Has the at home Covid-19 coffee craze began to slow now office working has returned?
Aoife Glennon, Prepared Consumer Food
Source: Bord Bia
As part of our Kantar report series for the prepared consumer foods category, the performance of the hot beverage category in the Irish retail channel was reviewed. This was compared with market trends witnessed by a prevalent hot beverage foodservice customer, the Insomnia coffee company, to get a holistic view of what has happened across the market over the past year. This insightful article will explore if the at home coffee craze which boomed in the pandemic has begun to slow, now office working has returned.
The Hot Beverage has category seen an explosion in retail sales during the pandemic as consumers were home bound with no choice but to bring their coffee addiction in house. On May 5th 2023, the World Health Organisation ended the global emergency status for Covid-19, three years after its original declaration. During this three-year period consumer trends have changed dramatically, against a backdrop of not just the pandemic, but also the rising cost of living and a war in Europe.
According to Kantar, the hot beverage category sales in Irish retail is valued at €252m, +1% in value versus 2022, and accounting for an additional €2.6m to the category (Kantar, 2023). Growth has been slower than the ROI grocery market as a whole, where sales grew by +4.7% compared to 2022. It is important to note that whilst hot beverage retail volume dropped by -4.5% (or -717 tonnes) compared to 2022, the value of this category has grown by 5.1% (+€10.8m) compared to 2019, i.e. the last “normal” year before the pandemic. This is encouraging as we can see the market overall is steadily growing.
Within retail coffee beans performed best out of all sub-categories, through penetration gains (more households purchasing these products) and positioning itself as a ritual treat to replace more expensive Out Of Home (OOH) experiences. This is an area in which small Irish brands can capitalise, as shoppers are willing to spend the extra money on indulgence and commitment to quality. Branded coffee dominates market share and steadily maintains around 80%, vs PL’s 20%. Branded coffee is growing at a stronger rate than Private Label (PL) (+40.6% vs +38.7%) in the 12w/e 16th Apr ’23 read. Notably PL grew in all retailers bar SuperValu. Trending out performance, coffee contributions dip when we return to the office, with more recent growth attributed to inflationary price increases.
In the last year, we have seen a shift away from tea to the benefit of coffee. Tea sales have declined vs 2021, however, in the latest year, the value of tea has grown by +1.2%. Within tea, shoppers are still very loyal to brands, with the branded sector of the market accounting for 80% of sales in value terms. However, PL has grown at a faster rate than Branded tea in the last 5 years.
One thing is for sure is that the at home coffee occasion isn’t going away anytime soon. 35% of people surveyed expect to be working from home in the next six months (as compared to only 19% pre Covid-19), and 16% will be working from home 2-3 days per week (Kantar, 2023).
Saying that, with the return to office foodservice coffee sales are in growth. Insomnia coffee company have witnessed growth in sales since 2021 despite consumers trading down cup size (from large to medium). Insomnia have witnessed several changes in the hot beverage market over the past 12 months, including increased use of alternative milks. Sixteen percent of hot beverage orders in Insomnia are for alternative milk beverages, with oat being the most popular and soy being the least popular choice. Speciality coffees are also trending, with cold brews being a particular favourite amongst Gen Z consumers. Insomnia also noted that Fairtrade coffee beans, ethical sourcing and sustainable coffee cups are now expected from customers rather than being a Unique Selling Point (USP).
The hot beverage category will need to work hard to maintain gains achieved in retail since 2019 including the expansion of innovative speciality NPD lines. Understanding foodservice trends, retailer strategies and sustainability demands will be key to future retail and foodservice growth.
References:
Kantar Ireland (2023). Hot Beverage Review, 52 w/e data 11th May 2023.
Insomnia (2023). Market trends witnessed by Insomnia coffee company (over the past 12 month period).
Rigby, J., Satija, B., Rigby, J., & Satija, B. (2023, May 8). WHO declares end to COVID global health emergency. Reuters. https://www.reuters.com/business/healthcare-pharmaceuticals/covid-is-no-longer-global-health-emergency-who-2023-05-05