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Each day TFO Canada publishes a sample of trade news on the Canadian import market along with any new, updated or changed regulations and legislations regarding international trade; countries in which TFO Canada offers services and on the export sectors which it promotes.


Ready to drink ó coffeeís next high growth frontier

Wednesday, September 27, 2017 > 10:10:02

Canadian Grocer

Coffee competition traditionally existed in two distinct areas: at-home coffee and out-of-home coffee. Folgers, Maxwell House and Nabob defined at-home coffee, while Starbucks, Tim Horton’s and McDonald’s ruled out-of-home. Competitive lines blurred with coffeeshop brands entering grocery aisles. As coffee’s popularity surges, competition has extended to a new frontier: ready-to-drink (RTD) coffee.

Canada’s RTD coffee market is currently valued at less than $100 million, yet holds enormous potential in the billion-dollar coffee category. Grocery coffee is stabilizing to single-digit growth, while RTD coffee is expected to produce double-digit gains upwards of 20%.

Even then, RTD coffee has more untapped potential. Consumer demand continues to swell as people look to satisfy need states for on-the-go convenience, functional benefits and healthier alternatives. Younger consumers with growing purchasing power are leading the drive in these need states. Canada’s product landscape includes new entrants Tim Horton’s, Nescafé and Kicking Horse alongside mainstay Starbucks and other regional brands. The U.S. product landscape is a little more crowded, with McCafé launching next year to join leaders like Starbucks, Monster Energy, Peet’s Coffee, Califia Farms and many others on shelf.

Retailers can maximize sales by tapping into manufacturer innovations and consumption trends. This starts with understanding three key insights about RTD coffee.

  • RTD coffee creates new coffee consumption occasions. Though breakfast is the leading coffee consumption daypart, snacking and lunch occasions are growing quickly as coffee consumption moments. In fact, only water surpasses coffee as the most consumed beverage during these two dayparts.

  • RTD coffee drives category innovation. Product innovation likes nitro cold brew or flavour innovations in bottled coffees and frappes represent the pulse of coffee innovation, and these innovations all take place in RTD coffee. Consumers that are searching for a unique product experience with coffee are more likely to try RTD coffee.

  • RTD coffee is a year-round drink. These coffee innovations are reshaping the “cold/iced” coffee season from summertime to year-round consumption. The seasonal nature of this segment has lessened compared to prior years.

How can you action these insights? Improve shopper touchpoints through better shelf placement and greater in-store availability. The onslaught of innovation is certain to strain existing shelf space no matter the grocery aisle. With its growing popularity, retailers should invest in product variety, which will require better shelf visibility. And while RTD may not be a trip driver, it defines category innovation and merits consideration to separately block these SKUs to convert more shoppers. Maximize shopper consideration by expanding incremental touchpoints beyond impulse coolers. Given coffee’s new consumption occasions, RTD touchpoints may also be suitable for the store perimeter, the snack aisle and the prepared meal section.

The quest for sales growth will become more challenging, making it difficult to win down the coffee aisle. RTD coffee stands out from these trends. The segment is in prime position to produce explosive growth aligned with category, consumer and manufacturer dynamics. Tapping into these insights presents unique basket-building opportunities to offset coffee’s value erosion and declining momentum.

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