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What it takes to win in the coffee aisle at grocery

It appears Canada’s coffee market has experienced tremendous value erosion. Across total coffee, Euromonitor lowered its five-year forecast by $1.2 billion. What has driven this devaluation? A lot of this erosion comes from the grocery side, driven by retailer activity and category maturity.

As consumers search for grocery convenience through e-commerce, home delivery and meal subscriptions, retailers are increasing their focus on price discounts as a trip driver. Loblaw maintains it'll closely monitor food deflation, expecting deflation to lessen but remain fierce. Metro indicates food deflation as a headwind for modest same-store sales growth and Sobeys continues to stabilize margins by fine-tuning the price/value equation. Price promotions are rarely sustainable, yet necessary to secure consumer spend – earning less consumer spend is better than losing the basket altogether. And building out strategic initiatives without price dependency – like click & collect or in-store pickup – also requires investment funded by shoppers among other sources in the short term. With its recent acquisition of Whole Foods, Amazon has emerged as a stronger retail competitor.

Category maturation is also reducing coffee’s growth potential. Single-cup coffee is no longer the driving force it once was. Brewer adoption has stabilized and consumers familiar with single-cup coffee are developing routinized purchase behaviour. Their shopping habits are now shifting to favour bulk purchasing instead of product variety. Café brands, organic/fair trade, and whole bean remain key to fueling performance yet not large enough to offset losses in category potential, especially without additional retailer support. Innovations like ready-to-drink cold brew are emerging, but also not material in a multibillion-dollar category. Third-wave coffee is growing popular, but translating this down a static grocery aisle increases complexity.

So now what? How can retailers thrive in this new reality, with a maturing category and aggressive pricing?

Creating stronger differentiation is paramount, and one way to achieve this is elevating the shopper experience with café equity. Most retailers have already started down this path in the perimeter (i.e. Starbucks in Safeway, Tim Hortons in Metro). Bringing café brand equity down the coffee aisle further integrates an improved perception with shopper experience. Café brands are the primary growth drivers and have both organic and whole bean varieties, making it the key trend that is strong enough to improve shopper experience and capture more shopper dollars. But again, the trend alone without retailer support is not enough to balance value erosion.

Simplifying product assortment and aisle navigation are just as important. Decluttering the shelf creates better impact and eases frustration, for routinized shoppers. Grouping the right segments together improves aisle flow and reduces congestion, which ultimately delivers an elevated shopping experience.

Price is a key shopper consideration, but it doesn’t have to be the most frequent benefit retailers advertise. Winning the shopper’s trip is increasingly important, and retailers that elevate the shopping experience strengthens their odds to win in the changing coffee landscape.


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