2010 TRENDS: Consumer Behavior

Introducing Xpress CoffeeIssue Date: SCR – August 2009, Posted On: 7/14/2009

Brand Keys polled 26,000 consumers of 441 brands in 63 categories this spring to discover value is the primary driver in the coffee category along with service and surroundings, quality and taste, and selection.
Dunkin’ Donuts® secured the top spot followed by McDonald’s® and then Starbucks®.

“Brands that received the highest marks for meeting or exceeding consumer expectations conform to a price-value formula that consumers use to calculate brand differences and to decide which brands to buy,” says Brand Keys President Robert Passikoff.

Shopper consciousness has shifted from just trying to ferret out deals to looking for brands that provide great quality and value for the money, he said. Winning coffee brands offer broad packaged goods assortments in sizes that allow customers to match their needs and their budgets.

Mike Ferguson, Fresh Ground Consulting
www.freshgroundconsulting.com
Fullerton, Calif.

The coffee industry has long considered itself recession proof and economists, to the degree that they believe coffee to be a cousin to vice, agree. They consider demand for coffee in general (caffeine more specifically) as “inelastic,” meaning consumers are reluctant to substitute another product regardless of a rise in price or, similarly, a decrease in their ability to pay. And despite several significant economic downturns within the 30- to 40-year lifespan of the specialty coffee industry, quality coffee has demonstrated inelasticity. Retailers and their suppliers and manufacturers have not only survived difficult economic environments, they’ve even prospered.

But the current economic downturn has seen the limits of inelasticity for prepared specialty coffee, if not coffee in general. Across the board, coffee retailers report drops in beverage sales. This is an important point and bears repeating because it holds clues to the future. “Elasticity” is being experienced in the marketplace for “prepared” beverages, the coffee drinks we have others make for us. Consumers are substituting, not another base product, but another preparation and finished product, opting for a less expensive method at retail (i.e. drip coffee) or making it themselves.

In a recent survey conducted by the Specialty Coffee Association of America, among retail respondents that had whole bean and ground coffee sales in 2007, 67 percent report an increase in sales for this category in 2008, roughly the same number (62%) reporting an increase in beverage sales. However, while 20 percent of retailers report a decrease in beverage sales, only 12 percent report a loss in whole bean and ground coffee sales. While not one respondent reported a loss of more than 15 percent in whole bean and ground coffee sales, one out of four respondents reporting a loss in beverage sales indicated a decrease in excess of 15 percent. And finally, while 16 percent of respondents report a drop in drip coffee sales, 24 percent report a drop in sales of espresso-based beverages.

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