Brave Bean Coffee, a service-disabled veteran owned business, is excited to announce the launch of its e-commerce site, making its ethically sourced, premium coffee blends available to coffee lovers worldwide. This expansion allows Brave Bean to further its mission of giving back to those who have given so much.

• The First Responder
• Sergeant’s Sip Espresso
• Twilight Tonic

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The above quote is from Chris Costagli, vice president of food insights lead at Nielsen IQ (NIQ), during his recent National Coffee Association (NCA) webinar, “Mastering Omnichannel Sales in the Coffee Industry” in which he informed attendees that more than half of all food and beverage unit sales originate in the food channel, but in the past year, 3.6 billion units disappeared from the in-store food channel, 67% of which was due to lost sales. Furthermore, the in-store food channel lost 2.41 billion units that completely disappeared from the FMCG industry altogether.

The lost sales can be attributed to consumers:

• Scaling back to reduce spending
• Buying less due to GLP-1s (weight loss drugs)
• More away-from-home consumption

Rising food prices remain top of mind for shoppers so they are buying less. Costagli said the F&B sales in the food channel have trended negatively over the past few years, falling 1.8% in the last year. As such, consumers are taking action to manage spend, and most shoppers have made changes to how they shop to save money — 87% have changed how they shop to save money, and they are using an average 3.9 strategies to do so (such as switching to lower-priced options, buying their favourite brands only when on sale, buying the brand that is on sale, buying essential items only, etc.).

And while 67% of in-store food channel unit loss is due to discontinued purchases, 34% of in-store food channel lost units are unaccounted for. Costagli explained that the ‘lost units’ shifted to other channels, the majority of which were purchased online. “Those shifting trends plus online growth underscore the importance of an omni strategy,” he said, adding that online sales grew 17% over the past year, driven by growth in every department across the store.

Consumers are shopping online – 85% order from pure play online retailers for home delivery and 69% order delivery from hypermarket, supermarket, mass stores – and they are experimenting with emerging retailers like TikTok. “The power of social media is significant and is something that should be used in omnichannel marketing,” Costagli said, adding that consumers using TikTok Shop are being introduced to new brands they did not already know, creating opportunity for some manufacturers and more competition for others. He shared that 62% of TikTok users are familiar with the TikTok shop experience and another 62% of TikTok users are open to making a purchase through TikTok Shop.

In online outlets like TikTok, influencers can have a huge impact, so Costagli suggested brands/manufacturers should lean into social platforms to drive awareness and capitalize on viral opportunities. During the webinar, he highlighted several ‘coffee influencers’ such as Morgan, the 2022 U.S. Barista Championship winner who is teaching 6.2 million TikTokers how to create the best coffee, while Cosette, a TikTok creator who has grown her page to 781.7K followers by sharing how she makes barista-style lattes at home for a fraction of the price.

Social shopping is in its infancy but already its showing strong signs of growth. NIQ revealed that shopping on TikTok generated >$2 billion in CPG sales over the past year. Health and performance food products account for nearly a quarter of TikTok food sales, driven by influencers showcasing health and wellness products.

Gen Z shoppers are more likely to be using third party apps to shop online and they believe AI-enabled tools provide helpful benefits that support their shopping needs. Hence, the smartphone’s role in shopping is evolving and influencing decision making more than ever. “Shoppers are turning to AI for everything from meal planning to diet advice and party inspiration. AI has the potential to influence what consumers buy and where they shop. Within seconds ChatGPT can give consumers product recommendations, suggestions on where to shop and much more,” Costagli explained, adding, “that has real implications for retailers and manufacturers: is AI recommending your brand or your stores?”

Simplicity and trust are paramount when it comes to shopping online. And with only eight seconds to engage online shoppers, it is critical that product information is accurate with the most important callouts. “Above all else, the online shopping experience must be optimized for a ‘Mobile First’ consumer,” said Costagli. NIQ research found that when shopping online:

• 77% of shoppers expect the online product titles to be more specific and transparent,
• 76% of shoppers prefer to have enhanced product content available when purchasing online,
• 90% of online buyers say that primary image quality is the most important factor in an online sale.

