One of the key things that makes the Canadian foodservice market so unique, also makes the market so vulnerable during these unusual times. Coffee. Canada has the highest foodservice consumption rate of coffee among the thirteen countries where we collect foodservice data. Directly connected with this coffee consumption is the morning meal occasion, where Canada is also a global leader. Connecting the final dot, we know that the morning occasions is linked to the workday occasion.

The NPD Group/CREST® data reports that workday meals (consumed either on the way to work, or on the way from work) accounted for about 20% of the decline in foodservice visits reported during the second quarter (April, May, June). Consequently, coffee is the hardest hit menu item. Prior to March, hot coffee was included in 30% of all meals or snacks (year ending December 2019). In the three-month period ending June, just 23% of all meals or snacks included a hot coffee, representing a decline of over 200 million hot coffee servings.

While I don’t typically report on the non-commercial side of the business in this space – encompassing cafeterias, office beverage services, schools and hospitality – this segment of the coffee market declined by a whopping  -75%, representing another 35 million lost servings.

So is there a fix for
the decline in coffee?

In order to answer that question, let’s consider some of the positive trends around coffee. Many coffee drinkers are continuing their foodservice coffee habits at home. Prior to the pandemic, 15% of foodservice coffee was consumed in the home. That has now jumped to 37%, representing an additional 35 million servings in the second quarter. Meanwhile, our NPD Retail Tracking Service reported that the sale of coffee makers was up by +150,000 units in the first six months of 2020. If each of these coffee makers was responsible for just 2 cups per day during the last quarter, this would translate into 27 million cups of coffee that were potentially stolen from foodservice. All of these home coffee occasions create opportunities to upsell customers with things like at-home breakfast or brunch combos, take-home packs of branded coffee beans, or even meal kits that include coffee as a component. Canadians continue to consume coffee, so it’s important for foodservice to continue to battle for their fair share.

Another bright spot for coffee is the PM snack daypart, the slowest declining daypart for visits during the second quarter. One quarter of all hot coffee is served at this occasion. As Canadians look for a diversion during the work-from-home-with-the-kids routine, they are seeking the small escapes these afternoon or evening breaks can provide. This is directly related to the growth in ‘cravable’ occasions we are tracking in CREST, which are also on the rise.

And speaking of cravings, the other area of positivity in the coffee market is in the specialty preparations. In the past quarter, hot specialty has declined at half the rate of hot brewed coffee, while cold coffee (cold brew, iced, frozen) has actually risen by +1% during this same time. In contrast to the hot coffee situation, cold coffee is the fastest growing menu item. A number of factors are contributing to this. First is the PM snacking situation, mentioned above. Next is the popularity of these specialty beverages among the younger cohorts. And third is the higher menu price these items command, which serve as a very big motivator for the operators to innovate around these items.

If there is one theme I have been reporting on since this pandemic began it is that very few new trends have emerged. Instead, many pre-existing trends have simply accelerated. In the case of coffee, it is the flat growth of brewed coffee in recent years, combined with the same trend in workday occasions. The reality is that more and more people were already transitioning to working from home. There is also the consideration that the under 45 age cohort has been declining in their brewed coffee consumption, which instead skews to a 45+ age cohort. This cohort also happens to be the one that has declined the most during this time and is the most hesitant to resume restaurant visits until they can truly feel safe again (Source: The NPD Group/ COVID-19 Foodservice Sentiment Study, Canada, May 2020).

Soon after the lockdown began, I visited the website of my favourite local coffee shop to see if they were open. I needed to order some coffee beans and I was pleased to learn that not only were they open for business, they were delivering. Surprise number two, they were also delivering their famous scones, frozen and ready to bake-off at home. Just like that, a $15 order for a bag of coffee jumped to over $30. The scones arrived individually wrapped, with an instructions card and a supply of parchment paper required for baking. A scone food kit as it were. I was impressed and very pleased with my take-out coffee occasion, prepared fresh in my own home. I would challenge other coffee operators and processors to learn some lessons from this little local operator when it comes to creating their own fix for coffee.

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