Coffeehouses Lose Customers as Canadians Switch to Home Brewing

Single-serve coffee machines are giving coffee giants Tim Horton's and Starbucks a run for their money.

The new report "What's Brewing in the Canadian Coffee Market: A Consumer Perspective'' suggests that more and more Canadians are choosing to get their java from home. Traditional auto-drip coffeemakers are the most popular choice for home brewing but single-serve machines, such as Kuerig and Nespresso are increasing in popularity. In fact, 27 per cent of Canadians said they drink more coffee at home than they did last year. The report also revealed that the same percentage noted that they now consume less coffee outside of the home.

So what's driving this change?

"While it's difficult to point to any one factor that is driving coffee drinkers back into the home, it's tough to ignore the likely impact that single-serve coffee makers are having on customer behaviour, " said Joel Gregoire, Foodservice Industry Analyst at The NPD Group.

Indeed, innovation, convenience and the ease of use of single-serve in-home brewing systems are transforming Canadians into aspiring baristas. Moreover, the influx of high-quality coffee maker brands that can provide coffee quality similar to those made at Starbucks and Timothy's, and the gradual reduction in machine prices have made home brewing more attractive and more accessible.

Gregoire added, "Coffee drinkers cite 'trying to spend less on coffee out of home' as the primary reason for their shift, followed by 'convenience.' Single serve coffee makers meet the needs of consumers in both instances in addition to providing other options for customization. It's a way for the consumer to get that perfect cup of coffee at home."

This shift in consumer behaviour isn't exactly the beginning of the end for coffee houses. Specialty, and in particular iced-coffees (such as the slushed varieties) have been a source of growth for the food service market. Between the 12-month period between May 2011 and May 2012, servings of specialty coffee in the food service industry grew by 12 per cent. If we were to home in on iced coffees alone we would discover that this segment grew 25 per cent.

When and why are consumers drinking iced coffee? The report findings show that iced coffee is primarily consumed as an afternoon or evening snack.

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When asked if there were any establishments that were immune to the shift in coffee consumption Gregoire said, "No operators are immune to the recent behavioural shift of coffee drinkers moving back into the home. The best thing that food service operators can do to defend against this is to understand what drives consumers to get their coffees outside of the home and meet that demand." The research showed that Canadians who claimed to be drinking more coffee outside of the home than at coffee houses revealed that convenience and new locations as key drivers. In a sense, the same principles of success that apply in the real estate market also apply in the coffee market: location, location, location.

Furthermore, consumers to a lesser extent, indicate that new beverages draw them to using foodservices. In other words, a strong innovation pipeline that offers new and exciting options for the consumer is another way to generate buzz. Top food service operators in Canada have certainly taken this to heart with a strong assortment of offerings.