Trade Down in Coffee? No Chance!

Last month, when I was standing at our booth at FMI, the rep from the plastic bag company to our left walked over to our espresso bar, put milk and sugar in her cup of Project Direct™ direct trade Peru San Ignacio, looked at me and proclaimed, without prompting, “Coffee’s coffee, right?”

Just like with plastic bags, the answer is a defiant: “No!” But when I hear this commodity/cup’o’joe/coffee’s-coffee approach to the beverage I love so much, it’s cause for pause.

The stats: Specialty coffee grew 12% last year in grocery. Big winners: Dunkin, Peet’s, and private brands. Traditional coffee grew 2%, largely from the influx of in-home brewers who left cafés and diners across the country (Nielsen).

So how do we explain the growth in specialty coffee and the flat trajectory of traditional? On the surface, it does not make sense:

  • The most active coffee drinking segment, Baby Boomers, is also the largest population segment, and grew up with traditional coffee
  • The Great Recession, one would think, should be driving people to “trade down” to less expensive options for their caffeine
  • Folger’s and Maxwell House are still the biggest brands in retail coffee, with the highest ACV
  • The most active drinkers of specialty coffee (18-45) are those that have a higher tendency to drink coffee out of home

So, to explain the growth of specialty coffee in a down economy, we have to look at the culture of the coffee drinker in 2010, and the relationship he/she has with the beloved beverage. The nuts and bolts rational grocery shopping stuff like nutrition, moderation, convenience and functional benefits – all that stuff gets thrown out the window in coffee. The only rational purchase trigger in coffee is price. So then we move to the more whimsical “brand connectivity” stuff like freshness, brand appeal, status, and personal identity. That’s where specialty coffee trumps traditional coffee. In fact, it’s not even close. Turn on the TV and you’ll still see the occasional ad for traditional coffee, but they target yester-year, forgotten eras, multi-generational family gatherings, and then a bunch of rational stuff like price and convenience. I’m sorry, but that does not work in today’s coffee era. Coffee is the poster child for “affordable indulgence:” You can get a week to two weeks of deeply satisfying caffeine experiences for $7.99. The consumer has moved past the rational and is on to the emotional. That’s why once you go specialty, you NEVER go back to traditional. You’ll trade down to the in-home brew, but not to drinking brown water.

What’s more, there is no such thing as a 23 year old at-home traditional coffee drinker. Gen Ys , and Gen Xs for that matter, grew up in the Starbucks era. Cue McDonald’s gazillion investment in a “Cup of Joseph.”

So…. how is a private brand going to beat a national brand in a battle for emotional mindshare? It’s doable. It takes a multiple touch point approach to communications pre, in and post-store, and a legitimately high quality product.

But there’s a shortcut! And it has to do with going past functional benefits and emotional triggers and onto something much simpler: appealing to the extremely bored shopper with INNOVATION.

Innovation in specialty coffee can mean auction winning coffees, direct trade coffees, micro-lot coffees, in-home brewing solutions, club memberships, tasting tours around the world, custom blends, sustainable packaging, re-usable packaging, off-the-wall branding, and so much more. And for the shopper pushing her cart down the aisle for the 52nd time in 52 weeks,  breaking the boredom is how to fast track conversion on the shelf – particularly for private brands.

So, plastic bag vendor, coffee is not coffee. Not anymore. Look at the scan data, and take a closer look at why people buy coffee. Coffee isn’t just coffee. Its increasingly irrational, and there’s no going back!

Posted
Categories

Post new comment

  • Web page addresses and e-mail addresses turn into links automatically.

More information about formatting options