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Private label Zanetti coffee assembly line.
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Private Label Coffee Sales in the U.S.
By Dan Shryock
It’s been nearly a year since American office workers fled their office cubicles and sequestered at home to guard against Covid-19. The mass evacuation service coffee channel hard, as sales nearly came to a complete stop.
The pandemic and the resulting economic recession forced consumers to alter their workplaces and lifestyles. Instead of stopping for a retail coffee or drinking the office brew, workers stockpiled their home supplies. Many even invested in new home coffee equipment in search of a better cup on their own.
Those changes continue to send coffee sales soaring across the United States. New sales numbers show private label coffee is reaping the benefits. US coffee sales during the first three quarters of 2020 maintain a standard sales trend, according to Nielsen Research tabulated for the Private Label Manufacturers Association. This year, however, total sales jumped across the country.
In a typical year, first quarter sales are high. There’s an expected drop during the second quarter before third quarter sales show some gains. The final quarter spikes as colder weather promotes hot-drink consumption. That pattern is holding true this year, according to Nielsen, but with a surprise note. Second quarter sales in 2020 – during the early weeks of Covid concerns in America – were much higher than during the same period in 2019. And, by Oct. 1, private label coffee sales were up 7.3% over the first three quarters of 2019.
For many consumers, the loss or reduction of income made it necessary to recalibrate spending habits. Still, American coffee drinkers have not cut back. They are buying in bulk. They are ordering online. They are buying more coffee than before the virus arrived.
“Economics forced consumers to be very smart in their purchases, and that’s a good fit for the private brand in total,” said Clay Dockery, Massimo Zanetti Beverage USA’s corporate brands division v.p. “Private label coffee has done very well [in 2020] and I expect it to continue. There is a seasonality index with colder weather. Coffee performs better in winter months,” Dockery said. “The third quarter kickstarts the cooler weather season. It continues through the first quarter [of the following year].”
Sales are even better this year. Coffee sales overall totaled more than $2.5 billion in the first quarter of 2020, an 8.4% increase over the same period in 2019. Private label sales topped $441 million, an 8.7% gain. And, as American consumers sheltered at home this spring, second quarter totals reflected the shift. Total sales reached $2.47 billion, up 12.8%, over the previous year. Private label sold $412 million, up 10%.
Third quarter sales show total coffee sales at $2.3 billion, up 8.7% over the same period last year. Private label sales surpassed $382 million, up 3.3%.
Those results are encouraging to Angelo Campanella, v.p. for channel development in the United States for Club Coffee, a Canada-based full-line roaster and co-manufacturer.
“I see the real numbers,” Campanella said. “We have already sold and shipped more (coffee) year-to-date than we did all last year and sales are going to continue to be very good.”
Home consumption here to stay?
Consumers now working from home were forced to find new, economical sources. They turned to e-commerce-based subscription services. They stockpiled their favorite brands, and they found their coffee in the private label section of their grocery store aisle.
These consumers have turned to what researchers are terming “countertop commerce.” The home countertop has become the hub for food and beverages and coffee drinkers are purchasing more in-home equipment – espresso machines, grinders, single-cup machines – to enhance their home coffee experience.
“I still see a line at the Starbucks drive-through lane, but things have changed,” Campanella said. “If you were one of the folks who worked from an office, you probably changed your mindset. You’re now thinking, ‘I’m going to be working from home for a year.’ Once you purchase a $200 home machine, you can make it exactly as you want it. You’ve made that investment. You’re going to use that equipment.”
That commitment boosts sales across coffee brands. “I think by the end of the year we’ll be up in the low- to mid-double digits [in sales increases],” Campanella said. “We already have the orders.”
Should there be a continuing coronavirus threat and stricter government stay-at-home requirements, the needed inventory will be available. “There’s a huge commitment by retail to not be out of stock,” he said. “A lot of those retailers have had time to plan for the surge.”
Dockery agrees. “ ‘Just in time’ strategies for inventory management are going out the window,” he said. “The coffee industry seems to perform effectively. We have a global supply chain that has not been terribly disrupted.” But, he said, “there are so many unknowns. I’ve told my customers everything is going to be business as usual until it isn’t. If another wave is what is predicted, I think it will be more impactful than the first phase.”
New trends in private label
The Covid-driven recession is forcing businesses to find new ways to promote their brands and support their employees working from home. Smaller regional coffee roasters are attracting new opportunities as a result.
“We’ve had a wave of inquiries,” said Neil Collie, sales manager for K&F Coffee Roasters in Portland, Oregon. “Private label is such a varying element. It’s not a significant business channel, but this Covid period has been extraordinary. The pipeline is full.”
Like most other roasters, K&F’s foodservice sales evaporated once the Pacific Northwest locked down in March. Since then, some customers slowly came back. Meanwhile, private label opportunities fill the void for the roaster.
“We’ve seen a flurry of interest in private label by a wide range of potential customers,” said Collie. “We have bid requests from both national brands and (smaller-brand) mom and pops. The proof will be down the road because the sales cycle can be a long one. I expect to see some fruition from the interest generated. Inquiries in July, August, and September were robust.”
Those inquiries sometimes come from unexpected places. “It’s a new paradigm,” he said. “Businesses are looking for avenues of sales growth, and private label is one of those that many companies see as a way of building brand.” Collie mentions an established natural products business with a strong international organics brand. The company now wants to sell organic coffee under its own private label.
“Here’s an opportunity for this organization to build its brand by incorporating private label as part of its message,” Collie said. “It’s coffee with a purpose.”
“That’s quite common,” Campanella adds. “We have several brand partners. We produce coffee for them, and they control the brand. We help the brand, the story, the romance.”