Though foodservice will account for roughly three-fourths of the projected $48 billion in sales for the U.S. coffee industry in 2014, the retail segment is finding new ways to reach consumers and compete with the restaurant industry for market share. A driving trend in retail coffee innovation and marketing is bringing the coffee shop experience into the consumers' homes, according to Coffee and Ready-to-Drink Coffee in the U.S.: Retail and Foodservice, 8th Edition, a report by market research publisher Packaged Facts (packagedfacts.com).
A key factor in giving consumers a coffee shop experience at home involves bringing favorite coffeehouse and bakery brands into the retail sector. This type of co-branding is effective in garnering instant brand loyalty and recognition—a defining factor in a crowded market. For example, leading fast casual restaurant operator Panera Bread capitalized on its strong following with the brunch/lunch crowd to push its Panera Bread Bakery Blends brand, which offers a variety of flavored ground coffees and is positioned as a premium retail coffee product. Likewise, leading baked goods and coffee chain Dunkin Donuts has capitalized on its success in the coffee category to expand into the retail sector. Meanwhile, Caribou Coffee has made its signature brews available within the retail sector, in addition to providing products to foodservice providers such as hotels, entertainment venues, and e-commerce channels. Even fast food juggernaut McDonalds revealed plans to enter the fray through its McCafé-branded packaged coffees (in whole bean, ground coffee, and single-cup offerings).
On a grander scale, co-branding of retail coffee goes beyond coffee shop brands to align with other indulgent brand. The bold, rich flavor of coffee provides a natural balance to indulgent sweet notes—making partnerships with decadent, palette-pleasing brands a natural fit. Such partnerships create brand recognition and cross-merchandising opportunities, notes Packaged Facts research director David Sprinkle. As recently as February 2014, major moves such as doughnut company Krispy Kreme's launch of ready-to-drink coffee beverages at more than 900 Walmart locations rippled across the retail landscape. Other recognizable foodservice brands—Godiva, Entenmann's, Cold Stone Creamery—have capitalized on their reputations to launch retail coffee products with flavor-rich, decadent, and even premium positioning.
Building off coffeehouse expectations for a wide variety of options, retail coffee manufacturers are also embracing variety. Limited edition offerings or seasonal flavors are an easy way to satisfy the need for variety and keep consumers engaged with the brand.