Private Brand Coffee: The Perfect Storm

Today’s economy has helped create a shift in how Americans buy coffee. Now is the time for retailers to develop and elevate, their private brand offerings. We call it the perfect storm.

Coffee Wars

The increase in specialty coffee consumption (I lump together Premium and Specialty coffee – to be explained another time.) is fueled in part by increased demand. It’s simple. McCafe, Starbucks and Dunkin’, since January, have poured upwards of $200 million into national advertising to promote coffee and espresso drinks – referred to as the “coffee wars.” That means more American shoppers are thinking about good coffee – as in Arabica coffee. Not necessarily specialty coffee (McCafe and Dunkin do not make the grade), but coffee none-the-less. Read on.

Rise of the In-Home Brew

Since the early 90s, when the Starbucks phenomenon spread East, the grocery channel slowly allocated shelf space to more Arabica coffee, but the biggest increase in consumption, clearly, was enjoyed by coffeehouses nationwide. Today, however, we see coffeehouses closing at a rapid pace. As a result, consumers increasingly turn their $4.00 latte purchases into beans or ground coffee purchases for brewing at home. The National Coffee Association survey found a 5% point increase in coffee preparation at home -- a tectonic shift in consumer behavior for the largest agricultural import into the United States!

No Trading Down Here

With the rise in-home brew, IRI reports that specialty coffee sales at grocery have reversed a four-year decline in sales to grow at a 12% rate to $915 million, surpassing traditional coffee’s 3% growth rate. Specialty is up, traditional (cans) is lagging. Why? Affordable luxuries. Consumers have given up the coffeehouse, but not the high quality beans. And premium brands are up year-over-year (Starbucks, Caribou, Peet’s, Dunkin’ and most notably, Specialty-grade private brands). You see similar trends in tea, chocolate, beer, and other categories where consumers develop passion (and pride) for quality.

Own Brand Trust

At the same time, consumer trust in store brands has never been higher. As you know, gone are the days when store brands were mere generics, relegated to the bottom shelf as a low-cost, non-brand alternative. But it’s more complicated than just throwing some mediocre Arabica coffee on the shelf and watching the money fly in. Retailers must establish shoppers’ trust by embracing the ideals of quality and innovation with true Specialty grade coffee, and then communicate it to the point of exhaustion! Packaging, signage, and in-store ambassadors must all display quality in unison.

Coffee wars, home brewing, the rise of specialty coffee, and acceptance of quality store brands… the time to act is now. The perfect storm won’t last forever.

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