US coffee sales remained steady in 2020, perking up in 2021
Good things are brewing for coffee in 2021, per the National Coffee Association’s (NCA) recent webinar, that is. During the webinar, “US Coffee Outlook 2021,” presenter Matthew Barry, beverages consultant with global market intelligence firm, Euromonitor International, reported that coffee sales fell slightly in 2020 – mostly due to the decline in foodservice sales – but less than other beverages. Coffee sales at retail alone reached USD $14.9 billion, keeping the United States the world’s largest coffee market.
Consumption held relatively steady (around 33 million liters) due to retail purchases, per Euromonitor. However, aside from the decrease in foodservice sales, ready-to-drink (RTD) coffee sales dropped slightly because of their tendency to be high impulse sales, which were hindered due to lockdowns during the pandemic. Currently, only bottled water outperforms RTD coffee.
According to Barry, coffee has strong retail prospects in 2021, particularly in RTD. He added that standard ground coffee sales had been declining but as more people started brewing at home, it became a growth category in 2020. Instant remains the only declining coffee category in the US market despite a slight spike in 2020 due to the Dalgona coffee fad (not a trend as it disappeared almost as quickly as it appeared).
Sales at chain coffee and tea shops fell 3.6% between 2019 and 2020 (many had the advantages of contactless, mobile ordering, even drive-thrus during lockdowns) while independent coffee and tea shops faired much worse with sales dropping 15% (most of which didn’t have the aforementioned benefits). “We don’t expect to see growth in independent coffee and tea shops until 2022,” said Barry.
He identified four key trends that will occur during the “new normal”:
Trend #1 — Slowing Down
Investment in the home (appliances, pets, etc.)
Lingering limitations on travel
Trend #2 — K-Shaped Economic Recovery
Some sectors exceed 2019 levels by early 2021; others may take years
Growing inequality, pressure on the middle price tier
Trend #3 — Digital Reliance
Massive acceleration of e-commerce adoption
Physical/digital lines get blurrier
Trend #4 — The Unwell Well
Interest in immune products falling
Mental wellbeing becomes a higher priority
A caffeine ceiling.
Regarding the “slowing down” trend, Barry pointed out that social distancing will last through at least most of 2021. More people are expected to continue working from home in the future – maybe not full time, but at least part of the time – which will affect on-premise coffee consumption. People will continue to spend more time at home because they invested in their homes during the lockdowns with home renovations, exercise equipment (like Peloton), pets, coffee machines (many consumers upgraded), etc.
In terms of the “k-shaped economic recovery,” Euromonitor expects the American economy will near recovery by Q4 2021. “The US is outperforming most of its comparable economies except Sweden,” said Barry, adding, “keep in mind that the recovery is not recovery for all people, it’s a fragmented recovery — a lot of people are still out of work or under-employed and will continue to be in 2021.
Amid this, there will be continued premiumization for consumers who were generally unaffected by the pandemic, although the foodservice channel will continue to be impacted. Barry explained that there will be economization for consumers who were affected by pandemic such as purchasing lower-priced or private-label brands, bulk sizes, etc. “There will be continued pressure on the middle tier, which will struggle in a polarized market.”
As the economy and markets recover, Barry said the foodservice/coffee shop sector recovery will splinter in two directions:
1-Efficiency oriented — fast, digital, personalized, contactless
2-Human oriented — slow, educational, sense of community
The reliance on digital (Trend #3) will continue as, once adopted it tends to stick around, said Barry, noting in particular, e-commerce adoption. “There is a huge and permanent shift to e-commerce.” [E-commerce sales of coffee, and tea, surged during lockdowns.]
Regarding the final trend, “the unwell well,” mental well-being appears to be replacing immunity as the key functionality of the future. “Americans are generally very stressed people, women and younger generations even more so,” shared Barry, noting that decaf sales are not doing as well in this environment as one would think. ‘Coffee mitigation,’ (functionality) not decaf will be key — there are lot of adaptogens out there that can be used in coffee. Products that add, rather than subtract, in order to create a less anxiety inducing coffee will be particularly popular, such as: cannabis, L theanine, cordyceps, rhodiola and Holy Basil (Tulsi). “This [mental well-being] is an exciting category as we move forward,” he said.
Summing up, the outlook for coffee in the US in 2021 is favourable for a variety of reasons, notably:
- Retail prospects will stay strong
- RTD coffee remains a growth category — expect cold brew to outgrow overall category
- Mental well-being is emerging as the hot functionality
- Habits that consumers picked up during pandemic will not go away (e.g., online shopping, brewing at home) — which is good for some sectors (coffee machine sales, retail coffee) and bad for others (foodservice/coffee shop channels, OCS, etc.)
Given these trends and outlooks, it will be quite intriguing to see how 2021 actually unfolds.
- Vanessa L Facenda, editor, Tea & Coffee Trade Journal.
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