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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

Shutterstock

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.


Packaged beverage options are exploding: 4 tips for boosting offerings and efficiencies in-store

From new ready-to-drink (RTD) coffees to infused teas to sparkling waters, packaged beverage options are at an all-time high, driven by innovation and consumer demand for variety.

BeverageBuyer-teaserBeverage manufacturers recognize that having diversity in their offering is critical and the same is true for convenience store operators, who want to keep customers coming back for more.

“Culturally, we’ve become so accustomed to having more choices than ever and from a consumer’s standpoint, beverages are low investment, low commitment,” explained Satoru Wakeshima, chief engagement officer at New York-based branding agency CBX. “It’s not a major decision and people like to try new things.”

Wakeshima predicts 2019 will see more of the rising beverage trends and new product explosion seen in 2017 and 2018, but with greater blurring of product types — more hybrids.

“Our expectations are higher than ever, and the bar continues to rise,” he said.

How can convenience store operators manage the packaged beverages category in a way that capitalizes on new and emerging opportunities, but maintains efficiency?

Beverage experts, offer the following tips:

1. Allocate intelligently

Because the category cannot expand infinitely, especially within the limited confines of the convenience store format, space needs to be allocated intelligently, which includes scaling back in some areas. It’s a simple concept that is not always executed.

“Reducing space for declining or slow-moving segments to make room for innovative or higher-velocity segments that attract shoppers to the store is the key to success,” says Peter Keaney, business analyst at Cadent Consulting Group. An example would be to reduce space for milk, where sales have been declining, to make space for more sparkling waters.

2. Rotate offerings with marketing support

“People want to discover new beverages, but they also want to be reassured that they’re making a good choice,” said Wakeshima. “Educating customers at retail, mobile or online to aid the deselection process becomes the expectation.”

3. Think like consumers

Thinking like consumers means in terms of “need states” rather than subcategories, as this is how consumers shop, according to Keaney. Moving forward, the plethora of packaged beverage options could be rearranged in the cooler by needs.

The NPD Group has identified four macro consumer needs: fueling, wellness, connecting and gratifying.

The NPD Group has identified four macro consumer needs: fueling, wellness, connecting and gratifying. These fundamental needs can then be broken down into more specific behaviors, known as need states. Examples of need states under fueling include “easy on-the-go” and “staying awake.” Meanwhile, need states under gratifying include “nostalgic drinks” and “morning drink favorites.”

4. Keep abreast of beverage trends

In addition to staying on top of the latest packaged beverage trends, retailers also should watch what’s trending outside the category, since trends often spill from one category into another eventually.

The fastest-growing packaged beverage segments currently are sparkling water, energy drinks and RTD coffee, all which are up by double-digits recently, according to Keaney.

Still and sparkling water continue to be big as consumers seek alternatives to carbonated soft drinks, he added. “In addition, plant-based and probiotic beverages are driving sales, as well as functional beverages and innovations like nitro cold brewed coffee. We’ll have to see how high CBD-infused beverages can fly.”

Originally published at Convenience Store News.