Costagli advised brands/manufacturers to create the perfect online store by partnering closely with retail partners and to drive online performance through availability, visibility, and content attractiveness. “Getting the online experience right for shoppers translates into growth.”

Coffee benefitting from the omni space — in fact, a quarter of coffee is sold online. Costagli shared that retailers sold nearly $6 billion worth of coffee online over the past year, up approximately 13%.

“The limits are endless, there are so many options online,” he said. “An omni strategy for coffee can tap into subscription services and direct-to-consumer and can benefit from a strong social media presence. Social media platforms like TikTok Shop are exposing consumers to brands and varieties not found in traditional retailers. This means that the competition for manufacturers is even stronger, including competitors that might not be on your radar.”

Meeting consumers online is a valuable proposition for retailers and manufacturers alike. Consumers are spending more online for coffee than they do in-store and they are buying more. Furthermore, online coffee shoppers are buying more units per occasion which suggests more variety seeking. Costagli advises retailers and manufacturers to promote incremental unit purchasing with wider selection and with purchase incentives.

According to NIQ, non-traditional channels are showing 31% growth in units per shopping occasion. Like TikTok Shop, non-traditional online channels are giving shoppers variety. For coffee drinkers, this means new experiences and flavours. For manufacturers this underscores the importance of innovation, especially in traditional retail both online and off.

Online coffee buyers are more affluent than those who buy coffee in brick ‘n mortar stores. Gen X, millennial and Gen Z consumers all engage differently so it’s essential to know your customer base, said Costagli and asked, “are your brands optimized online to reach coffee buyers where they are?”

No matter the type of site, it’s a fact that consumers are buying coffee online. To find success online, Costagli stressed that manufacturers must prioritize optimizing their search engine visibility and strengthening their social media presence to stay competitive and drive sales. “Navigating today’s market requires a relentless focus on the consumer.”

Vanessa L Facenda, editor, Tea & Coffee Trade Journal.
Keep in touch via email: vanessa@bellpublishing.com Twitter: @TCTradeJournal or LinkedIn: Tea & Coffee Trade Journal

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Warehousing automation plays a critical role in the success of tea and coffee producers’ operations, according to the 2023 Packaging and Automation in the Warehouses of the Future report produced by PMMI, The Association for Packaging and Processing Technologies. Warehouse operations for many consumer-packaged goods (CPG) companies are still highly manual and often operate from outdated buildings with unsuitable layouts, causing bottlenecks in their operations, according to the report findings.

The main drivers of automating warehouse operations are labour and skills shortages, but this lack of skilled workers also can act as a roadblock since tea and coffee makers often are challenged to find the right people to operate new technology. According to the PMMI report, 90 percent of CPG firms reported labour shortages were impacting their performance, with 60 percent of companies saying they were extremely impactful in their operations. According to the research, for some companies interviewed, it is a choice between automating the line or stopping production. More companies are turning to automation as a solution, in part because the goalposts for return on investment (ROI) have moved, with the cost of automation decreasing while labour costs continue to skyrocket.

In the context of tea and coffee producers, the report suggests that automation can help improve supply chain efficiency and reduce time to market. Automation also can also help tea and coffee producers reduce the risk of errors in their operations, leading to significant cost savings.

CPG companies are beginning to realise that a piecemeal approach to automation can be effective. A commitment to full automation may not be necessary. End-of-line processes are ripe for automation due to the operational bottlenecks that can occur in this area. The research indicates that e-commerce is impacting the processes of nearly half of the CPG companies interviewed and there is a clear movement toward more responsive direct-to-consumer models disrupting highly manual warehousing formats.

Warehouse automation

Two of the most automated processes within the warehouse are associated with logistics – warehouse management and inventory control. This may be because both functions tend to have a lower cost of implementation and a more appealing ROI compared with investment in automation machinery. Palletising/depalletising and secondary packaging are the other processes with the highest levels of automation in the warehouse, while the remaining processes are dominated by manual labour (over 60 percent of CPG firms report these functions are either fully or mostly manual in their warehouses).

