Grocery Coffee Sales Dip as Consumers Turn to eCommerce, QSRs

Coffee sales at the grocery store are reportedly below pre-COVID levels as consumers increasingly get their caffeine buzz from digital channels or restaurant chains.

Packaged coffee sales fell 3.7% year over year in terms of units, with ground coffee sales leading the decline, falling 5.6% while single-serve pods only fell 1.4%, Reuters reported, citing data from NIQ.

“eCommerce is growing, coffee pods are taking share of roast and ground coffee, and a higher percentage of coffee pods are sold online,” Jim Watson, executive director of beverage research at Rabobank, told the news outlet, adding that subscriptions are also gaining share.

Major players in the space are turning to digital channels and subscription commerce to capture convenience-seeking consumers. Keurig Dr Pepper shared on its earnings call last week that it is looking to coffee subscriptions to bring in recurring direct-to-consumer (D2C) revenue and seeing eCommerce sales overall increase.

“The convenience of eCommerce and pickup and delivery services continues to resonate well after any pandemic-related uplift would have normalized,” Keurig Dr Pepper CEO Robert Gamgort said, later adding that consumers have “shown no signs of pulling back” from digital channels.

Younger generations especially are looking for convenient options. In an interview with PYMNTS, Chamberlain Coffee Chief Marketing Officer Liz Ahern noted that these consumers seek out the kinds of higher-convenience coffee options that are well-suited to eCommerce channels.

“With our consumer, which is the Gen Z consumer, what we’ve found is a move towards and a preference for convenience when they’re looking for coffee formats,” Ahern said in September. “So, for example, a single-serve pack for a Keurig or a Nespresso machine, or something that is equipment-less… We’re finding that our consumer is really gravitating towards these formats.”

Consumers are stepping up their eCommerce habits overall. According to data from PYMNTS Intelligence’s study “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave,” created in collaboration with Amazon Web Services, 12% of grocery purchases are made via mobile device or computer, and about 1 in 3 shoppers said they are very or extremely likely to increase their online grocery purchases in the next year.

Meanwhile, major quick-service restaurant (QSR) chains are seeing sales increases. Starbucks, for its part, the world’s largest restaurant company by revenue, reported same-store sales up 8% year over year, according to the company’s fourth-quarter fiscal 2023 financial results reported Thursday (Nov. 2).

Plus, QSR giant  Restaurant Brands International (RBI) shared in its earnings report Friday (Nov. 3) that its Tim Hortons coffee shop brand’s comparable sales were up 7%. Drive-thru coffee chain Dutch Bros. noted in its last quarterly report over the summer that same shop sales were up 3.8% year over year.

Major grocery coffee companies, consequently, have been looking for ways to better compete with QSRs. The J.M. Smucker Company, for instance, shared in August that it is stepping up its at-home coffee offerings, providing lower-priced alternatives to coffee shops and targeting coffee categories such as cold brew, which consumers typically turn to restaurant options for.

“Coffee [cold brew] concentrate is highly convenient for consumers, as it requires no brewing equipment and allows for easy customization of the strength of coffee,” Mark Smucker, the company’s president, CEO and chair of the board, said at the time. “We look forward to bringing more no-brew innovation to the at-home market as we continue to make investments and explore opportunities in the fast-growing liquid and cold coffee segments.”