More Canadians are making coffee at home, providing a strong opportunity for grocers to perk up sales
Countless Canadians would agree: there’s nothing better than that first cup of coffee in the morning. In fact, Canadians are drinking 5.5 kg of coffee per capita in 2020, according to Statista, making our coffee consumption the 5th-highest in the world. But, interestingly, our coffee drinking habits are changing as a result of the pandemic. With much of the population working from home more and heading out to coffee shops less, grocery sales for coffee made and consumed at home have grown significantly. In fact, Nielsen data shows an increase of 8.2% for roast and ground coffee, with sales reaching $1.47 billion for the 52 weeks ending Aug. 15, 2020. During the same period, instant coffee sales saw an increase of 19.7% reaching $216 million.
“For a change, coffee isn’t happening in a to-go cup, which is completely new to some consumers,” says Jo-Ann McArthur, president and chief strategist at Nourish Food Marketing. As consumers increasingly brew coffee at home, the biggest trend seems to be bags of whole bean and ground coffee, as people are making big pots of coffee in the morning to see them through the workday. There’s been a move from “pods to pots,” says McArthur.
Coffee sales are definitely increasing at Colemans outlets in Newfoundland and Labrador, says store manager Bethany Roberts, and local producers appear to be winning. “We’ve seen a big increase in people supporting and buying local, in particular when it comes to coffee,” she says. Her store makes sure to stock a good selection from local producers, including Jumping Bean, a premium Newfoundland coffee company started in 2005.
Jeff LeDrew, CEO of Jumping Bean, says the company has seen year-over-year growth, including through COVID-19. One of the big winners for the company is bulk ground tins. People want to be stocked up with their favourite brands, he says, and Jumping Bean’s fair-trade, organic, low-carbon coffee hits the eco-conscious segment of the market.
In Toronto, “as soon as the pandemic hit, people went back to their staples,” says Ellen Osborne, category manager at Summerhill Market. Osborne found that while people were still willing to spend money on good coffee, they were “sticking with the brands they knew.” Summerhill has seen good sales with brands that have a strong presence in Toronto coffee shops, including Balzac’s.
Who should grocers be catering to in the coffee aisle? There are “two different customers” in Canada right now, McArthur says: those who are on tighter budgets and will be buying more affordable brands and private-label offerings, and those who kept their jobs and have more discretionary income than usual due to a lack of travel, sports or kids’ activities. Either way, coffee is often considered an “affordable indulgence.” This means there are opportunities to upsell, perhaps with slightly more expensive or premium brands, or single-bean roasts (for example, a coffee from the Dominican for those who usually travel there), or packaged Starbucks or Tim Hortons blends for those who miss their favourite cafes, says McArthur. That said, Colemans’ Roberts does see a trend toward the more value-conscious products due to tighter budgets, with customers who are making online orders often requesting that no substitutions be made with higher-priced product.
In terms of demographics, it seems just about every group buys coffee. Among adults aged 18 to 79, 70% will purchase coffee in Canada, with older adults leaning to ground coffee and younger adults towards ready-to-drink cold brews or lattes, says Adam Zitney, vice-president of marketing for the J.M. Smucker Company ( the parent company for the Folgers brand). In general, “most consumers dabble in different coffee products depending on their need,” though Zitney notes that historically in tough economic times, “large trusted brands with a long history of value and quality tend to do better.” Folgers has seen “double-digit growth” since the pandemic, he says.
Merchandising should be about making it as easy as possible for the coffee consumer, says Zitney, since shoppers want to get in and out quickly these days. “Retailers need a good mix of mainstream and premium offerings in both small and larger sizes” on shelves to meet demand, he says. Make sure the section is always looking full, adds Roberts, and pay attention to customer requests. More local offerings were brought in at Colemans, for example, because customers were asking for them. At Summerhill Market, Osborne says popular shelf-stable plant-based milks are being placed alongside the coffee products, especially oat milks, which go well with coffee.
Coffee is certainly among the “important items” on an average customer’s grocery list, especially now. “We haven’t seen category growth like this in quite some time,” says Zitney. This includes the curbside pickup or delivery consumer. “Coffee is a top three food category bought online,” says Zitney, who notes that “ensuring that assortments and promotion work for both bricks and mortar and e-comm will be critical” moving forward.