Currently, automation technology with the highest level of usage is conveyors (61 percent). This is quite possibly because of the wide range of applications conveyors serve and their relative simplicity compared to other technologies. Automated labelling and wrapping/sealing are also common, but over two in five (40 percent) of CPG manufacturers have yet to implement this equipment. Another area of opportunity for tea and coffee producers is in mobile robots, with just 16 percent of respondents using them in their warehouses.

Many CPG manufacturers (35 percent) still are reluctant to increase their spending on automation. Reasons behind this range from the physical suitability of their existing warehouse facilities for automation to concerns relating to long ROIs and high upfront costs. Some of the reasons differ between smaller and larger companies, and their approaches can vary depending on the levels of ROI they can achieve from automation. High levels of inflation pushing up consumer spending on food and drink and nondurable products, coupled with skills and labour shortages, appear to be driving investment in warehouse automation technology.

Another technology being considered by CPG companies is the use of cobots (robots designed to work with humans in a shared workspace), particularly for processes currently performed completely manually, such as repacking, loading, palletising, etc. Any increase in shipping singular units or shipping more mixed pallets is expected to make robots and cobots more appealing to CPG firms due to the time-consuming manual tasks generated by increased flexibility.

With so many advantages to be gained by implementing automation in warehousing operations, coffee and tea producers should examine all the options available.

• Tom Egan serves as the vice president of Industry Services for PMMI, the Association for Packaging and Processing Technologies. He joined the PMMI staff in 2003 following more than 20 years in the packaging industry during which he was also an active PMMI member. His previous work experience includes tenures at Eaton Corp. and as VP, marketing & sales, for Hoppmann Corporation. He has an MBA from Baldwin-Wallace College, and a BEE in Electrical Engineering from Villanova University. For more information on PMMI’s PACK EXPO East 2024 (18-20 March, Philadelphia, Pennsylvania), visit: packexpoeast.com

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Retail sales of coffee and tea in the United States are undergoing a transformation – especially in grocery stores and mass retailers.

Commenting on the changing retail world, Peter F Goggi, currently president of the Tea Association of the USA, and who previously spent 32 years working for Lipton Tea as part of Royal Estates Tea Company – he was the first American-born tea taster in the history of TJ Lipton/Unilever – said that during 2023, “inflation driven by supply chain costs, shipment imbalances, low unemployment and government spending reached levels not seen for 40 years”, averaging 8.0 percent for 2022 (In 1981 it was 10.33 percent). In that light, he believes “this level of inflation has certainly impacted the cost of goods and apparent growth rates in dollar terms.”

Tea Imports for 2023 were dragging, due mainly to the high level of inventories taken on by the trade during the supply chain-challenged Covid years. Tea companies anticipate that normal imports will return shortly. In regards to the market, Goggi thinks that “sales in dollar terms continue to grow. Volume declines are being seen in ready-to-drink (RTD), but are growing or staying flat in tea bags, specialty and foodservice.”

Qualitative research now indicates that at-home consumption remains high, and Goggi points out that “the likelihood for consumers to consume tea out of home declined. The hybrid way of working, with many workers continuing to split time between the office and home, will help sustain gains in consumption trends.”

Consumers are looking for specific health and wellness benefits from their food and beverages, placing that above sustainability. According to Tastewise’s 2023 trend report, “While health and wellness and international flavours have been trending in food and drink for years, this report shows preferences are evolving and consumers are zeroing in on specific niches that interest them.”

These trends complement tea’s strong position as a plant-based, healthful drink, consumed for its variety of benefits, rooted in its high flavonoid content. In fact, several new research papers were published in 2020 and 2021 illustrating tea’s extraordinary ability to act as a booster of human immune systems, followed by an important study in 2022 highlighting tea’s high content of a class of key bio-actives, flavan-3-ols.

Among the challenges facing the tea industry continues, Goggi points to these facts: too much tea is being produced; prices are too low; tea is a leader in ecological sustainability, but social and economic legs are struggling; retailers continue to push down pricing; costs are being pushed up the supply chain.

