Covid-19 and its effect on consumer behaviour

It is June, and by now, many cities and countries around the world have “reopened” or have begun to lift restrictions. As life “after Covid-19” slowly resumes, many are wondering how people’s attitudes towards eating in restaurants, sitting in coffeehouses/cafés, and shopping have changed, and are these changes temporary or permanent. Not all changes though, are bad for business.

In a webinar last week (see last week’s blog, Can Coffee Be Resilient Against Covid-19? for a recap), organised by the World Coffee Producers Forum (WCPF), Fernando Serpa, vice president, Global Sourcing Latin America & Fresh Food, Walmart Inc, said there have been “drastic changes in consumer behaviour” during the Covid-19 pandemic, which have disrupted the supply chain and he identified four key areas:

  1. Channel shift
  2. Category mix
  3. Foodservice hit
  4. Drop in purchasing power

Serpa said there has been a huge shift from brick ‘n mortar retail to online channel (for all categories, including coffee and tea), and whether online or in stores, consumers are buying more or larger sizes of consumable items because they want to minimize trips to store and because they are not purchasing these items out-of-home (consumption at work or on-the-road is now taking place at home). Takao Ueshima, executive director, Specialty Coffee Association of Japan, echoed that sentiment in terms of coffee, noting that in Japan, out-of-home (OOH) consumption fell 90%, but “sales of roasted ground coffee and whole beans in grocery stores, online, mail order/subscriptions grew 30-50%.”

A new report from the Specialty Coffee Association (SCA), The Specialty Coffee Industry During Covid-19, which was conducted in conjunction with Square Inc, outlines the current state of the specialty coffee industry, predominantly in the US, but Europe as well, finds that there has been a 109% increase in coffee subscription sales among coffee shops that have remained active during the pandemic as well as a 25% increase in the number of sellers offering subscription coffee services.

The SCA report also revealed that there has been a 5,380% increase in combined sales across curbside and/or pickup orders in coffee shops (many of which have expanded their assortments to include consumer packaged goods like toilet paper, paper towels, eggs, etc) as well as a 521% increase in coffee sellers offering curbside and/or pickup since shelter in place. Additionally, the report shows a 340% increase in delivery sales among coffee sellers and a 521% increase in coffee sellers offering delivery since shelter-in-place mandates began.

Serpa shared that e-commerce retailers were “overwhelmed almost overnight with the shift to online purchases (even Amazon and Walmart had problems, which led to delays in delivery).

With regard to the change in category mix, Serpa said that at the beginning of the pandemic, when the stay-at-home directives went into effect in countries, the shift in purchasing went from apparel (pre-Covid-19) to cleaning supplies to packaged food to fresh food. And when consumers started receiving stimulus money, there was an increase in purchase of electronics and products to help children learn at home.

Evidencing the shift in purchasing behaviour, the SCA report found that there has been an 11% increase in equipment sales (coffee makers, electric kettles, etc) at coffee shops/cafés.

Serpa noted that every business with gatherings of “more than five people” is hurting (such as foodservice, which has been decimated) and the supply chain has been damaged. For example, in last week’s webinar, Bill Murray, CEO of the NCA, said its members lost almost 90% of their foodservice business within three to four weeks following the stay-at-home directives.

In a previous NCA (National Coffee Association of the USA) webinar, “Covid-19 and the Outlook for US Coffee,” Matthew Barry, beverages consultant, Euromonitor International, said that “foodservice losses will be severe and last long term.” While he was referring to the US market, his comment is true for the global foodservice channel, and is not exclusive to coffee. He noted that the long-term impact is due to: lingering social distancing requirements, closure of establishments financially devastated by shutdown (many markets are already seeing this happening with independent and mom ‘n pop businesses), and substitution for inexpensive retail options. Barry added that “some, but not all, foodservice consumption moves to retail during social distancing.”

The fourth key shift in consumer behaviour that Serpa identified is a drop in purchasing power, which is due to the extreme rise in unemployment (which is temporary for some, but many have lost their jobs completely). “People are going to be very hesitant with purchasing/spending,” he said. Gone (temporarily or for the foreseeable future) could be the daily OOH coffee or tea purchases or more premium coffee and tea products from retailers for at-home consumption.

While the changes in category mix are constantly evolving, are the other shifts temporary or permanent? Will economies around the world improve and unemployment start to decrease? If so, purchasing power will increase. However, it is too early to predict. So as with everything else Covid-19 has impacted, we will have to wait and see how it all unfolds this year and moving forward.

Speaking specifically to the specialty coffee industry, but the sentiment can be applied to many small businesses, restaurants and cafés that are acclimating, adapting and evolving amid Covid-19, Peter Giuliano, the SCA’s chief research officer, in the SCA report said, “Specialty coffee businesses [many of which also sell tea beverages and other tea products] … are evolving in how they serve communities and generate revenue during this unprecedented time. Amazingly, three in four Square coffee sellers have continued operating during shelter-in-place orders, finding ways to adapt to new circumstances. This shows tremendous resilience and creativity, from curbside coffee pickup to grocery-style markets, home delivery to expanded e-commerce. These trends seem to represent more than a moment in time — they likely indicate a greater transformation of the specialty coffee industry, and a new way that coffee shops work within the communities they serve.”

  • Vanessa L. Facenda, editor Tea & Coffee Trade Journal. She may be contacted via [email protected]

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