Canadians love their coffee. In fact, according to Toronto-based NPD Group, as a nation we consumed 2.3 billion servings of the caffeinated beverage in 2015, up nearly 10 per cent from 2014. Traditional hot-brewed coffee remains the segment’s top seller, accounting for 76 per cent of servings sold. Hot specialty coffee checks in at 14 per cent and iced specialty coffee at 10 per cent. Despite its small share of sales, iced-coffee beverages have experienced increased popularity, growing by 10 per cent over the last five years. During this same period, hot specialty coffee servings have grown by four per cent, while hot-brewed coffee experienced a decline of one per cent.
Lesser-known brewing methods are trending as consumers — particularly younger diners — seek greater variety. Technomic’s 2015 Canadian Breakfast Consumer Trend Report indicates sales of cold-brew and pour-over coffees will grow at chains as demand for specialty coffee drinks continues to increase.
TEA TIME
Canadians continue to show an increased interest in tea, fuelling growth in menu offerings for the category. Technomic’s MenuMonitor reports specialty tea beverages experienced significant growth in Canada over the past year, appearing on menus 12.4 per cent more often in the first quarter of 2016 than in the same quarter of 2015. Hot tea also experienced a 4.7-per-cent increase during the same period. These statistics come as no surprise to James Kenny, senior foodservice and specialty channel manager at Tata Global Beverages Canada, who identifies specialty-tea beverages, such as tea frappes and lattes — specifically those featuring matcha tea (a finely ground powder of specially grown and processed green tea) — as the top tea trend of 2015.
Kenny attributes tea’s steadily increasing popularity to the demographic shift currently affecting all facets of the foodservice industry. “The younger generation seems to accept tea a lot more than the generation before,” he says. “We were coffee drinkers and the next [generation] drinks tea at Davids Tea, tea shops and even Starbucks.”
These preferences suggest tea is being chosen for its health attributes rather than for the dose of caffeine it offers. The Tea Association of Canada, based in Toronto, has played a significant role in promoting this mindset. This spring, it launched the #DrinkTea Campaign in Canada to further promote the benefits of tea consumption. The campaign’s social media-friendly imagery includes slogans such as “Calorie Free! Drink Tea!” and “Real Men Drink Tea”.
Starbucks has clearly embraced tea’s growing market share. According to the company’s most recent Teavana Business Update, the tea category in Starbucks stores has been experiencing double-digit growth across both its U.S. and Canadian portfolio. Over the past two years, the chain has released seven new handcrafted Teavana tea beverages in Canada, including new flavours of its Teavana shaken iced teas, a limited-time citrus green-tea latte and the Teavana White Tea Youthberry Granita. When purchasing tea and tea beverages, Canadians are seeking sustainability. “Not unlike with coffee, they’re looking for the knowledge they’re drinking a beverage that is good for the livelihoods of people,” explains Tata’s Kenny.
Interest in single-origin and single-estate teas is also growing as some of the country’s more educated tea drinkers are looking for teas from specific regions, such as the Darjeeling district of India. In fact, Kenny identifies this as a key trend garnering consumer and operator attention this year — mirroring the growing popularity of single-origin coffees.
HEAVYWEIGHTS
Competition in the coffee and tea segment is fierce; leading the pack are the usual suspects, with Tim Hortons maintaining its perennial position as the country’s top-performing coffee chain, as well as the top-performing operator on F&H’s 2016 Top 100 Report.
In response to the more adventurous natures of millennials, the chain has been exploring new flavour profiles. Last year, Tim Hortons launched two limited-batch coffees in select Canadian markets as part of a series of blends sourced from renowned growing regions around the world.
Last April, the brand’s iconic Iced Capp lineup received a new addition with the launch of a maple-flavoured version. Keeping with what seems to be a Canadiana theme, a new latte — dubbed the Latt-eh — was recently made available in select markets for a limited time. The new latte features Arabica espresso and 100-per-cent Canadian-sourced milk.
This past year saw dramatic developments for McDonald’s McCafé brand. The QSR chain made its first foray into the traditional café space with the launch of its standalone McCafé concept late last year. The locations are part of the company’s ongoing strategy to build on its reputation as a leading coffee brand and offer greater access points. The new concept features a smaller footprint than traditional McDonald’s restaurants, allowing the McCafé brand to expand into high-density urban locations.
“Our two McCafé standalones are exceeding our expectations. Early indications [show] this is a very successful endeavour,” says Catherine Crozier, head of McCafé Platform (Business) at McDonald’s Canada. “The cafés have been met with great response and it’s exciting to see them as ‘must-attend’ destinations with our guests taking selfies and sharing their experience on social media.”
