Foodservice Coffee and Tea: Incl Impact of COVID-19 - US - July 2020

OVERVIEW
What you need to know 
Key issues covered in this Report
Definition 
Coffee wave definitions 
EXECUTIVE SUMMARY 
Top takeaways 
Market overview 
Figure 1: Unemployment and underemployment, January 2007-June 2020
Figure 2: Spending cuts – NET – Any rank, November 2019
Impact of COVID-19 on foodservice coffee and tea
Figure 3: Short, medium and long term impact of COVID-19 on foodservice coffee and tea, July 2020
Opportunities and challenges  
Re-emergence 
Figure 4: Important foodservice coffee factors – NET – Any rank, by location most often visited for coffee, April 2020
Recovery 
Figure 5: Foodservice coffee attitudes, April 2020
Figure 6: Coffee attribute interest – NET – Any coffee, by gender and age, April 2020
THE MARKET – WHAT YOU NEED TO KNOW
Retail competition percolating
Panic buying and supply chain issues raise coffee prices
Poor economic conditions lead to fewer pour-overs
MARKET PERSPECTIVE
Retail options thrive as consumers stay home
RTDs beat foodservice at functionality 
Figure 7: Interest in functional coffee attributes (retail), May 2019
Energy drinks give consumers a jolt
Figure 8: Total US retail sales and forecast of energy drinks and shots, at current prices, 2014-24
MARKET FACTORS 
Coffee prices spike due to pandemic panic buying and supply chain disruptions
Economic fallout will last much longer than the pandemic
Figure 9: Unemployment and underemployment, January 2007-June 2020
Figure 10: Spending cuts – NET – Any rank, november 2019
KEY PLAYERS – WHAT YOU NEED TO KNOW 
Major players pivot in the wake of COVID-19
Operators must get creative to offset morning occasion losses
Value is king as consumers limit discretionary spending
COFFEE AND TEA MENU TRENDS
Coffee and tea drinks continue to rise on menus
Figure 11: Top 10 coffee beverages on US menus, Q1 2017-20
Figure 12: Top 10 tea beverages on US menus, Q1 2017-20
Coffee preps play it cool
Figure 13: Top 10 coffee preparations on US menus, Q1 2017-20
Traditional coffee flavors flourish
Figure 14: Top 10 coffee flavors on US menus, Q1 2017-20
Fruity, spicy tea flavors on top
Figure 15: Top 10 tea flavors on US menus, Q1 2017-20
LTOs show new directions in coffee and tea preparations
Figure 16: Select coffee and tea LTOs, October 2019-June 2020
WHAT’S WORKING
Dunkin’ reinvents itself
Figure 17: Dunkin’ Refreshers Facebook ad, June, 2020
Brands pivot in response to COVID-19
Figure 18: DIY Dunkin’ Donut Kits, April 2020
Is it tea’s time to shine?
WHAT’S STRUGGLING
Breakfast’s boom goes bust
Figure 19: Caribou Coffee email, “Feeding a herd? Order a Bundle (new!) from Uber Eats,” June 20, 2020
Independents may never fully recover
WHAT TO WATCH
Value-based promotions will be vital to success in a recession
Figure 20: Panera Bread Bread email, “FREE COFFEE Sign Up Extended!” July 6, 2020
Figure 21: Caribou Coffee email, “Only 2 more days to earn your Caribou Coffee Karma Badge,” July 29, 2020
The micro cafe
Figure 22: Starbucks micro cafe
Functionality comes to coffee shops
THE CONSUMER – WHAT YOU NEED TO KNOW 
Afternoon treats and snack occasions can make up for dwindling morning sales
Hot drinks are a must-have but operators should play it cool
Flavor and functionality keep coffee exciting, especially for younger drinkers
COFFEE AND TEA CONSUMPTION
Cold drinks satisfy younger consumers
Figure 23: Coffee and tea consumption – NET – Any consumption, April 2020
Figure 24: Coffee and tea consumption, April 2020
Figure 25: Coffee and tea consumption – NET – Any consumption, by age, April 2020
Frequent purchasers are more likely to experiment 
Figure 26: Coffee and tea consumption – NET – Any consumption, by change in coffee purchase (pre-COVID-19)
COFFEE PURCHASE LOCATION
Coffee chains reign
Figure 27: Coffee purchase location, most often, April 2020
All generations prefer coffeehouse chains
Figure 28: Coffee purchase location, by generation, April 2020
Lower-earning households rely on affordability of fast food and c-store coffee
Figure 29: Coffee purchase location, by household income, April 2020
CHANGE IN COFFEE PURCHASES (PRE-COVID-19)
One third of consumers increased their coffee purchases pre-COVID-19
Figure 30: Change in coffee purchases (pre-COVID-19), April 2020
Gen Zs and Millennials are driving the market forward
Figure 31: Change in coffee purchases (pre-COVID-19) – More, by select demographics, April 2020
Independent coffeehouse consumers were buying more coffee pre-COVID-19
Figure 32: Change in coffee purchase (pre-COVID-19), by coffee purchase location, April 2020
IMPORTANT FOODSERVICE COFFEE FACTORS
Hot drinks are table stakes, but restaurants should chill out
Figure 33: Important foodservice coffee factors – NET – Any rank, April 2020
QSR coffee drinkers are most price conscious
Figure 34: Important foodservice coffee factors – NET – Any rank, by coffee purchase locations, April 2020
COFFEE ATTRIBUTE INTEREST
Creamers can aid in consumer comfort with coffee functionality 
Figure 35: Coffee attribute interest – NET – Any coffee, April 2020
Younger consumers will move functional coffee forward
Figure 36: Coffee attribute interest – NET – Any coffee, by gender and age, April 2020
Frequent coffee buyers most interested in functional coffees
Figure 37: Coffee attribute interest – NET – Any coffee, by change in coffee purchases (pre-COVID-19), April 2020
Coffeehouse chain and independent consumers most open to flavor innovation
Figure 38: Coffee attribute interest – Net – Any coffee, by coffee purchase locations, April 2020
FOODSERVICE COFFEE BEHAVIORS
Consumers primarily drink coffee in the morning but opportunity lies in afternoon occasions
Figure 39: Foodservice coffee behaviors, April 2020
Flavor innovation can excite young coffee consumers
Figure 40: Foodservice coffee behaviors, by generation, April 2020
Premium, flavored coffees pave the way for upsell opportunities 
Figure 41: Foodservice coffee behaviors, by change in coffee purchases (pre-COVID-19), April 2020
Coffeehouse chain customers prefer flavored coffees
Figure 42: Foodservice coffee behaviors, by coffee purchase location, April 2020
FOODSERVICE COFFEE ATTITUDES
Focus on the afternoon treat occasion
Figure 43: Foodservice coffee attitudes, April 2020
Figure 44: Denny’s email, “Packs that feed the fun!” July 22, 2020
Foam-topped drinks appeal to younger generations
Figure 45: Foodservice coffee attitudes, by generation, April 2020
Promote dessert-like coffee flavors with c-store consumers
Figure 46: Foodservice coffee attitudes, by coffee purchase location, April 2020
APPENDIX – DATA SOURCES AND ABBREVIATIONS
Data sources
Consumer survey data
Direct marketing creative
Abbreviations and terms
Abbreviations