Coffee remains a critical point of differentiation

by Keith Nunes
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KANSAS CITY -- The announcement this past week by Krispy Kreme Doughnuts executives about their intention to make the donut chain a beverage destination highlights how important coffee drinks have become in both food service and retail.

Krispy Kreme is expanding its beverage platform so coffee and other specialty drinks play a larger role in the chain’s total sales mix. The company’s efforts mirror those adopted by McDonald’s, Dunkin’ Donuts and the J.M. Smucker Co.

McDonald’s is working with Kraft Foods to bring its McCafe products to retailers. Dunkin’ has seen success with its iced coffee platform, and Smucker is innovating in the category with the launch of Folgers Flavors liquid coffee enhancers, a spin-off from the flavored liquid water enhancers that hit the market several years ago.

Thanks to the success of Starbucks’ customizable coffee platform, coffee is now viewed as an affordable indulgence by many consumers, and they have shown an interest in experimenting and trading up to more expensive specialty, gourmet items. Earlier this year the National Coffee Association’s National Coffee Drinking Trends (N.C.D.T.) market research showed daily consumption of what the group calls “gourmet coffee beverages,” which is defined as espresso-based beverages and regular coffee made with gourmet coffee beans, is up to 34% compared to 31% in the 2013 data. Daily non-gourmet coffee drinking is down 35% from the previous year’s 39%, according to the data.

Among demographic specific data, N.C.D.T. findings indicate those consumers 25 to 39 years of age are the strongest consumers of gourmet coffee beverages, with 42% who said they consume daily, as compared with about one-third among consumers aged 18-24 and those 40-59, and just one-quarter of those 60+. Daily consumption of gourmet coffee beverages is also strongest among Hispanic-Americans, 48% of whom said they drink gourmet coffee beverages daily, as compared with 42% of Asian-Americans, 32% of Caucasian-Americans and 23% of African-Americans.

A key takeaway from the N.C.D.T.’s data is that consumers that fall into the millennial demographic and Hispanic’s, two of the most sought after demographics by the food industry, are also those consumers most interested in buying gourmet coffee.

This trend has legs and will continue to grow. Innovation will continue to come from food service, but also from the burgeoning single-serve segment. As Keurig Green Mountain and Nestle continue to invest against their single-serve platforms and food service operators continue to innovate in coffee, one can expect the beverage to remain a key point of differentiation at home and at food service.
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