Coffee wars: The battle is brewing for the attention of coffee fans in Canada

By Barbara Smyth
Coffee wars at restaurants in Canada

Canadians love their coffee! Canadian coffee drinkers consume an average of just over 13 cups of coffee a week. That means that those who drink coffee are likely to have two cups per day. Few if any other food or beverage items hold such popularity among Canadians, so it’s no wonder that there’s a battle brewing around coffee between foodservice operators and manufacturers that cater to in-home coffee consumption.

Importance at breakfast

With nearly 40 per cent of breakfast meals including coffee, no other food or beverage has such an impact on the occasion. Where consumers go to get their coffee is also likely to be where they get their breakfast. Considering this, are consumers becoming more likely to get their coffee from the kitchen or from foodservice?

In Canada, 80 per cent of breakfasts are prepared and eaten at home while foodservice accounts for five per cent of occasions. Though this figure may seem relatively small, there’s been a shift in the past few years as breakfast has seen the most growth of any meal occasion at foodservice with traffic increasing by 13 per cent since 2008. This growth has been driven by quick service restaurants (QSRs) with traffic increasing nearly 20 per cent over the past four years as major chains up the ante with new offerings at breakfast. This includes a focus on coffee, which is ordered in 65 per cent of breakfast visits.

QSRs have done a tremendous job of promoting coffee as a central plank in their morning menu by driving trial though value or even free offerings. Clearly consumers are buying into it. Just look at the drive-through in the morning when passing by a major QSR chain that serves breakfast.

Beyond breakfast

Though primarily a morning drink, coffee is also a viable option for consumers throughout the day, and foodservice chains are capitalizing this. Some of the “hottest” items right now are specialty coffees, growing 33 per cent since 2008. Specialty coffees include espressos, espresso-based beverages such as lattes and cappuccinos, iced coffees such as iced cappuccinos and frappucinos, in addition to other varieties that aren’t considered to be brewed coffee.

According to a new report from The NPD Group Inc., What’s Brewing in the Canadian Market Place, Canadians are far more likely to drink specialty coffees in either the afternoon or the evening compared to brewed varieties. Consumers also indicate they are more likely to drink a specialty coffee as a treat, which corresponds with general motivations that consumers have with respect to overall eating habits. As morning turns into the afternoon, and the afternoon turns into the evening, consumers generally look for more indulgent options. Specialty coffee in the afternoon is less about providing a boost of energy versus being a treat, and perhaps a reason for a break and simple (or in some cases not so simple) indulgence.

Foodservice operators have done an excellent job of positioning coffee as an afternoon indulgence that’s a key part of a break. In some respect it’s ironic that having a coffee in the morning is about speeding up, and in the afternoon it’s about slowing down.

Full service dining

The growth in coffee consumption away from home has been fueled exclusively by QSRs while full service restaurants (FSRs) have seen servings decline servings at 17 per cent between 2008 and 2012.  One of the challenges for FSRs is that they’re underrepresented among young coffee drinkers.

Eighteen- to 24-year-olds are the fastest growing segment of coffee drinkers at foodservice with servings growing 28 per cent between 2008 and 2012. This group represents nine per cent of coffee servings at QSR versus three per cent at FSR. Although coffee is an on-the-go option, which lends itself to QSR, this segment has also dedicated substantial resources to coffee programs contributing to their growth in the category.

Though FSRs may not be in a position to dedicate a similar level of resources to their coffee programs, providing innovative options can be a point of differentiation on the menu to attract younger consumers to whom specialty coffee has greater appeal.

In-home’s response

The growth in coffee consumption at foodservice has not gone unnoticed by companies with a vested interest in in-home coffee consumption. The introduction of single-serve coffee makers, where consumers use pods to make coffee, has experienced dramatic growth. About one third of coffee drinkers say that they have a single-serve device in their home, and the majority of these owners indicate that they’ve had it for less than two years. NPD data also show that of any small domestic appliance, single-serve coffee makers have shown the highest rate of unit growth over the past two years.

Canadian coffee drinkers consume an average of just over 13 cups of coffee a week.

While coffee drinkers point to spending less as the top reason for drinking more coffee at home, a significant number point to having a new device at home as the reason they’re switching. This represents a challenge for foodservice operators as single-serve coffee makers encroach upon the areas where foodservice excels: variety and ease. Unlike the standard automatic drip coffee makers, single-serve options provide consumers with the ease and flexibility to make specialty coffees, which is typically foodservice’s strength.

Foodservice’s advantage

While it’s difficult to forecast what the next move will be in the coffee war, what can be identified is what motivates coffee drinkers to use foodservice over making coffee at home. Coffee drinkers cite convenience as the number one reason for drinking coffee more often outside of the home. Having a new location in the area where one lives and works, and new beverage and snack food options are also among the top reasons that coffee drinkers cite for getting their coffee at foodservice.

In addition to convenience, foodservice operators should remember that variety of coffee selection and accompaniments serve as important differentiators between in and out-of-home occasions. One only needs to look at the newest menu offerings of the major foodservice chains with developed coffee programs to substantiate this point.

Canadians’ love for coffee means that foodservice operators, coffee manufacturers and coffee appliance makers will continue to battle it out. Innovation has been a key strategy in this battle and the ultimate winner has been the consumer, who enjoys more variety in coffee than ever before.

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About the author

Barbara Smyth is Director, Client Development (Foodservice) for The NPD Group. The NPD Group has more than 25 years of experience providing reliable and comprehensive consumer-based market information to leaders in the foodservice industry. For more information, visit www.npd.com or contact Smyth at barbara.smyth@npd.com.

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