Americans still love their coffee

Which of these tea-related insights carry over into coffee’s retail reality? Three insights emerged in the 2023 National Coffee Data Trends (NCDT) report published by National Coffee Association of the USA. Firstly, more Americans drink coffee everyday than any other beverage, including tap or bottled water. The pandemic didn’t change how much coffee Americans consume, though it did impact where.

Secondly, “coffee consumption at home peaked when Americans were kept home by pandemic restrictions, with 85 percent of past-day coffee drinkers consuming their brews at home in January 2021.” Today, at-home consumption is slightly above pre-pandemic levels (82 percent compared to 79 percent in January 2020).

Thirdly, “coffee consumption outside of the home fell by almost 25 percent between January 2020 and January 2021,” before recovering as Covid restrictions eased. Today, out of home past day consumption is back at 34 percent, near pre-pandemic levels.

Fourthly, the most popular place of purchase for at-home coffee is the grocery store; 39 percent of past-day at-home coffee drinkers bought their coffee at the grocery store. Mass merchandisers were the second-most popular place of purchase for at-home coffee at 23 percent. “Both of these figures have remained consistent since January 2020.”

Stephanie Harlow, senior trends analyst at GWI, examines US consumers who regularly/often consume coffee and tea, said that buying by this type of person “has remained unchanged in the last three years. That said, if we look at Gen Z, there’s a slightly different story. The number of Gen Z regularly/often consuming coffee has sustained a small growth at 3 percent but the amount consuming tea has grown by 13 percent in the same timeframe.”

Harlow thinks “this growth is in part due to more Gen Z picking up a coffee to go or while out and about; the number who say they regularly/often drink coffee outside their home has grown 6 percent since Q4 2020.”

Among consumers who consume coffee at home, the number reaching for iced coffee has grown 19 percent since Q4 2020. And Harlow’s data indicates that, “while the number going for ground coffee pods has grown 8 percent in the same timeframe. The number of consumers preferring whole bean coffee has fallen 5 percent. The number who say they drink herbal tea has grown 13 percent since Q4 2020, with the number who say they drink black tea growing by 10 percent in the same timeframe.” Chamomile tea drinkers have also grown by 8 percent and green tea drinkers by 6 percent. Kombucha is more out of favour though, the number saying they drink it has dropped 13 percent in the same timeframe.

Harlow noted that Folgers is currently the top brand – and “among consumers who drink coffee at home, it has overtaken Starbucks,” which sat on the top spot in Q4 2020. The number choosing the brand has grown by 11 percent.

Beleaguered by labour shortages

Erwin Henriquez, Euromonitor’s senior research analyst, has a different take on the current situation. He believes that “coffee and tea continue to evolve and transform beyond the pandemic. Despite the apparent recovery of hot drinks in foodservice industry, the rising prices of goods and labour shortages continue to pose a challenge, which may impact the industry’s growth in the future. Foodservice has changed since 2019, with increased digital ordering leading to more complex orders”.

This has, of course, compounded labour problems for short-staffed teams. As a result, Henriquez thinks that “US coffee shops are pushing for higher wages and benefits. This is all to say that the industry is facing significant challenges in on-trade channels, which explains in part why the industry is focusing on the retail channels in search for growth.”

Henriquez and his colleagues said the data clearly shows that “pandemic purchasing behaviour is still very much present, with consumers still partially working from home and realizing that the difficult economic situation means fewer trips to cafés and more in-house coffee cups.”

However, retail sales growth of hot drinks (mainly in coffee) is driven by the continuation of price increases and inflationary pressures. Henriquez concludes that “while the industry saw declining volume, it managed to grow in value terms at higher rates than in the past. Inflationary pressures and general price action is part of the equation”, but he adds that premiumisation also plays a key role here.

Henriquez believes that consumers facing challenging economic conditions “are more willing to trade up in coffee/tea for the home,” which is still significantly cheaper than a cup in the on-trade. “We can see the rise of premium and specialty brands in the retail aisle, with more and more players gaining space in the already crowded market.”

