Our NCA offices are located just a few blocks from Wall Street in New York City, where stockbrokers are quick to warn their clients that “past performance is no guarantee of similar results in the future.” Despite this ominous caveat, every analyst studies the historical returns of various investments in an effort to anticipate what to do next.
This is true in many areas, from weather patterns to sports. We look at the record of a team or a race horse as a measure of how strong a contender each may be. By learning that a team does better in a home stadium, or that a horse runs faster on a muddy track, we hope to get a glimpse of the future.
Last week I had a couple of speaking engagements on behalf of the NCA, addressing both the Tea Association, where we discussed opportunities to work together and market trends, and a separate event in New York.
In preparation I spent a couple of weeks poring over our National Coffee Drinking Trends Report (NCDT) and just released Single Serve report. As with sports teams, or stocks, the past cannot predict the future.
But if you look beyond the surface, the richness of the historical coffee-drinking data reveals itself in very interesting ways. And so the NCDT and Single Serve data revealed five mega trends driving today’s coffee market, and while one or two may be obvious, taken as a group they create an interesting picture.
If you were to look at overall numbers and drinking trends, you’d see that coffee consumption patterns move slowly year-to-year. The average number of cups of coffee consumed by the typical coffee drinker has held steady for the past five years, at about 3.2 cups per person. The percentage of Americans who drank coffee during the prior year has fluctuated between 76% and 84% for close to a decade – and has probably been more impacted by the economy than anything else.
But looking below that surface, you will see a gradual shift towards quality: gourmet coffee, single origin, premium espresso-based beverages. This shift seems to be gaining momentum — a shift that is due, at least in part, because of the next market driver.
If you look at the move to quality, it is demographically driven by age. Millenials (or the under-39 crowd), specifically.
It’s a matter of behavior, and the trends created by these choices. Who’s more likely to drink coffee away from home – and spend time in a coffee shop? Order a nitro cold brew? Drink an espresso-based beverage?
Our research shows that the younger you are, the more likely you are to do all of these things. There’s a clear generational divide. A generation ago, “coffee” typically meant a stovetop percolator. It was a practical means to an end.
Millenials have more feelings about their coffee. They consider it a reflection of their individuality. What they drink is a reflection of how they see themselves in the world. To them, it can be about socializing. It can be about creating that bespoke artisanal beverage. It can be about the certifications emblazoned on the packaging – or the beautiful packaging itself – representing something about “who they are.”
If consumption patterns break along age and generational lines, so do attitudes.
For example, about 17% of all coffee drinkers will express concern about environmental and sustainability issues: specifically, when asked about reasons to limit their consumption of coffee, the 17% raise a concern like “I’m concerned about the carbon footprint” or issues relating to waste or economic inequities.
But if you ask the same question of coffee drinkers under the age of 39, that percentage expressing concern nearly triples, to 50%. Ignore the concerns of this demographic at your own peril, whether with respect to sustainability or the extent to which you give back to the community. Remember, Millenials control an estimated $1.3 trillion of consumer spending annually.
There’s a move to quality, but convenience is a wild card. Americans are still in a rush, and we drink a lot of coffee away from home. Some venues, such as coffee shops, are rated highly by consumers for convenience and quality – while at other venues serving coffee, consumers rate convenience more highly than quality. There seem to still be opportunities to deliver high-quality and convenience to consumers who feel they are sacrificing one over the other.
This is the most interesting, and elusive concept of all.
Value is highly personal. We definite it for ourselves, and in our individual context. If you’ve ever been on typical business trip — one where your flight is delayed, your connection gets broken, and you end up late at night in a strange hotel —you start thinking that those peanuts in the minibar, which price out to about ten cents a nut are suddenly a good value: quick, somewhat healthy, and right at your hungry fingertips.
27% of Americans have decided that their coffee value equation includes a single serve machine that makes one of their morning rituals easy, quick, flexible, and consistent. It is that special blend of attributes that make single serve coffee a good value.
So what do these trends tell us about the future?
These trends tell us that there are still opportunities in the consumer market. They don’t tell us whether those opportunities will come in the form of new drink preferences, easy home cold brew kits, new appliances on the kitchen counter, or some combination of all three.
All we know for sure is that, as these opportunities emerge, our members will be helping to make them happen.