Single-Serve Brewing: Untapped Potential
There’s been ample debate within the last year about the state of the single-serve category. Has the novelty worn off? Is it a category on the decline? Or is there still room for growth? Based on findings from the NCA’s NCDT study, single-serve is far from “over” as there is potential in under-served markets.
Since 2012, single-serve brewers have been the second most-used coffee preparation method in the United States. According to the National Coffee Association’s (NCA) National Coffee Drinking Trends study, in 2016, 28 percent of past-day coffee consumers drank single-serve brewed coffee yesterday, up from 25 percent in 2015. Not stupendous growth, but growth nonetheless.
The NCA, New York, NY, hosted a webinar in August entitled, “Single-Cup Brewing: Plateau or Potential?” presented by Michael Edwards, co-founder of market research firm, Dig Insights, Toronto, Ontario, which helped conduct the study. The NCDT found that the single-serve category has grown dramatically, but the rate of growth has decreased. As with any maturing category, explosive growth eventually tapers off but viable categories find ways to evolve and adapt. For single-serve brewers, there are opportunities that marketers have not capitalized on: new consumers and “new” products.
The online data collection for the NCDT study took place 11-26 January, among nearly 3,000 respondents, ages 18 and older. The weighted sample profile reflects the American population 18 plus, with interlocking quotas for age, gender, region and ethnicity. Respondents must have consumed a beverage other than tap water in the past-day, but drinking coffee was not a requirement to participate in the research. The NCDT study found that awareness of singleserve machines remains high with approximately 75 percent of respondents aware of single-serve brewers, up from 59 percent in 2011. “Single serve was not an overnight success, it took time,” said Edwards.
The highest rate of awareness is among Baby Boomers (ages 54 plus) at 82 percent followed by Gen Xers (ages 35-53) at 74 percent. Awareness among Millennials (ages 18-34) is 69 percent. Single-serve brewer ownership grew from 1 percent in 2005, to 29 percent in 2016, showing that household penetration is low, leaving ample room for growth.
Edwards said that the in terms of coffee consumption, the US market overall was flat with declines in traditional brewing methods but increases in gourmet/espresso-based beverages. He noted that coffee as an overall category skews older but gourmet/espresso blended drinks skew younger.
Drinking and Preparation Methods
Drip coffee makers remain the dominant brewing method. Per the study, 50 percent of pastday coffee drinkers drank drip brewer-prepared coffee yesterday in 2016 versus 54 percent in 2015, and 58 percent in 2013. Drip coffee is also the brewing method most often used – 84 percent – prior to single-serve brewers.
Overall, 85 percent of past-day coffee drinkers drank brewed coffee (as opposed to instant or ready-to-drink). This is consistent versus 86 percent in 2015 and 2014.
However, Edwards noted that because total brewed coffee is not growing, growth in one brewing method will come at the expense of other methods. (Evidencing this, among past-day coffee drinkers, 12 percent used an espresso machine in 2016, up from 9 percent in 2015.) The NCDT study also found that nearly one-third (32 percent) of single-serve owners drank coffee made with a drip coffee maker during the past day, illustrating that for many, single-serve does not completely replace drip.
Furthermore, single-serve brewer owners are more likely than non-owners to have drunk coffee yesterday (68 percent versus 52 percent). This is being spurred by single-serve owners having a greater tendency to drink all types of coffee – both gourmet/speciality and nongourmet/speciality.
Coffee consumption is still heavily skewed towards breakfast. In 2016, 66 percent of consumers drank coffee at breakfast compared with 21 percent in the morning, 8 percent at lunch, 16 percent in the afternoon, 7 percent at dinner, and 15 percent in the evening.
Quality also comes in play as Edwards said, “we’re not seeing growth in consumers’ perception that coffee brewed using singleserve brewers is excellent.” Even the perception of variety declined as 66 percent of respondents believed that single-serve brewers allow them to “experiment with many brands of their favourite coffee” – down from 74 percent in 2014. Furthermore, the belief that single-serve brewers make better tasting coffee than other brewing methods also dropped: 33 percent in 2016 versus 40 percent in 2014.
Consumers are already aware of the convenience factor associated with single-serve systems. But opportunity remains in terms of “new” products–by simply raising awareness–and targeting under-marketed consumers such as Millennials and Hispanic Americans.
As previously mentioned, among beverages made with a single-serve brewers, traditional coffee continues to be the most popular. Between 20 percent and 31 percent of singleserve
owners claim they do not know if they can make many of the premium coffee beverages with their single-serve machine. Hence, there is room to grow awareness among consumers that single-serve brewing systems can be used to make more than traditional hot coffee and flavoured coffee. These products are not new, but as awareness is low, there should be more marketing of the machines’ capabilities of making espresso and espresso-blended drinks such as cappuccinos, café mochas, lattes, café con leches, Caffe Americanos, macchiatos and frozen blended coffees to drive purchases.
Millennials are more willing to try making speciality coffee beverages using a single-serve machine. Specifically, 28 percent of Millennials make espresso regularly or occasionally with their single-serve machine compared with 21 percent of Gen Xers and 10 percent of Baby Boomers. Thus, marketing and advertising of speciality coffees available for singleserve brewing systems targeted specifically at Millennials is essential.
While it does not really behoove coffee roasters (but it does benefit multi-beverage single-serve suppliers), there is opportunity for single-serve brewer manufacturers to increase awareness of other beverages – tea, chai latte, hot chocolate, apple cider, lemonade – and products such as soup that the machines can make.
Aside from breakfast, strong coffee consumption periods include between lunch and dinner and after dinner. Noting this, there is opportunity to grow single-serve brewer usage in weaker times – perhaps by marketing lower caffeine beverages such as decaf macchiatos, decaf teas, hot chocolate or hot cider.
Challenges Facing Single-Serve Brewers
The NCDT study found that compared to non-owners, single-serve brewer owners are more likely: to be 18-39 years old, to have a higher income on average, to have kids at home, to live in the Northeast and less likely to live in the West, to have drunk gourmet coffee in the past-day, to have drunk bottled water, chai tea, tea latte, alcohol, sports drinks and energy drinks yesterday, and to feel their financial situation is the same or better versus six months ago.
So where are the new opportunities? With those who intend to buy a single-serve machine. Per the NCDT study, compared to non-owners, single-serve brewer intenders are more likely: to be 18-39 years old, to be middle income rather than high or low income, to have kids at home, to be Hispanic American, to live in a major city versus a rural municipality, to drink coffee out of-home past day, to feel their financial situation is the same or better versus six months ago.
Therefore, single-serve brewer manufacturers will more than likely benefit from focusing on three key under-served markets: Hispanic Americans, Millennials and major cities. “There is opportunity to increase single-cup brewer ownership among Hispanic Americans where there is currently lower awareness of single-serve systems than non- Hispanics,” said Edwards, adding that to date, there have also been lower marketing efforts directed towards this group.
Millennials are more likely than Gen Xers and Baby Boomers to make premium coffee beverages and other non-coffee beverages with a single-serve machine, and yet actual ownership is lower than their older demographic counterparts so raising awareness of single-serve systems and their multi-function capabilities would be wise with this group.
Lastly, single-serve brewer ownership is saturated in the Northeast so growth opportunities are in major cities outside that region and targeted toward middle-income consumers with children at home.