When millions of Americans suddenly found themselves homebound amid the pandemic, they didn’t skimp on their java. Increased at-home coffee consumption has translated into a relative boom for some smaller-scale coffee roasters.
Consumers have taken their specialty coffee shop habits home with them by buying pricier beans and trading up to fancier Folgers. They’ve also been signing up in droves for coffee subscription services that send bags of artisan beans to their doorsteps.
It’s one part brute logistics — stay-at-home orders squashed excursions — and another part psychological, said Matthew Berk, chief executive officer of subscription coffee company Bean Box.
“I think when things get hard for people, they look to have small, very meaningful luxuries,” he told CNN Business in an interview. “I think there’s an appetite for experiences at home now that we’re stuck there.”
Bean Box was founded six years ago in Seattle, a city steeped in coffee history, on the premise that people want an at-home coffee experience that mimicked their experimental endeavors at cafes. Consumers increasingly grew appreciative of the artisan roaster, which sources specialty batches of beans from small farmers, Berk said.
“This happened with wine in the 1980s and craft beer in the ’00s, with highly fragmented, super-local makers that very quickly garnered a national audience,” Berk said.
Bean Box partners with about 35 roasters based in the Pacific Northwest and offers monthly subscriptions that include a four-pack sampler of 1.8-ounce bags of beans or a 12-ounce coffee-of-the-month.
In recent months, demand surged across Bean Box’s offerings with some categories seeing a fourfold increase, Berk said, adding that he’s noticed significant increases in the numbers of subscribers who log back online and buy individual 12-ounce bags of coffee that they liked.
“We’ve gone from having hundreds of bags on hand to having an inventory in the thousands [of bags] with that lot turning over every couple of days,” he said.
Trade Coffee, a subscription service that uses an algorithm to curate coffee to consumers’ preferences, much like a caffeinated Spotify, more than doubled its overall sales and notched an even greater increase in the number of new customers, CEO Mike Lackman wrote via email to CNN Business. The cost of having a 12-ounce bag of coffee delivered every two weeks ranges from $15 to $22.
As Trade’s customer base grew, Lackman noticed similar trends in buying habits: People consistently purchased on the middle to higher end of that range.
“This tells us that there is a broader appetite for brewing better at home,” he wrote.
From the coffee shop to the home
There is a significant split between how consumers purchase mainstream brands of coffee and specialty roasts, said Jim Watson, senior beverage analyst at Rabobank’s RaboResearch Food & Agribusiness arm.
“Grocery stores can handle 100-box cases of K-Cups really well, but they don’t handle the local roasters with unique, limited-time beans [as well],” he said, noting the latter’s sales typically occur at the coffee shop level.
Since Covid-19, the temporary or permanent closure of coffee shops has forced high-end coffees into the direct-to-consumer market, he said. And some of those shops have leaned more heavily into their subscription sales.
From March 22 to April 19, subscription sales at US coffee shops were up 109%, when compared to the period from Feb. 9 to March 7, according to payment processor Square’s analysis of millions of anonymized transactions from thousands of US coffee shops.
Popular Los Angeles coffee shop chain Go Get Em Tiger noted its GGET Coffee Club subscription site grew from 440 members in March to upward of 1,400 subscribers as of mid-June, said Noah McKeown, general manager of e-commerce.
“In the first month of quarantine, our club membership count more than doubled and our overall e-commerce revenue was up close to 70% from the previous quarter,” McKeown said via email.
Blue Bottle, the iconic California-based coffee company majority-owned by Nestle (NSRGF), recorded a 150% uptick in year-over-year e-commerce sales after closing its cafes on March 16, a company spokesperson said. The chain added about 300 to 400 new subscribers per week and saw its customers snap up coffee-making equipment with far greater frequency.
Prior to the pandemic, Blue Bottle typically sold two to five drippers — devices used in the making of pour-over coffee — per day through its online site. That’s now increased to 20 to 30 per day, Blue Bottle said.
Peet’s Coffee, which got its start in 1966 in Berkeley, California, and has grown to 200 locations in nearly a dozen states, saw a 70% increase in subscription orders fulfilled in May 2020 as compared to May 2019, a company spokesperson said. Subscription sign-ups peaked in April, but Peet’s is still seeing five times more daily subscription sign-ups now versus pre-Covid-19.
Even during a time of recession, the higher-end at-home coffee purchases could have some staying power, said Rabobank’s Watson.
When the cost of overhead and goods are taken out of the equation, “you can buy nicer coffee and pay significantly less,” he said.
Trading up at the grocery store
Specialty-focused mainstay brands got boosts — much like everything else in the grocery store — from the mid-March pantry-loading.
In the first quarter, more than 1 million households tried J.M. Smucker’s (SJM) Folgers, Dunkin’ or Café Bustelo brands, with 75% of them buying Folgers for the first time in 12 months, Mark Smucker, the company’s president and CEO, said during a June 4 earnings call.
The biggest growth areas for the Folgers brand were its dark roast Black Silk and premium Noir grounds, brand extensions similarly priced to the classic Folgers but launched to cater to evolving coffee palates. Black Silk and Noir will take center stage in more of the company’s future marketing efforts.
“The Black Silk is going to be our hero; Noir will be our hero for the future,” Tina Meyer-Hawkes, vice president of marketing for J.M. Smucker’s coffee division, told CNN Business.
Whole-bean sales, which are considered the high-end of the retail coffee sector products, had larger sales growth than the less-premium ground and instant products, data from consumer research firm Nielsen show. For the 12-week period that ended June 6, whole bean sales grew 35.8%; ground and instant increased 15.9% and 27.5%, respectively, according to Nielsen.
Peet’s fastest-growing bagged coffee sales were in the premium price tier (about $6 to $10 a bag) and super-premium ($10-plus per bag), a company spokesperson said. From March 15 to May 16, premium bag sales increased 33% and super-premium sales jumped 81% from the same period last year.