Perking Up Coffee and Tea
The key beverage categories are changing, and retailers need to keep up with the times by stocking items that cater to the latest caffeine craze.
Whether impulsively grabbing a New Age single-serve cold brew from a cooler at the checkout, stocking up on their favorite bulk bin coffee beans or looking for a strong cup of tea, tired, cranky shoppers looking for their caffeine fix can now expect to find a plethora of options in their local grocery stores. Many American shoppers are coffee and tea fanatics, and the categories are not going anywhere anytime soon, but today’s time-strapped, health-conscious consumers are starting to gravitate away from traditional bags of ground coffee and sugary boosters in favor of quick, healthy options that will immediately satisfy their need for a pick-me-up. Data from consumer research firm Nielsen shows ground single-serve coffee continues to gain dollar shares while traditional ground coffee has declined slightly in dollar sales.
“This is likely reflective of consumers’ on-the-go lifestyle where they are looking for quick and convenient ways to enjoy their caffeinated (or decaffeinated) beverage,” notes Jordan Rost, vice president of consumer insights at New York City-based Nielsen. “Building on the convenience factor, refrigerated liquid coffee has seen significant growth in the last year, with dollar sales up 10.3 percent.”
This does not mean that retailers should neglect their beloved, traditional coffee and tea aisle, however.
David Bugni, assistant store manager at Woodlake Market in Kohler, Wis., stocks around 110 SKUs of coffee beans in the store’s bulk bin whole-bean section. While cold brew has taken off at a head-spinning rate over the past few years, Bugni has noticed plenty of shoppers still reaching for the whole beans.
Not the Same Old Grind
“I have a lot of customers who are buying whole bean and either grinding it in-store or taking it home to grind,” Bugni says, adding that beans from local companies are the best-sellers in his store. Bugni first started working in coffee 12 years ago, and he says that when he first broke into the business, flavored coffees were all the rage. Things have changed dramatically since then as consumers have become more conscience about their sugar consumption and wary of ingredient lists. Rost agrees, confirming that in recent years consumers’ preference for product transparency has become more apparent.
“Coffee and tea categories are not immune to this,” Rost adds. “Today, consumers are taking a more hands-on approach to their health, which includes following proper nutrition guidelines to prevent or manage health issues. And one ingredient consumers are trying to keep a closer eye on how much they consume is sugar.”
Brian Arkus, executive vice president of sales for Austin, Texas-based High Brew, has also noticed a decline in sugary coffee drinks as consumers continue to search for the healthiest options. High Brew recently took this a step further in the better-for-you coffee world by launching a line of protein-enhanced coffee beverages called Creamy Cappuccino + Protein.
“Shoppers are looking for the authenticity of the coffee beverage,” notes Arkus, who points to the cold brew boom, which grew from 4 percent to 6 percent over the past year in the total ready-to-drink (RTD) category alongside an annual growth rate of about 60 percent.
Crazy for Cold Brew
Certainly, cold brew has become one of the hottest words in the coffee world. Beverages boasting this slow-brewing process have taken over shelves across the country at an alarming rate. Retailers should be readily aware of this pervasive trend and make sure they place these products at impulse purchase points around the store, according to Brian Lovejoy, coffee general manager of Los Angeles-based Califia Farms, who says some retailers are still struggling to figure out where the best home for cold brew is within their aisles.
“Cold brew is growing so fast and becoming such a big category that retailers are trying to figure out where it belongs,” he says. “Multi-serving sizes usually end up in the dairy case and next to our other products. Retailers are a little bit more confused about where to put the single-serving sizes. Some grocery retailers have a premium beverage section and the single-servings often go there or they sometimes end up on shelves alongside products like fresh-pressed juices and kombucha. But now it’s becoming such a big category that retailers are starting to find dedicated space to cold brew coffee, and our hope is that more and more retailers are seeing the opportunity in cold brew and creating independent sections for it.”
Some manufacturers are getting creative with cold brew and offering products that help bring it into unexpected areas of the store. Baton Rouge, La.-based Community Coffee Co. has done just that by introducing a make-at-home cold brew coffee kit. Woodlake Market is also getting crafty with cold brew by bringing a toddy press right into the store to tempt shoppers with a fresh cup of cold brew on-the-go.
“Right now, it’s all about cold brew. That’s kind of the hot button right now and everyone is gravitating towards it,” notes Bugne, who further shares his view that, “The toddy press is a fantastic little machine and the quality of the coffee is amazing.”
Cold brew is not just for coffee, though. Tea is getting its own cool makeover, which has not slipped by Bugne. Along with the fresh cold brew coffee, Woodlake Market offers Rishi iced tea in the same format. The retailer also offers single-cup hot tea that can be brewed at different temperatures for the perfect cup. Research from the Tea Association of the U.S.A.’s 2016-2017 Tea Market review even called out cold brew tea as one of the growing trends in the category.
“From first-hand experience, we continue to see compounded growth and interest with cold brew tea,” says Niko Nikolaou, co-founder and CEO of New York City-based Cham Cold Brew Tea. Nikolau also points to nitro offerings, either kegged or in portable cans, as one of the biggest trends he has noticed this year.