Coffee and tea e-commerce retailing was significant in 2023, but for Henriquez “not as much as in the past.” The pandemic has played a significant role in adopting e-commerce retailing, especially for grocery items. While e-commerce sales continue to grow, they are doing so at a slower pace than in 2020. Due to rising inflation, there might be a significant shift towards in-person shopping soon. According to Henriquez, as grocery shopping is becoming increasingly expensive, data shows that people are now more carefully monitoring their expenses and removing non-essentials. Ordering groceries online, which often comes with an extra charge, is one such non-essential, especially now that the physical risk of Covid-19 has been reduced.

Coffee shop spending rebounds

Facteus’ co-founder and head of data & growth, Jonathan Chin, argues that spending at coffee shops “has definitely bounced back and surpassed 2019 numbers. Some regions in the US have bounced back higher than others. Surprisingly the Midwest and South have jumped way above their 2019 numbers more than the coasts. This is a bit counterintuitive, but perhaps with all the pandemic exoduses and work-from-home trends many coastal people moved to the South and Midwest. Maybe they took their coffee habits with them?”

Chin argues that “coffee shop spending has bounced back strong since the pandemic.” Spending is now well above 2019 levels, despite inflation; “it was always a question on how coffee spending habits would react post-pandemic with the influx of home coffee equipment and work from home trends.” Chin quotes Howard Schultz about the various ways in which coffee shops still offer, post-pandemic, “a ‘third place’ where people could enjoy and spend quality time.”

In the view of James Watson, executive director of beverages research at Rabobank US, “we’ve seen a strong post-Covid recovery for coffee shops. Meanwhile, retail coffee is not doing nearly as well.” He think there are many other segments of the beverages economy where consumers are looking for cheaper options. “It is not a completely zero-sum game. It’s possible to make coffee at home and then go out to get a second cup. Indeed, overall, coffee volume is probably slack, or growing ever so slowly. The shift is going back to on-premise. Covid saw a net decline in the number of coffee shops. This meant a boom for at home coffee. Office attendance is at 50 percent, during the very best weeks. What we have today is not a return-to-office story. What we have is a return to previous consumption habits.”

• Gordon Feller, based in California, travels the world reporting about innovations that can change our economies and strengthen small enterprises. Since 1980 he’s been publishing reports and magazine articles about coffee/tea innovations on five continents. He is both an ABE Fellow – Japan Fdn. and Global Fellow – at the The Smithsonian Instition. He can be reached at Gordon.Feller@gmail.com.

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The new franchise-focused site is dedicated to resources that current and future franchise partners can easily access online. Frequently asked questions, information about available markets, and a step-by-step walk-through of the application process are all housed in one easy to bookmark place.

“The Human Bean has grown to a nation-wide company because we continue to pick and attract the right kind of partners,” says franchise COO, Scott Anderson. “And then we provide guidance and tools to make their ownership experience really enjoyable and rewarding. This new website that’s dedicated to our franchise family is part of that endeavour.”

New features on the customer focused site include a colourful compilation of drink menu items (each listed with nutritional information), a searchable locator map with over 150 drive-thrus across the US, and a robust e-commerce shop.

“For the main website, we wanted to infuse energy into our drink descriptions and e-commerce store,” says chief marketing officer, Janie Page. “It’s fun and dynamic, and it represents the kind of experience you have when you visit The Human Bean drive-thrus. It’s true to who we are.”

With drive-thru locations open and in development in 20 states, The Human Bean’s new websites will be visited annually by both those looking for a beverage-based business opportunity or a convenient drink on the go.

More info can be found at thehumanbean.com and franchise.thehumanbean.com.

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During the recent “The Impact of Covid-19 on Coffee E-Commerce,” webinar presented by the National Coffee Association (NCA) of the United States, Kathy Cummins, head of analytics at Hinge Global, said that amid Covid-19, online retail purchases (including curbside pickup) increased but have dropped slightly. However, sales in pure-play e-commerce (e.g., Amazon, eBay, Chewy) have continued to grow.

Cummins explained that online revenue for traditional retailers (such as Walmart, Target and Kroger) grew in March and April, trended down in May, but are still higher than pre-Covid levels. “Brick ‘n mortar shopping can be frustrating at this time because of wait times to enter stores and out-of-stock problems, which are contributing to online shopping. Pure play e-commerce has grown steadily since April, a shift in behaviour that may stay for a while.”

