The explosion of working from home has sparked significant growth in home coffee consumption and experimentation, creating more nuanced preferences for in-home and out-of-home products.
Everyone knows that work schedules have become less predictable over the past two years due to the coronavirus pandemic. What remains to be seen, however, is what the “new normal” will look like and how workplace services – such as catering and refreshment services – will be affected in the long term.
While traditional catering services have suffered historic fallout as a result of the coronavirus pandemic, the future is anything but bleak for service providers who take the time to understand changing consumer needs.
That’s according to Caleb Bryant, associate director of food and beverage reporting at Mintel, a Chicago-based consumer research firm. Bryant shared his research on the complex topic of the impact of remote work on the coffee industry at the National Coffee Association’s recent virtual convention.
The explosion of working from home has sparked major growth in at-home coffee consumption and experimentation, Bryant said, creating more nuanced preferences for in-home and out-of-home products.
And while service providers continue to struggle with the loss of out-of-home purchases, Bryant said new consumer preferences are creating opportunities for in-home and out-of-home markets.
A “critical moment” is coming
“The rise of remote work represents a critical time and opportunity for coffee brands to respond to rapidly changing market dynamics,” Bryant said.
While many coffee outlets – cafes, convenience stores and restaurants – closed in 2020, total coffee sales increased by 11%.
More importantly, coffee consumption will continue to grow.
“Coffee is unique in that the increase in remote work will bring long-term category gain,” Bryant said.
A key dynamic that Bryant focused on is the impact of in-home trends on out-of-home demand.
Nearly a third – 32% – of remote workers have improved home coffee options during the pandemic compared to 23% of non-remote workers.
Brands capitalize on experimentation
While driving demand for coffee, the pandemic has also sparked a demand for home coffee experimentation that shrewd brands have been able to capitalize on.
Examples include Nescafé Barista Creations, designed for making specialty cold beverages, and Dunkin’ Cold Brew Coffee Packs. No special equipment is required for these products.
Nestlé also saw strong growth in its single-cup Nespresso machines.
Single-cup coffee posted the strongest growth while roast coffee, relatively stable historically, saw double-digit growth, Bryant said.
RTD coffee did not do as well due to the loss of impulsive coffee trips, but is expected to rebound.
And while the changes have been most pronounced in domestic market consumption, Bryant stressed that the opportunities for growth are not limited to the domestic market.
Catering cafe possibilities
While retail coffee brands need to empower workers to make their own specialty drinks at home, foodservice brands need to create unique specialty coffee drinks that appeal to remote workers and can’t. be replicated at home.
Remote workers, for example, think specialty drinks can’t be replicated at home and are likely to view coffee and tea purchased at cafes as affordable treats.
“Remote workers may buy coffee away from home less often, but they will turn to more expensive drinks that they cannot make themselves,” he said.
Almost three-quarters, 72%, of remote workers agree that buying coffee outside the home helps break up the day, and they view coffee and tea as affordable treats.
Customer demographics matter
Diving further into consumer research, Bryant said Gen Zers prefer flavorful coffee: 65% of Gen Zers say flavor is a key driver for coffee, while Millennials want flavored coffees that are less sweet but complex.
The home barista trend also presents opportunities for coffee additives – branded flavored creamers. Forty percent of cream users want blends with cream flavors while 20% want creams that provide functional benefits.
“Functional creamers can bridge the gap between coffee and functionality,” Bryant said.
Syrup also has a big opportunity, being popular with Gen Zers.
There is also a slight increase in the launch of brewed coffee bags allowing a single cup of coffee as if it were a tea.
“Jitter-free” products are emerging in the functional market as brands target those who want sustained energy rather than blazing energy.
Bryant cited some opportunities as being more focused on the out-of-home market:
- 39% of Gen Z consumers say a wide selection of cold coffee drinks would motivate them to shop more often at the coffee shop.
- 35% of Gen Zers are interested in more indulgent flavored coffee drinks.
- 46% of Gen Zers buy iced coffee away from home, compared to 26% who buy regular hot brewed coffee.
- Millennials are the main consumers of hot specialty coffee.
Market factors to consider
Rising coffee prices, meanwhile, create opportunities for valuable offerings such as loyalty programs. An example of this is Panera’s coffee subscription offer.
Looking further into the future, Bryant said a decrease in commuters and a labor shortage are driving the need for smaller-footprint service units with fewer employees, noting that QSR are already the pioneers of this movement.
Starbucks opened its first micro cafe designed for mobile pre-orders before the pandemic, which could serve as a footprint for future locations, especially in urban areas.
Automated formats are another option. Costa Coffee, a UK-based coffee brand acquired by Coca-Cola Co. in 2018, is growing through its automated coffee kiosk.
Additionally, “we may see a revival of the food truck trend following labor shortages,” Bryant said.
He also sees a growth opportunity for breakfast delivery, which he says is underrepresented in the booming foodservice delivery market.
Then there is the growth of co-workspace formats.
Saks 5th Avenue has a SaksWorks coworking center that mixes retail with coworking spaces.
Capital One has Capital One Café, a half-café and co-working space and banking services.
“Cafés will become smaller, more experiential and connect with consumers at home,” Bryant said. “Work will never be the same again and the coffee market will never be the same as before.”