“Cold brew continues to grow within coffee and has expanded into tea,” Nikolaou adds. “The demand is still strong with consumers, which is giving brands sustainable growth. Yet you’re starting to see the category experiment and innovate past ‘cold brew.’ Some examples would be carbonated fruit and coffee infusions as well as nitrogen – a trend we think you’ll see grow further with tea as well.”
Iced, Iced Baby
Iced tea has really gone to new lengths in innovation in recent years. For example, Key Largo, Fla.-based beverage company Carela has introduced iced RTD bitter melon green teas to U.S. shelves. Bitter melon is believed to have a variety of health attributes, such as being helpful to blood sugar regulation. Retailers can benefit from stocking their shelves with on-trend interesting coffee and tea beverages, which not only draw in the wellness-minded crowds who are willing to pay a premium, but also create an exciting experience for every shopper as they discover new products they have never seen before.
“The greatest opportunities we foresee is more retailers interested in carrying cold brew coffee and tea as well as a willingness to take some risk with unconventional and innovative brands,” Nikolau says. “I think the challenges on the horizon that most of these brands face is further educating the consumer on their offerings as well as their value proposition. Additionally, production and pricing are always challenging when working with new processes or ingredients.”
In addition to health and wellness, consumers have also developed a taste for local products. Many retailers have increased their focus on sourcing products produced nearby. Much to the delight of their customers, Shoprite, a subsidiary of Keasbey, N.J.-based Wakefern Food Corp., recently expanded its Locally Grown program, which offers “a rich variety of products throughout the supermarket – from farm-raised beef to seafood, flowers, fresh fruits and vegetables, baked goods, honey, craft beer and roasted coffees,” according to company officials.
Among the coffees that have recently joined the program are: Booskerdoo Coffee, which roasted in Monmouth County, N.J.; T.M. Ward Coffee, a family-owned, 148-year-old Newark, N.J.-based coffee company that roasts its own peanuts and coffee; and Candlewood Coffee, which is roasted in Connecticut and sold in ShopRite stores within the state.
“ShopRite is proud to work with local family farms and businesses because local is not only how we source our food, it’s who we are,” says Derrick Jenkins, vice president of produce and floral at ShopRite. “We look forward to offering shoppers an ever-increasing assortment of locally made products and goods throughout the year.”
Bugni has also made it his mission to stock his shelves with local coffee, and says Colectivo Coffee – which is roasted fresh daily in Milwaukee’s nearby Riverwest neighborhood – is by far his top seller. Bugni has even dedicated a large end-cap to Colectivo coffee and stocks 14 SKUs of their beans. Bugni has also seen great success with Sheboygan, Wis.-based Torke Coffee and stocks a variety of hyperlocal coffees located within 20 miles of the store.
Everything in its Place
Stocking shelves with the types of products consumers want is important, but making sure these items are given the correct placement is crucial to keep sales strong, category experts say. In order to create a successful store layout, some retailers may need to break old habits, observes Corina Flushing, COO and co-founder of Arteasan Teas. Flushing suggests placing lesser-known brands in more eye-catching places that are normally occupied by conventional brands and moving the brands that consumers already have a relationship with to the lower shelves.
“Grocers are slow to adapt and tend to have the same spacing for conventional sodas that they used to, even though market research has shown a decline in those drinks,” Flushing warns. “If they keep putting these products at eye level and with a lot of spacing, it’s difficult for new and exciting, emerging brands to find space on their shelves. We’re working to educate grocers. If a person is going to get a Coke, they are going to look for it and will find it on the bottom shelf, but nobody is going to look for new brands.”
Tricia Wallwork, CEO of Bessemer, Ala.-based Milo’s Tea Co., says her company works with retailers to help them get the most bang for their buck when stocking their products.
“We really try to work with each retailer to cater to what their needs are. We want to add value to every retailer we work with,” Wallwork says. “Every retailer has their own personality and how they like to do things, so we work with them to find the right assortment and allocation of space. We have point of sale placement at virtually all the retailers we’re in.”
Infusing Liquid Gold
In-store sampling is another way for retailers and manufacturers alike to get smaller, premium products into shoppers’ carts. Many manufacturers, especially those that are still up-and-coming, offer in-store demo programs that retailers can take advantage of.
“The conversion of sampling to a purchase is at a very high rate,” Arkus says. “Getting liquid into people’s mouths definitely turns them into future buyers.”
Daniel Casanas, co-founder of Carela, says since the bitter melon drinks are so new and contains unfamiliar ingredients, demoing has been especially beneficial to the product’s in-store success.
“We’ve done demos in 40 or 50 Florida stores and shoppers were pleasantly surprised by how good it tastes,” Casanas says. “We’re going to do a lot of social media and targeted local ads to really work with retailers to target their audience. For instance, with Richard’s Foodporium in Florida we ran an ad in their circular, which proved to be really beneficial.”
Retailers can also take advantage of other promotional programs offered by manufacturers, such as Community Coffee Co.’s sweepstakes, which focus on tailgating and will continue through the end of the football season. The campaign enables consumers to win prizes such as tickets to the Big Game by entering the sweepstakes, and Community Coffee Co. offers in-store promotional material like shipper displays and shelf talkers.
“It really pushes it to the front of the store and brings it to the shopper’s attention,” says Jodi Conachen, Community Coffee Co.’s general manager of communications.