Last Updated on April 5, 2020 by kristina
Segments of the US coffee market that are minor ones currently but growing quickly from a small base could point the way to where the industry is headed
Cold brew, nitro and delivery services may not yet be mainstream everywhere in the US – trials of the latter are only just getting under way – but all look set to play an increasingly important role in the US coffee market. So too might another very niche product that has arrived in the market on the back of a wave of legislative activity on cannabis, hemp and cannabidiol (CBD).
For the time being at least, the only potential cloud on the horizon is a growing number of warning signs about the economy as whole. Recent years have seen the US economy recover after the crisis in 2008, with low unemployment levels and high levels of consumer confidence, although some studies suggest that income growth has been skewed significantly to higher-income households and wage growth elsewhere is moribund.
Despite the generally positive economic outlook, data about the housing market in the US was among a number of indicators that suggest the likelihood of a recession is growing. Consumers may have begun to take that on board, and with more such indicators it is possible their mindset might cause them to make adjustments to what they drink, how often they do so and where they do so. Were that to be the case, the out-of-home market could be affected.
Key role for premiumisation
For the time being that market continues to thrive, driven in large part by ‘premiumisation,’ as a report issued late last year by Allegra suggested. The report said the branded coffee shop market in the US – which it valued at US$45.4 billion – was still growing steadily and was set to expand to more than 40,800 outlets by 2023, representing five-year CAGR growth of 2.8%.
Allegra said industry leaders were ‘broadly positive’ on market conditions, with high staff turnover, labour costs and increased competition cited among the main challenges for the coming year and Starbucks continuing to dominate the US coffee shop industry, remaining the clear consumer favourite and commanding a 40.1 per cent market share.
Delivery services could be a huge market
Unsurprisingly it is at Starbucks that potential revenue expanding concepts such as coffee delivery services are being trialled. January 2019 saw the company announce an expansion of its successful Starbucks Delivers pilot to an additional six cities across the US, an initiative undertaken in partnership with Uber Eats.
The expansion followed successful testing in Miami in late 2018, a test also powered by Uber Eats that saw strong demand, including repeat business throughout the day and positive feedback from customers.
The idea behind Starbucks Delivers is to leverage Uber’s expertise as a quick and reliable delivery provider that is already well-established in offering customers a premier experience in a growing mobile and on-demand economy. The partnership will also allow Starbucks to reach new customers who are using the Uber Eats platform, as well as offer existing customers a new method for including Starbucks in their daily routines.
“We know we have untapped customer demand for Starbucks Delivers in the US,” said Roz Brewer, group president and chief operating officer at the company. “We’re building on learnings from past delivery pilots and by integrating our ordering technology directly with Uber Eats we’ve unlocked the ability to bring Starbucks to customers for those times when they’re not able to come to us.”
The company noted that the global online food delivery market represents a US$95 billion opportunity and is projected to grow by more than 11 per cent annually through 2023.
Speaking to C&CI in January 2019, Bill Murray, President and CEO of the National Coffee Association said he expected other coffee companies to begin testing similar services. Mr Murray said coffee delivery was currently still in the very early stages, but that by partnering with established players such as Uber Eats coffee companies could enter the market in a low risk manner.■ C&CI
This extract is from an article that first appeared in the March’19 issue of C&CI, click on subscribe now if you wish to read the article in full and other informative articles in the current and future issues of C&CI.