Coffee sales down 3%, but Canadians still love their coffee shops

Canadians are ordering coffee less, but still turning up at the local coffee shop, according research from the NPD Group.

The number of out-of-home coffee servings has declined three per cent in the past year, while the number of coffee shop visits remains almost the same.

For coffee chains such as Starbucks and Tim Hortons and restaurants moving into the coffee business, such as McDonald’s, that’s forced a change of strategy, says Robert Carter, executive vice-president of foodservice at NPD Group.

• Tim Hortons concept store: coffee-flavoured beer, digital menus
• McDonald's to shrink menu, allow choice of toppings

"The marketplace in Canada is challenged and it has been relatively flat," he told CBC News.

"For operators like Starbucks and McDonald’s and Tim Hortons to grow, they need to look beyond their core offerings and look at what is it that they can expand into to attract more customers into their store or give customers a reason to come multiple times in a day."

Canadians enjoy going to the coffee shop, but sometimes they're looking for more than just a cup of coffee, Carter said.

At Starbucks, the need to keep customers coming back more often has led to a plan to start serving alcohol. That transforms it into more of a European-style café, which serves both coffee and alcohol.

Changing tastes in coffee

At Tim Hortons, there are plans afoot for a complete revamp of their food serving menu.

Canadians drink 2.1 billion servings of coffee a year, putting them second only to the Italians in drinking coffee in restaurants, Carter said.

But they’re shifting their tastes away from traditional drip brewed coffee to specialty coffees.

Over the last four years, hot brewed coffee servings have declined at a rate of two per cent whereas hot specialty coffee servings have grown by four per cent and iced specialty coffee servings have surged by eight per cent, according to NPD research.

The Millennials are driving demand for specialty drinks. They start drinking coffee younger than their parents — as young as age 16 and they love the sweet coffee-based drinks offered in the chain restaurants.

One of the trends eating into coffee sales at restaurants is the popularity of pod-based coffee makers, Carter said.

Make it at home with a pod beverage machine

“There’s couple of challenges that coffee providers like McDonald’s and Starbucks and Tim Hortons need to worry about — one is the growing use of pod beverage at home, which has grown dramatically in the past five years,” he said.

Those pods make it more likely consumers will opt for a cup of java at home.

One big casualty of the growth of coffee-service by McDonald’s, Starbucks and Tim Hortons has been the independent coffee shop, Carter said. They are disappearing rapidly from the landscape as the chains grow.

'I think there’s a movement toward the high premium independent operator and I still think there’s an opportunity for those types of independents to survive in current climate, but they will really need to have a unique point of difference and it will be around high-end innovative beverages," Carter said.