Trends in Coffee and Tea

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By Danielle Schalk

The ongoing disruption of daily routines has had a drastic impact on the coffee and tea segment of the foodservice industry.

According to data from The NPD Group, in 2019, hot coffee was included in 30 per cent of all meals or snacks. But, in the three-month period ending June 2020, just 23 per cent of all meals or snack occasions included a hot coffee — a decline of more than 200-million servings.

And, as Vince Sgabellone, Industry Analyst, Canada Foodservice, The NPD Group, points out, tea is easy to prepare at home, making it especially hard, in the current environment, to get tea drinkers to make foodservice visits for their daily cuppa. However, he notes there are opportunities for operators to offer unique tea experiences at home — such as virtual tea tastings — as tea bags or leaves are easy to send/deliver to customers.

“Morning routines have been turned upside down and it’s been really tough for coffee cafés,” says Bret Yonke, senior manager, Research & Insights, Technomic. “Coffee cafés will not fully recover until consumers who have shifted to working from home are able to return back to offices/places of work.”

However, he adds, this will be a gradual recovery as some will continue working from home and those returning to their workplaces won’t do so all at once.

“In terms of the industry’s response, it’s all about digital and to-go orders right now,” Yonke explains. “Those with the best apps/online-ordering platforms are best positioned to hold onto coffee occasions. [And,] having a drive-thru is a huge bonus right now that can really keep an operation afloat.”

To this end, Starbucks has already announced plans to accelerate the expansion of convenience-focused formats over the next 18 months, including drive-thru, mobile-order-only Starbucks Pickup locations, walk-up windows and curbside pickup.

Yonke notes that the pandemic has made health and wellness top of mind for many consumers, which could boost interest in tea.

“Tea is a versatile vehicle that operators have been able to experiment with in order to satisfy consumer demand for natural ingredients and flavours. This has caused operators to test new varieties and flavour combinations, often in LTOs,” he explains.

“Matcha has been growing in popularity for some time now and more Asian tea varieties have been popping up recently…Looking to the future, oolong and Sencha are two varieties to look out for as they continue to emerge,” Yonke adds. “Floral flavours like lavender, hibiscus and rose have been appearing in more tea applications as well.”

Looking beyond the pandemic’s impact, the introduction of more non-dairy alternatives is a trend that has continued to grow, with Second Cup launching oat milk in May, Starbucks rolling out its Oat beverage in Canada in July and Tim Hortons introducing its first non-dairy milk — Silk Almond Beverage — in June.

And, according to Patrick Grismer, EVP and CFO of Starbucks, plant-based offerings are benefiting the brand’s bottom line. “Our average ticket has benefited from the customer appeal of our plant-based offerings, which are premium priced. Specifically, we’re seeing positive momentum in the alternative-dairy space, as its share of U.S. company-operated net sales nearly doubled in the quarter,” he shared during Starbucks Q4 results presentation.

“We are seeing this thirst from our customers around healthy options for themselves,” said Kevin Johnson, president and CEO of Starbucks during the call, citing the success of the brand’s plant-based beverages — especially oat milk.

And, as Sgabellone, notes, this trend has the potential to grow further, as it skews toward the younger demographic, which continues to grow its influence on the market.

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