She said that Amazon is and will continue to be dominant in coffee online sales, with an annual market size of $1.08 billion in the US, and +36.9% CAGR. Capsules constitute 86% of the coffee sales on Amazon.

Cummins noted that coffee on Amazon has grown steadily by ~32-38% CAGR — the dip was the result of the lack of ability to fulfill, not a drop in demand. The search for coffee online spiked and remains high since Covid-19 began. Searches for ground coffee peaked in March and have since dropped but are still higher than pre-Covid. She said searches for coffee pods spiked but searches for K-Cups remained consistent. Half as many consumers looking for Nespresso capsules versus K-Cups but search levels are high for both: 766,000 searches for K-Cups and 300,000+ for Nespresso capsules. “Keurig machines are more prevalent in US, but Nespresso capsules are harder to find in brick ‘n mortar stores,” said Cummins when explaining why capsule/pod searches rose.

Amazon has nearly 600 brands of coffee capsules and pods and the top ten brands within that subcategory of coffee have a 55% dollar share, according to Cummins. Although Nespresso and Starbucks have biggest dollar share, she said Bradford Coffee Roasters has the highest sales per ASIN (Amazon Standard Identification Numbers, which is Amazon’s version of a standard SKU number). “We are seeing brands that may not have a lot of SKUs, but each SKU is driving a lot of sales.”

She said Nespresso capsules are less common than K-Cups so brands that offer Nespresso format can benefit from less competition, adding, “there is further opportunity by increasing pack sizes — but make sure copy is clear and concise.”

There are more than 820 brands of ground coffee on Amazon, and the top ten brands make up a 52% dollar share. The leading brand is Starbucks followed by Café du Monde. Cummins shared that niche products do well on Amazon. For example, super-premium products are common in the top ranks for ground coffee, including Death Wish and Four Sigmatic. “In ground coffee, premium and unique positioning help differentiate items, the leading brand is Death Wish Coffee. Four Sigmatic [mushroom enhanced coffee] takes advantage of many keywords to drive search to its product — paleo, immune support, concentration, focus, etc., which is driving sales.”

And echoing the statement made by Fernando Serpa, vice president, Global Sourcing Latin America & Fresh Food, Walmart Inc that I referenced in a previous blog (see “Covid-19 and its effect on Consumer Behaviour”), Cummins said large pack sizes in both capsules/pods and ground coffee are common, and address foodservice and office needs, as well as large households. For example, Café du Monde is driving volume through large-count packs (4-packs of 6 cans = 24 cans).

Cummins also shared drivers of e-commerce success, the first being that if a company is just starting on e-commerce or can choose only one, Amazon best place because it has the best/easiest platform to use, “Amazon has the most sophisticated search — a lot of back end key words.” She also pointed out that consumers are looking for specific brands but emphasized that companies cannot use branded keywords in copywriting, but may can link with paid advertising/PPC (pay per click).

She reiterated that the coffee landscape is competitive (600+ brands in pods/capsules and more than 800+ in ground on Amazon alone) so the number one thing is to win on search — and search is free. To win on searches, and ultimately sales, Cummins advised companies to:

• Make sure copywriting stands out and that the digital component is strong.
• Few key words mean the item is not optimised for organic search (free marketing).
• Sustainability is a big thing in optimising copywriting.
• Brands should have product reviews.
• Mobile-friendly digital content is absolutely critical as 66% of all e-commerce purchases is via mobile devices.
• A+ Content sells the product and drives conversation.

Above all, Cummins stressed that products must not be out of stock. She further emphasized that analytics are crucial, “you can’t manage what you don’t measure.”

She also noted that brick ‘n mortar stores are more receptive to new business/companies/brands when they can first prove their success and the optimal way to do this is through successful e-commerce products.

E-commerce is growing and if a company is not taking advantage of this platform, it is missing a huge revenue-generating opportunity.

• Vanessa L Facenda, editor, Tea & Coffee Trade Journal.
  Keep in touch via email: vanessa@bellpublishing.com
  Twitter: @TCTradeJournal or LinkedIn: Tea & Coffee Trade Journal.

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