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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Casino.org, a division of iTech Media, conducted a survey of breakfast habits across the United States to see what Americans are eating and drinking. The findings showed that 55% of respondents skip breakfast regularly while 10% eat breakfast on-the-go, and for those grabbing that breakfast on-the-go, the top choice is McDonald’s. 

Of the respondents who opt for a beverage with breakfast, nearly half – 48.4% – choose coffee. At a distant second, is water, at 19.5%, followed by juice (14.2%). Of course, there are those Americans who like tea at breakfast but the survey found that contingent trails far behind at 7.4% (hot tea). 

What may be a surprise to some, the favourite style or type of coffee at breakfast is filtered coffee — the preferred choice of 62.3% of survey respondents. The second choice, though significantly smaller, is the latte at 16.3%, followed by espresso at 6.2%, cappuccino at 4.4% and mocha at 4.1% (see infographic). 

Although filtered coffee dominates, Casino.org researchers noted that when looking at the data from a generational perspective – Boomers to Gen Z – there is a 27.5% uptick between the groups with the trend amongst younger demographics towards coffees like lattes rather than filtered coffee. 

Curiously, among the coffee data, the only iced or cold coffee segment is Frappuccino’s/frappes, which accounted for 2.9%. The last category was ‘other’ (3.8%), which might factor in other espresso-blended beverages as well as cold brew/nitro cold brew and ready-to-drink (RTD) coffees (although ‘latte’ might be a catch-all phrase for all espresso-based coffees). 

The absence of specialty coffee drinks is a bit confounding as the National Coffee Association’s spring National Coffee Drinking Trends (NCDT) Survey shows that in 2023, 52% of consumers in the US are drinking specialty coffee. That number is up from 34% in 2008. ‘Specialty coffee’ in 2008 included espresso, cappuccino, latte, café mocha, traditional specialty coffee and frozen blended coffee. Today, ‘specialty coffee’ also includes caffè Americano, macchiato, flat white, cold brew coffee and nitro cold brew. Furthermore, the NCDT survey reported that younger Americans, non-Caucasians drive consumption of espresso-based beverages. The strength of the broader specialty coffee category is driven by those under 40 years with the 25 – 39 demo driving espresso -based beverage consumption. According to the study, those under 40 also have a stronger propensity to consume cold coffee beverages. (See the Specialty Coffee is Resilient blog for more details.) 

RTD tea was not mentioned in any capacity either, which is also peculiar as it accounts for more than 85% of tea sales in the US and continues to grow in popularity, particularly in herbal/botanical teas. 

Casino.org surveyed 10,000 Americans in May 2023 about their breakfast habits. The ages ranged between 18-70 with all participants residing in the United States. Approximately 50% were male, 47% were female, and 3% identified as non-binary or other. If Casino.org conducts this survey annually, it will be interesting to see how the results change from year to year and if we will see more defined segmentation among the categories such as espresso-blended or espresso-based beverages, cold brew/nitro, RTD coffee/tea or iced coffee/tea, etc. 

For now, as I am working remotely and do not have access to my French press, I am going ‘old school’ and brewing a pot of coffee with a classic automatic drip coffee maker! 

• 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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