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Shutterstock. Dalgona coffee is made by whipping equal proportions of instant coffee powder, sugar, and hot water, then adding it to cold or hot milk.

Coffee talk: Research shows Gen Z craves RTD beverages

Shutterstock

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With people working (and going to school) from home, it’s changing how people consumer coffee: Think less take out and more at-home creations.

New research from Mintel suggests that the at-home coffee market is set to grow by 4.9% this year to reach $15.6 billion (in the United States), compared to a total of 3.9% growth experienced between 2015 – 2019.

Mintel’s consumer research shows that as many as two in five (39%) people are willing to pay more for premium coffee at home and, in turn, finding their inner barista.

Caleb Bryant, associate director, food and drink, Mintel, said that many are buying coffee shop branded coffee to recreate that authentic coffee shop experience: “Despite the fact that many Americans are facing economic uncertainty, premium and foodservice-branded coffees have an opportunity to market themselves as affordable luxuries. The purse strings may need to tighten but a premium home-brewed coffee is still less expensive than drinks from a coffee shop.”

For those without the patience or know-how to satisfy their caffeine cravings at home, ready-to-drink (RTD) coffees are a favoured alternative. Leading the way in this at-home craze is Gen Z, with 46% opting for RTD coffees. Only 45% of Gen Z consumers drink ground coffee compared to 63% of millennials.

Mintel research shows that not only are Gen Zs not brewing their own coffee, they have yet to develop brand loyalty when it comes to coffee: only 33% say they typically stick to the same brand of coffee, compared to 44% of Gen X and 50% of boomers.

“Gen Zs in particular are set to adopt the trend for enjoying specialty coffee at home. Before COVID-19, many Gen Z consumers bought their coffees out, treating themselves to cold coffees from their preferred coffee chain. But with these younger consumers experiencing the sharpest rise in unemployment and already on lower incomes, they are the most price-sensitive to coffee drinks. We’re likely to see Gen Zs reduce their coffee shop purchases, possibly dramatically depending on the severity of the recession, giving retail coffee brands a golden opportunity to connect with this next generation of coffee lovers,” Bryant said in a release.

Shutterstock. Dalgona coffee is made by whipping equal proportions of instant coffee powder, sugar, and hot water, then adding it to cold or hot milk.

Shutterstock. Dalgona coffee is made by whipping equal proportions of instant coffee powder, sugar, and hot water, then adding it to cold or hot milk.

Case in point is the photogenic Dalgona frothy coffee craze so popular on social media. From March 1, 2020 through June 15, 2020, there were more than 440,000 posts mentioning Dalgona coffee on Instagram, Pinterest and Twitter. As a result, sales of instant coffee – the primary ingredient for Dalgona – are poised to experience  a 5% rise in sales growth this year.

“Consumers are discovering it is safer and more cost-effective to have their own coffee at home and this trend is likely to continue even once the virus is under relative control,” said Bryant. “This shift opens up a real opportunity for products, machines and gadgets that will help people create their favourite coffeehouse drinks at home.”

Key takeaway: Coffee brands (both retail and RTD) have the opportunity to build long-lasting loyalty among Gen Z consumers and can use flavoured coffee varieties to appeal to these consumers (42% of them are interested in unique flavours of coffee). C-stores can capitalize on this trend with the right product assortment.


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C-store IQ Payment Solutions Report

 

Look, no hands: Convenience shoppers prefer to tap and pay

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Cash is no longer king, having been dethroned by shoppers opting for contactless payments at the c-store level. 

Fittingly, a primary driver is overall convenience, as shoppers seek quick and easy ways to pay, whether in store or at the pump, according to Convenience Store News Canada’s proprietary research report C-store IQ: A National Shopper Study

C-Store IQ is the first convenience and gas specific study that delves into the wants, needs, perspectives and habits of Canadian consumers. 

Of course, these days contactless isn’t just the word for tapping to pay with a credit card, debit card or mobile app—it’s a strategy to help combat the spread of COVID-19. 

According to C-store IQ research, the definition of convenience, for most shoppers, is an experience that ultimately saves them time and effort: 41% of those surveyed said it purely comes down to having a “convenient” experience and 34% define this as a “quick stop/in and out.” 

Screen Shot 2020-05-27 at 11.31.10 AMThis need for speed extends to the checkout experience, where tap and pay rules. It’s the method of choice for 67% of Canadian c-store shoppers when asked: “How did you pay for your purchase during your most recent in-store visit to a convenience store?”

  •     35% used a debit card 
  •     31% used a credit card 
  •     30% reached for cash
  •     1% opted for mobile payment 
  •     1% used a gift card
  •     0.3% used a retailer’s mobile app

Of course not everyone has access to a debit or credit card, which highlights another key payment option—prepaid reloadable cards issued by credit card companies. In most cases, these are sold by c-stores alongside a wide-range of gift cards. The prepaid cards are convenient for everyday spending and suitable for people who might not qualify for a credit card, budgeting, privacy or for children as an allowance card. C-store IQ data shows that 6% of shoppers purchased a gift or prepaid card during their most recent visit—that’s more than those who purchased wine (3%) or e-cigarettes (3%). 

