There’s been immense pressure on retailers to maintain sales growth amidst all the headwinds facing them, especially within the center store aisles. Shoppers are making fewer grocery trips, defining value through different lenses, and exploring local & healthier options. To grow center store sales, retailers have turned their attention to hot beverage the last few years. Coffee, tea and hot chocolate are the key categories in this department and have posted strong sales growth since 2012. Nielsen’s “Canada’s Center of Store” report listed coffee as the number one sales driver for center store through 2020, bringing in $500 million over the next four years. Mintel’s Joel Gregoire also estimates that the category will reach nearly $2 billion in value. Yet, there is even more potential in coffee than most recognize.
Most of coffee’s growth has been generated behind the emergence of single-serve coffee like Keurig and Tassimo. These items make brewing coffee quick and convenient, with minimum mess and preparation. At the same time, users enjoy much more product variety that could only have been previously possible in a café. How else can you make the perfect cup of cappuccino or espresso, time after time? Retailers also like single-serve because of premiumization, since shoppers pay for a higher price per cup and replace their traditional coffee canisters or instant coffee jars with single-serve cups and discs. Despite the growing popularity, retailers should not forget about instant and bagged coffee forms. Those segments still represent the majority of the $1.4 billion dollar coffee category.
In order to capture more coffee dollars beyond higher price per cups, there’s an opportunity to simplify the shopper’s purchase decision. Coffee is traditionally a planned purchase, meaning that the category makes it on the grocery list. In fact, only 10% of coffee purchases are truly impulse purchases. However, more than half of all shoppers are undecided beyond the format (instant, bagged, single-serve). The grocery list says “coffee” and not any particular brand or roast. At the first moment of truth, the shoppers spend over a minute searching the shelf to locate their coffee of choice. Simplifying the shopper’s purchase starts with an improved merchandising layout. Beyond segmenting by instant, single-serve, or roast and ground, grouping items by brands or roasts will help to reduce the time spent product searching.
Past merchandising, introduce shopper marketing elements to elevate the shopping experience. Grocery shopping is still very much a chore that puts shoppers into auto-pilot mode. For coffee-loving shoppers, they like to touch and feel the packaging and most certainly appreciate the aroma of coffee beans. These shoppers are open to category engagement as they decide what item to buy. Shopper marketing helps create an emotional bond with coffee. A retailer communication could focus on education to brew the perfect cup of coffee. A joint effort with manufacturers could focus around coffee culture and coffee quality. Some sampling can even give consumers a taste of the perfect cup of coffee before they go home to recreate the experience.
In a category that will deliver millions of incremental dollars over the next few years, no one can afford to rely purely on growth momentum and premiumization. Capitalizing on this opportunity begins with better merchandising and better shopping experience.