Key drivers of OOH coffee identified

Research from Rabobank has identified three key drivers of change for the out of home (OOH) coffee market.

Analysts predict the next wave of OOH growth will be driven by innovation and expansion outside of the core offering, focusing on areas such as better food, new approaches towards coffee real estate, the growth of digital platforms and new packages and machines for coffee.

The three key drivers of the shift in the OOH coffee segment are:

Evolution of the coffee shop, which is driven by intense competition within coffee and from established foodservice operators rapidly improving their coffee offerings.

Within evolution of the coffee shop, Rabobank identified five themes:

  • (Good) Food is increasingly necessary to partner the coffee
  • Competition from Quick-service restaurants and C-stores e.g McDonald’s Cafe
  • New coffee brands, e.g Irish Centra stores making its own coffee brand Frank & Honest
  • Co-location partnerships e.g Peet’s Coffee and Capital One banks
  • Coffee shops as a marketing tool and innovation lab e.g Starbucks Roastery

Convenience and technology: consumers are demanding convenience in every aspect of their lives, including how they get their coffee. While the coffee industry is developing new technologies to meet these trends, Rabobank said the rollout is still in its early stage and varies across companies and sub-segments.

  • A strong digital presence such as loyalty apps, mobile ordering and handheld devices for baristas. All this data can then drive sales and loyalty offers.
  • Many coffee brands are exploring delivery, with China’s Luckin Coffee turning delivery into a major area of its business.
  • High quality vending is on the rise following the rising cost of labor in coffee shops. The Coke-Costa acquisition is a key example here with the company looking to expand its Costa Express business.
  • Ready-to-drink coffee is booming (outside of Japan), providing on-the-go convenience with a package and product that supports near endless innovation.

Premiumization has always been a driver of change in beverages, but Rabobank has focused on emerging markets and less-developed coffee segments.

  • The foodservice and office coffee markets is an area where premiumizaton is driving fundametnal change in consumer experience.
  • New coffee formats are also a way to deliver premium coffee. Rabobank predicts coffee-on-draft such as illy’s Aria nitro coffee to expand rapidly.
  • Premiuization is also growing in emerging markets such as Brazil, Bengal and Vietnam.

Read Rabobank’s full report here.

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