The company also introduced several products exclusive to the standalone locations, including a mocha latte made with Ghiradelli chocolate syrup and the McCafé Affogato made with Oreo cookie crumbs, soft-serve ice cream and a shot of espresso. The concept currently boasts two locations in downtown Toronto — one at Union Station and the other in First Canadian Place. As Crozier explains, the company isn’t currently looking to expand the café’s presence, opting instead to focus on the existing locations for the time being. “While we’re currently focused on these two locations, we continue to receive interest not only in Canada, but around the globe, about this new concept,” she adds.
Cold beverages have been a key focus at Starbucks this year, with offerings such as the Teavana Shaken Berry Sangria Herbal Tea, Affogato-style Frappuccino and Granitas making their debut.
This summer, the brand also launched the Iced Coconut Milk Mocha Macchiato — the company’s first iced-beverage to feature its Single Origin Sumatra Coconut Milk (launched last August).
“Following the highly successful nationwide launch of Starbucks Cold Brew last summer, we’ll use the same thoughtful craft and eye for innovation as we do for hot coffee to deliver an exceptional new menu where craft meets cold,” says Peter Bond, director of Beverage & Promotion, Starbucks Canada. ‘We’ve seen iced beverages do incredibly well in the Canadian market year-round, so there’s a lot of opportunity in cold, particularly handcrafted beverages with innovative flavour.”
According to Bond, Starbucks has seen approximately 30-per-cent growth in the performance of its iced beverages over the past two years, representing “one of the fastest-growing areas” of the brand’s business. “Starbucks expects the category of cold coffee, including espresso, to double in the next five years,” he adds.
REGIONAL ROASTS
Smaller and regional coffee chains continue to carve out a share of the market, thanks to loyal local followings. These establishments are often ahead of the curve compared to their larger counterparts, as the smaller size allows for swifter roll-out of new products and ideas.
Calgary-based Good Earth Coffeehouse has cranked out several new beverage offerings in the last year, including the Spicy Mexican Mocha, featuring a hint of smoky chipotle flavour. The brand also introduced the Five Spice Tea Latte, Earl Grey Frappe and, the recent launch of three cold-brew coffee flavours, as well as a Shaken Black Tea Lemonade and Cherry Green Tea Lemonade.
When it comes to developing and introducing new menu items, Gerry Docherty, president and CEO of Good Earth Coffeehouse admits it’s a bit of a balancing act. “It’s really about listening to our customers and understanding what it is that they’re looking for in their local coffee house,” he says. “We, of course, stay on top of industry trends, while being diligent in ensuring these trends are a fit for the Good Earth brand.”
Regional café brands tend to appeal to their clients through a strong set of core values customers can identify with. Good Earth, for example, puts great focus on its coffee farmers through direct and ethical trade practices, wholesome food, environmental consciousness and support of the local community.
Ottawa-based Bridgehead got its start as a fair-traded coffee and tea company and its coffeehouses continue to source from small-scale farmers. The brand also has a strong commitment to the environment, demonstrated through its offering of porcelain and glassware for sit-in enjoyment as well as compostable cups and containers for to-go orders.
Similarly, Ancaster, Ont.’s Balzac’s Coffee Roasters has built its brand on the cornerstones of “artisanal, sustainable, local and natural” offerings, including organic, locally sourced milk.
EVERYONE ELSE
Though the coffee café category continues to flourish, experts believe traditional foodservice establishments continue to miss out on the check-inflating opportunities coffee and tea can offer.
During a panel at this year’s Restaurants Canada Show, segment experts Jeff Williams, strategic account manager – Canada at Bunn-O-Matic Corporation and Tata’s Kenny highlighted key factors preventing these beverage offerings from reaching their full potential. Williams identified front-of-house staff’s lack of knowledge and training as a key factor hampering sales of after-meal beverage offerings. “At the end of the day, it’s the staff that are presenting these products to the client,” he explained. “There is no doubt that part of the theatre behind our products is someone’s ability to represent them [to the guest].”
Kenny believes restaurant operators need to put a greater focus on making tea part of the dining experience. “Make tea as important as a dessert or the appetizer to complete the meal,” he suggests. “There is an experience around it.”
Part of achieving this is ensuring teas are displayed more prominently on menus. “[Tea] is a category unto itself; it’s not just hot beverage, it needs to have a very prominent place on the menu,” Kenny adds.
Volume 49, Number 6
