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Specialty coffee on the rise

Single cup coffee pods, cappuccino/iced coffee and refrigerated ready-to-drink coffee are giving food retail sales a jolt, show the findings of Packaged Facts’ recently released coffee report.

Sales in these segments were up 8.3%, 16.5% and 16.5%, respectively, across a multi-outlet geography tracked by IRI during the 52 weeks ending Oct 2, 2016.

Ground coffee, which makes up the largest segment with $4 billion in sales, fell 2.3%.

Some retailers have shifted their coffee offering by granting more space to new innovations such as compostable coffee pods and cold brew coffee — which tend to appeal to Millennials — while scaling back on ground coffee, but found that they’d alienated older consumers.

Photo: Starbucks; Illustration: SN/Anna Kang

Photo: Starbucks; Illustration: SN/Anna Kang

“The consumption of specialty drinks and the new innovations in coffee are embraced by younger audiences so what happens is that some of the products consumed by older consumers started to lose shelf space. Now retailers are beginning to look at the whole section to make sure it addresses multiple generations,” George Puro, president of Puro Research Group and lead analyst for the Packaged Facts report, told SN.

Meanwhile, food retailers are keeping close watch on the latest and greatest coffees. According to the report, new product concepts tend to be incubated at coffeehouses and cafes before being adapted into packaged goods.

“In general, retailers are losing customers to people who buy things online and they recognize that e-commerce is shifting how consumers spend time at retail and so foodservice is trying to introduce more immersive experiences that you can’t get anywhere else,” said Puro, who pointed to Starbucks Reserve Roastery as an example. In 2017, Dunkin Donuts is poised to introduce cold brewed coffee in kegs that is infused with nitrogen to give it a beer-like head, according to reports.

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