digitalization and convenience converge in the trend of smart vending machines, which are computer-controlled and cloud-based management systems, allowing for live inventory monitoring and sales data.
Smart vending machines are poised for solid growth in the convenience industry. They represent a significant shift in how we think about convenience and will substantially impact the retail landscape in the years to come.
Smart vending machines link to the internet; they can keep track of inventory and restock themselves automatically. Smart vending machines can accept various payment methods, including credit cards, Apple Pay, and Android Pay.
Smart vending machines can give customers real-time information about the products they buy. For example, a smart vending machine might display nutrition information or allergens.
Facial recognition software allows smart vending machines to remember customer preferences, allowing the device to personalise coffee orders to consumers' tastes and preferences.
Some experts expect smart vending machines to become the norm over the next five years.
Convenience And Personalization
Consumers are seeking products that enhance comfort and are focusing on their needs. Consumers want a convenient offer; they expect fast and easy products to prepare. Simultaneously, they expect products to be healthy, unique and tailored to individual needs.
Convenience allows coffee drinkers to enjoy products with little effort or difficulty.
Coffee market segmentation shows convenience means different things in different contexts. For example, an at-home coffee consumer wants a great-tasting product they can brew quickly to drink at home or take on the go. However, many consumers do not have the time or expertise to brew specialty coffee, leading to out-of-home purchases at coffeehouses or other food service establishments serving specialty coffee.
Four coffee trends cater to consumer desire for convenience:
Single Serve Coffee Capsules
Single-serve coffee capsules are increasingly popular; they offer consumers a way to make a quick, consistent, and convenient cup of coffee.
Single-serve coffee capsules offer the exact amount of coffee needed for one cup, eliminating the risk of over or under extracting the beans. This offers coffee drinkers a consistent cup of coffee every time.
Single-serve coffee capsules are easy to clean up, as there is no need to grind beans or deal with messy filters.
Liquid Coffee Concentrates
Liquid coffee concentrates conveniently offer consumers a way to enjoy a delicious cup of coffee without having to brew a whole pot. Coffee consumers simply add water to the concentrate to enjoy the perfectly portioned product.
When brewed correctly, liquid coffee concentrates can taste as good as premium roasted coffee. Premium brands manufacture coffee concentrates that use quality beans and a careful production process. However, some brands may use lower quality beans or cut corners in brewing, resulting in a less than stellar cup of coffee.
Ready-to-Drink (RTD) Coffee
The global ready-to-drink tea and coffee market was valued at USD $98 B in 2021; it is expected to experience a CAGR of 6.2% from 2022 to 2030. The RTD coffee market is expected to experience a slightly higher CAGR of 7.69% from 2022 to 2027.
Major brands in the RTD coffee space include Nestle, Arla, Starbucks, Coca-Cola, and Suntory.
RTD coffee is particularly popular amongst younger consumers and the working population, as it offers an instant energy source.
One way of segmenting the global RTD market is by coffee packaging, such as bottles, cans and other packaging materials. Glass and PET bottles are widely used for RTD coffee globally, with the latter being most popular.
Instant coffee is a powder of water-soluble coffee prepared from grounded or roasted coffee beans.
Convenience drives growth in the instant coffee market; its preparation is fast and straightforward compared to fresh coffee.
Instant coffee manufacturers invest in improving and developing instant coffee’s aroma, quality, and flavour. Such efforts work to ensure the taste of instant coffee is similar to that of freshly brewed coffee.
Coffee aficionados often perceive instant coffee as inferior to specialty coffee, yet some coffee influencers cover these products in their content, normalising instant coffee among sophisticated coffee drinkers.
The instant coffee market was valued at USD $25.1B in 2020. It is projected to reach USD $34.6B by 2028, growing at a CAGR of 4.13% from 2021 to 2028.
Personalization tailors the customer experience based on a company's information about an individual.
Customization is an essential part of the contemporary coffee experience. Some findings indicate customization is the third most important factor coffee consumers value, after price and product quality.
Coffee brands aim to reach younger consumers (e.g., Gen Z, Millennials) who value the hedonistic pleasure of coffee (e.g., taste, aroma). Reaching these segments (and other segments) requires offering customization options for condiments (e.g., sugar, stevia, flavoured sweetener), milk and milk alternatives (e.g., milk, cream, oat milk), and toppings (e.g., cinnamon, sugar).
Personalization also extends beyond the product into the marketing and communication customers receive. For example, coffee brands should customise their email marketing based on a customer’s purchase history, offering personalised communication.
New Brewing Methods
Consumers are expressing greater interest in chilled coffee; there is growing interest in iced coffee, accounting for seasonality.
Snapchilled coffee provides an innovation on conventional iced coffee. Snapchilling brews and immediately super-cools coffee, locking in flavour without allowing the coffee to oxidise or dilute. Snapchilling is often used in ready-to-drink products, enabling quality brews to be produced at scale.
Nitro Cold Brew Coffee
Nitro coffee, cold brew coffee infused with nitrogen gas, is popular, rising and falling with some seasonal popularity.
Third-wave coffee shops were the first to create and embrace this coffee innovation in the 2010s, rapidly becoming popular with coffee lovers. Now major brands, such as Starbucks, successfully introduced nitro cold brew coffee.
Experts believe the global nitrogenated coffee market will reach USD $51.1 million by 2025, expanding at a CAGR of 26.6% over the forecast period.
Some of the world's biggest coffee chains have stores which have drive-through capabilities. Such chains include Starbucks, Tim Hortons, Peet's, and Costa Coffee.
Drive-throughs have been part of the coffee industry for decades. Drive-through coffee shops provide a quick, convenient option in a high-traffic area where a regular dine-in café might not succeed. This product distribution strategy has shown strong growth, and many believe it's just starting.
"Branding and marketing strategy for coffee drive-throughs must be unique; you want to focus on convenience, fast execution, and a standardised customer experience."
"Coffee shops can gain revenue and retain customers by creating a fast, efficient, and friendly drive-through experience."
Coffee delivery can take two forms: third-party delivery (e.g., UberEats) or coffee subscriptions offered by companies.
The global online food delivery sector is valued at USD $130.2 B in 2022 and is expected to grow to USD $223.7 B by 2027, achieving a CAGR of 11.44%. Major global food delivery market players include UberEats, Deliveroo and DoorDash.
Coffee companies can consider using third-party delivery partners to bring their food and beverages to market. Brick-and-mortar coffee businesses offering a combination of food and beverage products, such as cafes, may have an advantage in bundling products.
The coffee subscription model is burgeoning. Coffee subscriptions enable consumers to receive coffee from suppliers, delivered straight to their door.
COVID-19 lockdowns led to a rapid increase in the adoption of coffee subscriptions, as consumers sought coffee while at home.
Easy integrations with e-commerce platforms allowed coffee roasters to provide subscription coffee services and direct-to-consumer sales at scale in 2020. Subscriptions enable coffee retailers to improve and normalise revenue, as it's for a fixed period of time.
The coffee subscription model is best poised to endure in the premium, specialty coffee market. Customers valuing authentic, high-quality blends may continue to give a premium status to the product and experience high-quality coffee subscription offers.
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