Coffee is still a treat out-of-home despite cost-of-living

According to Lumina Intelligence, 13% of UK consumers are buying coffee OOH each week over the last year (Lumina Intelligence Eating & Drinking Out Panel, 52 w/e 19^th Mar 23), and this remains unchanged year-on-year. Coffee and sandwich shops account for 75% of coffee occasions, a 2ppt increase in channel share, stealing from quick service restaurants. With the cost-of-living crisis squeezing many household incomes this not only highlights how resilient the category is in terms of buyers, but also a shift to the premium end of the market. This is reflected in recent coffee and sandwich shop performance which have, in the last 12 weeks, grown ahead of the market in terms of value (Kantar, 12 w/e 14^th May 23). However, it does need to be remembered that trip performance for these channels and the total OOH market remain below pre-COVID levels.

In the last year, OOH 92% of coffee occasions are hot, the remainder cold or iced. The most popular occasion is a latte accounting for 36% of coffee occasions, followed by a cappuccino at 22% and a cheaper americano at 18% (Lumina Intelligence). The latter has gained in popularity in the last year showing that despite trade up in channel there is some potential trade down in product, negatively impacting milk demand due to americano’s lower dairy content. However, as well as cost reasons health considerations may also be driving this change.

It also seems that consumers are more cost conscious about when they are having their OOH coffee occasion, teaming it with a meal or snack, rather than buying it as a standalone treat. Consumers are doing this more when they are on the go, travelling or socialising, with the latter being a particularly important driver for the coffee category. And socialising has different needs; consumers want a pleasant atmosphere, speciality offerings and an experience, with customisation becoming more of the norm.

Opportunities:

• Cost cutting behaviours are still evident in the category. Address value for money through loyalty schemes and meal deals.
• Play on treating of both hot and cold coffee with premium or specialised offerings and customisable options.
• Ensure the environment meets socialising needs to encourage consumers through the door.
• 20% of coffee occasions use plant-based milks (Lumina Intelligence) and this is a significantly higher proportion than those who follow a vegan diet. Remind consumers of the great taste cow’s milk adds to a coffee.
• Despite being a treat consumers are increasingly considering health and sustainability credentials. Communicate cow’s milk and British farming’s advantages in these areas.

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