Overall, research shows younger shoppers demonstrate higher usage of debit and mobile payment compared to older generations. As a result, convenience stores will continue to feel the pressure to offer more digital or frictionless shopping, payment, and promotional solutions.

Screen Shot 2020-05-27 at 11.31.28 AMThat pressure is mounting in the era of COVID-19, with customers across multiple generations getting on board to minimize handling cash and the hand-to-hand contact involved with payment and making change. 

 The future is frictionless

Whether spurred by convenience or precaution, C-store IQ findings are in line with overall payment trends across Canada.

New technology and payments innovation are transforming the way Canadian consumers make payments, according to Payments Canada’s annual Canadian Payment Methods and Trends report: “In pursuit of more convenient, faster and secure payment experiences, Canadians are rapidly adopting newer digital channels, such as contactless (tapping card or mobile), e-commerce, mobile and online transfers.” 

  •     Contactless payments grew 30% year-over-year from 2017-2018 with a total of 4.1 billion contactless payments (card and mobile) worth $129.9 billion at the point-of-sale. 
  •     Debit represents almost 60% of volume of these contactless payments 
  •     Debit, often viewed as a convenient substitute for cash, overtook cash for the first time 
  •     Mobile devices were used by nearly 35% of Canadians for contactless payments on a regular basis 

“We are at a pivotal moment, with a number of key driving forces that are accelerating the transformation of Canada’s payment environment,” Cyrielle Chiron, Payments Canada’s head of research and strategic foresight, said in a statement. “Evolving technology and industry innovation are changing the game, fuelled by consumer and business demands for friction-free, fast and secure payments.”

To be adaptable is to be mobile

While mobile payments represent a slower uptake than contactless cards overall, nowhere is this more apparent than at the c-store level, according to data from C-store IQ. However, the 1% of shoppers who paid with their mobile during their last c-store visit doesn’t tell the whole story. Broken down by generation: 4% of millennials used a mobile payment or a retailer’s mobile app, compared to 1% of Gen X and less than 1% of boomers. 

Survey participants said they used mobile payment apps far more frequently during transactions with other retailers, such as grocery stores, big box and restaurants. This indicates the issue might be one of the payment option simply not being widely available at the c-store level.

In fact, when shoppers did have the opportunity for mobile payment at a convenience store, more than 80% rated their experience as satisfied or very satisfied. This further implies that speed and value are primary expectations of c-store shoppers.  

According to Global Payments, merchants who “start accepting digital wallets in an ecommerce environment consistently realize meaningful benefits. These include a familiar experience for consumers, enhanced security and a flawless customer journey that minimizes payment friction.”

There are generally two approaches at the c-store level:

  1. Accept payments via mobile wallets, such as Apple Pay, Samsung Pay and Google Pay. Basically, this means ensuring your terminal is programmed so customers can tap and pay with their mobile phone. 
  2. Create a branded mobile app with in-app payment functionality. This is an effective way to build brand loyalty and engage with customers through rewards and special offers. Starbucks does a great job of this. 

Overall, mobile payments represent a massive opportunity at the c-store level, especially when it comes to satisfying younger shoppers. And, in most cases, this doesn’t require a whole lot of work at the operator level if your terminal is already enabled for contactless card transactions.

Cash on demand

While digital payment methods are growing in scope, it’s worth noting that cash still has a valuable role to play on the c-store landscape—after all, it usually accounts for 30% of transactions. 

The Canadian Bankers Association emphasizes that while consumers are increasingly turning to digital channels and electronic payment methods (especially during the COVID-19 crisis) cash remains important.

In fact, in recent months, the Bank of Canada stepped in, “strongly” urging retailers to stop refusing cash payments to ensure everyone could access the goods and services they need. “Refusing cash could put an undue burden on people who depend on cash as a means of payment,” the central bank said in a statement.

Convenience stores also play an important role in ensuring Canadians have easy access to cash. Of the ancillary services offered by c-stores, ATMs came out on top, with 24% using an in-store ATM, according to C-store IQ data. In this case, millennials (29%) are more likely than boomers (20%) to use the ATM. 

The bottom line, according to data from C-store IQ, is convenience stores that prioritize simplifying the shopping and purchase steps are more likely to see rewards with increased traffic and basket size. This means operators of all sizes can benefit from offering multiple payment solutions spanning credit, debit, mobile and prepaid card acceptance. Whatever the motivation—speed or safety—as more consumers go contactless, they’re opting to shop at c-stores and gas sites that accommodate these payment solutions. 

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