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The coffee industry is expected to maintain its growth for the next five years. However, a factor poised to highly influence the industry is the fact that coffee drinkers are more informed than ever, according to a recent IBISWorld report.
Consumers are increasingly becoming more aware of health issues and taking into consideration nutritional information. As a result, experts recommend industry operators to react fast to address the rapidly changing preferences and needs of coffee lovers.
Worldwide, approximately 145 million bags of coffee are consumed every year, representing about 10 million tons of coffee and two billion cups every day. Britons, on their side, are drinking 95 million cups of coffee daily, as per latest statistics published by the Centre for Economics and Business Research (CEBR). Even if coffee demand is being pushed to record by coffee-loving Millennials, specifically, this demanding and knowledgeable generation consequently holds the power to change the course of the industry. Players in the coffee industry failing to adapt to the preferences and needs of the majority of the consumers are bound to run aground.
Today, coffee drinkers are more demanding and discerning than ever. Studies demonstrate that their purchasing behaviour is steadily based on ethical concerns such as human rights, labour conditions, animal well-being, and the protection of the environment. It is no longer enough to propose consumers a tasty cup of coffee to satisfy them. In reality, their appreciation of a cup of coffee and consumer loyalty now spans from bean to cup. They want to know where the coffee beans come from, and they want to know who are the farmers and harvesters behind these beans. They also want to know whether these workers and farmers are paid fairly for their coffee beans and labour, They equally demand transparency in terms of quality and are reassured if they know that their coffee beans are sourced in sustainable and ethical manner, protecting not only the workers and farmers but the environment too.
This is where Fair Trade coffee makes the difference. Fair Trade coffee is coffee that is certified as having been produced to established fair trade standards based on dialogue, transparency and respect. These standards also seek greater equity in international trade and contribute to sustainable development by offering better trading conditions to coffee bean farmers. Fair trade practices furthermore prohibit child or forced labour. Adopting such practices, doubtlessly, offers a competitive advantage. Costa Coffee, for instance, has thoroughly embraced this strategy, placing its customer well-being at the core of its processes. The chain sources its raw materials from Rainforest Alliance Certified farms. Starbuck, on its behalf, buys 100% ethically sourced coffee in collaboration with Conservation International, supporting coffee farmers in various producing countries and helping them to adopt sustainable practices.
Recent studies show that despite consumers are becoming more conscious about health issues associated with poor eating habits and are now making efforts to avoid unhealthy foods. They are also showing more interest in taking cognizance of nutritional information of the food items they are consuming and they are less likely to make repeat purchases if they are not satisfied with the nutritional information. This trend is viewed as posing a threat to numerous operators in the food and beverage industry who are not wholly providing healthy food and beverage items, according to the IBISWorld report.
In its forecast, IBISWorld exhorts that the coffee industry can no longer rely solely on coffee and needs to be more creative and versatile to continue expanding. It suggests that non-traditional and high-margin menu items such as breakfast items and wraps, as well as iced coffee drinks, will aid in boosting a healthy growth. Large operators, such as Starbucks and Dunkin’ Donuts, have been quick to acknowledge the evolving tastes of their clientele. Even if the two leaders of the coffee market in the United States (U.S.) are maintaining their strategy to expand and have more and more stores in every corner, it seems that both are hitting the end of an aggressive growth strategy and have to implement fresh refocused strategies. One of their moves is to diversify their menus in an innovative manner and remodel the designs of their locations until 2023 in view of generating sales and attract a wider range of customers.
Diversification is not a new concept in the coffee market. As a matter of fact, behemoth Starbucks launched itself in this direction some five years ago by increasing its focus on food. It acquired La Boulange pastries and Evolution Harvest granola bars in the U.S. In the United Kingdom (U.K.), the giant launched a new food range with the Duffin’ doughnut/muffin hybrid. Diversification is, indeed, a surefire growth strategy adopted time and again by companies worldwide. In the coffee industry, it can help coffee shops to deepen their market penetration by growing sales of existing products in existing markets. Diversification can lead to product development as launching new products into an existing market can increase sales. An example of such a strategy is when Starbucks introduced a new premium coffee concocted with rare and exclusive beans. At the same time, the need to diversify can result in market development in new places, thus extending geographical reach.
Nonetheless, the fruits of diversification can only be reaped if done in a proactive manner rather than reactively. An anticipatory, change-oriented and self-initiated approach like that adopted by Starbucks since years, for instance, can allow coffee operators to mature. Seasoned business decisions can also buffer them from down times. On a parallel note, selective targeting is equally proving to be a solid strategy in the coffee industry. Costa coffee, for example, relies itself on a shrewd mix of geographic and demographic segmentation strategy to target customers and satisfy their preferences and needs. This strategy likewise helps the chain to introduce new products accordingly with limited risks.
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