Coffee and tea market innovation

The global pandemic forced a shift in consumer priorities, and the coffee and tea industry is feeling the impact. A steep decline in away-from-home coffee and tea consumption has led to stunted consumption overall.

Trends to watch:

Clean energy and functional ingredients

Pre-pandemic, consumers were seeking healthier coffee. Fortifying coffee with functional ingredients has been an innovation focus for several years and the world health crisis has accelerated growth. Coffee can be an ideal “delivery vehicle” for added vitamins or other nutrients, as its strong flavor helps to mask their taste.

Many health-conscious consumers are also adding their own functional ingredients to traditional coffee. Social media conversations that mention “coffee” paired with “whey” have increased 26% year over year (YoY). Social media mentions pairing “coffee” and “whey protein” are up 32% YoY.

Consumers look to coffee as a beverage that provides a source of “clean energy.” RTDs that provide great-tasting products with “free from” labels—like soy free, GMO free or no artificials—will stand out from other offerings. The popularity of “free from” food items indicates consumers perceive healthiness as much by the absence of ingredients as the addition of ingredients with functional benefits.

RTD products adapt to survive

Sales of RTD coffee and tea have soared in recent years, but the nature of these products relies heavily on away-from-home consumption. These brands have been hit hard, as RTD consumers in quarantine opt for less expensive, multiserve options. As lockdowns ease, many people are still spending more time at home in order to protect their health and finances. Multiserve packaging, bag-in-box and cold brew concentrates are all packaging options that will encourage in-home consumption.

Premiumization and indulgence

Budget is a growing concern for many coffee drinkers, but brands should also target the opposite end of the value spectrum. Indulgent coffee may serve as a comfort food to consumers dealing with stressful lives. Premiumization is important as consumers seek small treats to alleviate stress and anxiety. Brands can fill the demand for indulgent treats through flavor innovation and recipes designed to elevate the in-home coffee experience.

Innovation and convenience

Coffee brands can innovate around convenience and more use occasions. Convenience is often a deciding factor in purchase decisions, so innovative packaging is important—especially for RTD products. Portion-control packs or portable packaging designs may appeal to consumers on the go.

Today’s coffee market is not without challenges and aligning with consumer needs and values is critical for success. Companies that can innovate, meet evolving consumer expectations and become vertically integrated should fare well.

To read this article in its entirety, check out A new kind of brew: Innovations in coffee and tea – digital magazine.

Geri Berdak is CEO for The Dairy Alliance, a nonprofit funded by dairy farm families of the Southeast that brings together dairy farmers, retailers, schools, sports teams, health professionals, state leaders, the media and the public to promote nutrition and wellness. Berdak has dedicated her career to the broader health and wellness category, leading marketing and product innovation efforts for Fortune 500 companies like PepsiCo, Monsanto, Solae/DuPont, as well as the Innovation Center for U.S. Dairy, Kerry and Isagenix.