| Aug 31, 2023

Grounds for Concern? Omnichannel Coffee Consumption Trends

Woman Drinking Coffee

As consumers weather record-high inflation, small indulgences like coffee have been placed on the chopping block. To cope with elevated prices, consumers are exploring their options— from dry coffee purchased at retail stores to hot or iced coffee purchased at limited service restaurants— by shifting across brands, categories, and channels. Numerator’s modern, single-source consumer panel allows us to analyze household-level food & beverage purchase behavior trends across all channels to brew up some warm omnichannel insights for brands, restaurants, and retailers interested in the coffee industry.

Coffee Consumption Shifts A Latte

Over the past four years, consumers have increased their coffee spend across most CPG and restaurant categories— driven in part by lifestyle changes catalyzed by the COVID-19 pandemic and by rising prices— and dialed back their trips across almost all categories. At-Home Dry Coffee has seen the most significant sales increase, while in the most recent year, consumers dialed back their spend on Limited Service Restaurant (LSR) Specialty and Cold Coffee (two categories typically seen as “indulgences” compared to at-home or hot restaurant coffee).

In the past 52 weeks, consumers have increased their spend on dry coffee (+6.5% vs. the prior period) and decreased their coffee spend at limited service restaurants (-4.6%), suggesting that consumers are cutting back by making coffee at home. Both high-income and low-income households are spending more on dry coffee (+17.2% for high income and +6.1% for low-income) despite making fewer coffee trips to retail stores— which could indicate that pricing is driving the majority of the dry coffee spend increase or consumers are stocking up on more per trip. These two groups are spending less on limited service restaurant coffee and making fewer trips to LSRs for coffee.

While coffee pods comprise the majority of dry coffee spend (62%), spend and unit sales have only seen minor increases. Price increases have made the most impact on dry grounds, which make up most of the remaining (33%) dry coffee spend. Consumers are spending more overall on the category (+10%) and per unit (+19%) but buying fewer units (-7%).

Trouble Brewing for Premium Coffee Brands

“Value” coffee brands are winning over cash-strapped consumers from more premium LSR-branded products. Consumers are spending more on store brand coffee pods like Great Value (+10%) and Kirkland Signature (+7%) and less on branded pods like Starbucks (-1%) and Dunkin’ (-2%). The disparity between store brand and branded is even more dramatic when unit sales are taken into account— consumers are purchasing Great Value (+2%) and Kirkland Signature (+6%) more often and buying less Starbucks (-13%) and Dunkin’ (-10%) coffee pods.

The same trend holds true in dry coffee grounds— value brands are driving significant dollar sales increases, while LSR brands are lagging. In the past 52 weeks, Great Value is the only dry coffee ground brand to capture more unit sales versus the prior period, while Folger’s has seen dollar sales up 10% and unit sales down by 13%. Price increases have similar unit declines for Dunkin', Starbucks, and McCafe ground coffee.

Dry Ground Coffee - P52W Sales vs YA

Steaming Hot Restaurant Insights

The outlook for Limited Service Restaurants is mixed— hot coffee spend is up 9% vs. a year ago, while cold coffee is down 6%, suggesting that consumers are purchasing simpler and cheaper coffee drinks. Consumers have decreased their spend on Frappes, Lattes, and Macchiatos and are making fewer trips to purchase those categories overall.

LSR Coffee Sales P52W

Shifting coffee consumption is affecting key restaurants differently. Spend is up on the McCafe Caramel Frappe (+14%), Dunkin Iced Latte (+13%) and Starbucks Hot Cafe Mocha (+21.4%), but down on the McCafe Macchiato (-14%), Dunkin Iced Macchiato (-17%) and Starbucks Iced White Chocolate Mocha (-22.3%). As the Pumpkin Spiced Latte season begins, restaurants should keep an eye on sales migration to understand where PSL sales are sourced from and if those sales are incremental.

Generations Espresso Different Coffee Preferences

It’s unsurprising that generations have shifted their coffee consumption differently given their different lifestyles and purchasing power. Boomers are the powerhouse spenders behind coffee right now— they comprise 80% of all coffee pod spending, and spend slightly more (+1.4%) on coffee pods than other generations. They’re also propping up limited service coffee, spending more (+13.9%) vs. a year ago and making more trips (+2.7%) to restaurants and cafes for coffee. Boomers are spending more on ground coffee (+6%) too, though that trend is primarily driven by price increases.

Gen X consumers— another group with more disposable income— have increased their spend on both limited service coffee (+8.1%) and dry coffee (+7%). LSR hot coffee is capturing more Gen X spend, while cold coffee sales are down with this group.

Millennials currently comprise over a third (36%) of LSR coffee spend, but have significantly decreased their spend (-25.9%) and trips (-22.3%) to restaurants and cafes for coffee. These cash-strapped consumers are spending more on Dry Coffee (+10.4%), particularly ground coffee.

While Gen Z only comprises 3% of dry coffee spend in the past 52 weeks, a greater percentage (+9pts) of these consumers have increased their category spending in the past year. Increased spend on dry coffee has come at the expense of LSR coffee for Gen Z consumers, who have cut back on spend (-15.7%) and trips (-18.9%).

LSR Trips, Change vs YA

The Perfect Blend of Consumer-Sourced Insights

Consumers are managing a range of financial concerns: the roll-back of government benefits, the end of the student loan payment pause, ongoing inflation, and a potential recession. Restaurants, brands, and retailers will need a perfect blend of consumer-sourced insights to drive growth. Numerator can help— we know who consumers are, what they buy across restaurants, stores and delivery services, and what offers will engage them most. Learn more about our Restaurant and Beverage solutions today.