CHERRY HILL, NJ -- Office coffee service operators attending the National Automatic Merchandising Association Coffee Service Education Summit in Cherry Hill, NJ, gained insight on overall beverage consumption trends, and how they affect the workplace market, from Harris Interactive market researchers who presented the findings of a study analyzing beverage consumption in workplaces.
The researchers emphasized the importance to coffee purveyors of understanding the broader beverage market, and offered suggestions for using the study's findings to more effectively market to consumers' changing expectations in order to gain a larger share of the market.
PHOTO: NAMA's director of coffee service Roger Stewart introduces Harris Interactive market research experts Mary Bouchard (right) and Jennifer Kitchen at 2009 OCS Summit. Harris Interactive team brought operators up to date on consumer attitudes toward beverages at work.
"The overall beverage category has seen a lot of changes, some of which can help establish context for coffee at work and the influence of some beverage trends on what you're selling," said Harris Interactive vice-president Jennifer Kitchen. "Choices have exploded since 2002, dramatically altering the beverage landscape. And a lot of messaging from government, the medical industry and the press about health and wellness has led to the emergence of ready-to-drink, nutritionally enhanced beverages as a highly popular solution for health-conscious consumers."
Kitchen offered an overview of the influences presently shaping the course of the beverage market. The appeal of functional teas, enhanced bottled waters, and sports and energy drinks -- all claiming to impart heightened immunity, heart health, digestive benefits and weight management -- has grown across all ages of consumers, she noted.
For their children, parents seek drinks that offer beneficial vitamins and minerals, and have decreased sugar and caloric content. Today's young adults are "savvy, demanding and highly connected" to what they drink and how it can benefit their lifestyles -- energy drinks play heavily in their beverage repertoire. Baby Boomers are also looking for drinks with functional benefits, including those that boost memory, lower cholesterol and blood pressure and reduce free radicals, the market researcher showed.
Workplace refreshment providers must note that functional beverages are claiming and improving upon positions previously owned by other beverages, Kitchen emphasized. Consumers are turning to enhanced waters, teas and energy drinks for the energy boost once conferred only by coffee. Flavored waters are eclipsing pure water by offering taste and enhanced nutrition (with few or no additional calories).
Market trends show that that juices and juice drinks have lost their luster as the nutritional beverage segment of choice, as alternative beverages provide the added attractions of being lower in sugar and higher in vitamin and mineral content, with fewer calories. While functional beverage popularity has grown rapidly, juice and juice drinks have declined 16% and 27%, respectively, over the past five years.
Single-serve bottled water has had a sustained run of remarkable growth that has slowed somewhat as a result of fairly recent challenges. The introduction of flavored water and nutritionally enhanced bottled water products helped stimulate market growth through 2006, and continues to be the driving force behind a slow-but-continuous expansion of the category. But Kitchen pointed out that rising concern over the environmental impact of manufacturing, discarding and transporting bottled water has led to a slowdown in category growth as of 2007.
Coffee has both benefited from and been challenged by the evolution of the overall beverage market. On the plus side, the emergence of everyday coffee connoisseurs who are emotionally connected to the coffee experience, and the proliferation of specialty coffee drinks, have increased coffee consumption away from home. Another positive trend is that specialty coffee drinks once "owned" by high-end coffee shops, and popular primarily with their affluent patrons, have gained foothold in quick-service restaurants that reach a much broader constituency.
"Specialty coffee has caught fire," Kitchen said. "Lattes are not just at Starbucks anymore -- they're at McDonald's. Now consumers are considering whether to pay $5 at Starbucks or $2 at McDonald's; they have choices they didn't have five years ago. It puts the onus on suppliers to find ways to continue adding value and differentiating their products to get their 'share of spend.'"
Kitchen also pointed to an increased focus on single-serve coffee through the adaptation of the "pod" to American coffee preparation, and the advent of other portion-packed single-cup fresh-brew systems, as a positive development for growth in coffee's market share.
Market factors that have been detrimental to coffee, the researcher continued, include the increased consumption of soda and functional beverages -- this has cut into coffee's "share of thirst." Functional beverages have also staked a claim to coffee's energy-enhancing position, while providing appealing flavor with far fewer calories than many specialty coffee drinks.
"With all this change in consumption patterns, our beverage clients have had to rethink both their positioning and their product offerings," Kitchen observed. "They have to consider: How do I maintain 'share of spend,' given all the choices available? How do I broaden the occasions for which my product is consumed? How do I ensure my product delivers a unique and compelling message?"
She pointed out that 90% of coffee-drinking occasions take place during three morning hours, and suggested operators explore ways to expand into new timeframes. One way to do this might be to add iced coffee beverages.
"Beverages have become very experiential -- not only are they consumed to satisfy thirst, but also for the emotional reward they provide as they're consumed," Kitchen summed up. "The more personal the connection, the more they'll choose your product over others."
COFFEE BY NUMBERS
Next, Harris Interactive senior research director Mary Bouchard shared detailed results of the survey, which was conducted in June with a sample of 1,400 employed U.S. adults. Its purpose was to gauge "share of thirst" in the workplace.
This research found that more than half of employees have free coffee available at work, which means that it is the most commonly available free beverage. At the other end of the spectrum, survey participants said specialty coffee was the least available free drink, with 64% having no access at all, and only 12% reporting it as provided free of charge. Interestingly, 25% of employees said that coffee is not available in their workplaces.
Despite the state of the economy and measures taken by businesses to cut expenses, survey participants reported very little change in beverage availability at work -- either free or for purchase -- over the past year.
Among all employees, the beverage considered most important to have available at work is bottled water -- 34% said it is extremely or very important (the survey did not differentiate among single-serve and bulk bottled water, or pure water provided through coolers). Coffee was a close second, with 25% considering its availability extremely or very important. Conversely, having hot chocolate and hot tea available was described as extremely or very important by only 8% of those surveyed.
The study showed bottled water, coffee and soda/iced tea as the most consumed workplace drinks. Hot chocolate and tea -- the second-most-common "free" drinks, according to the survey -- have very low reported consumption rates.
"Coffee has a fairly polarizing effect, with 26% drinking it more than once a day and 36% reporting that they never drink it," Bouchard continued. "Interestingly, those who are 35 and older are more likely to drink coffee throughout the day. However, water consumption is not age-dependent; 39% of employees say they drink bottled water more than once a day."
Consumption of water at work has increased dramatically over the past year, with 67% of workplace consumers reporting that they drank more this year than last. Coffee consumption, however, has remained constant. During the same period, employees reported a significant drop in their consumption of soda, iced tea, hot chocolate, hot tea and specialty coffee drinks.
When asked why they consume each of the beverages available at work, employees responded that they select coffee for the energy boost it provides, a break from the workflow and its role as a de-stressor. Only 3% cited choosing coffee for its health benefits.
Bottled water consumption in the workplace is primarily driven by thirst and by employees' regard for the beverage as a healthy choice. Juice is also highly regarded as a "healthier" selection.
WHERE TO GET IT?
While the majority of employees do not bring beverages from home, those who do are most likely to bring bottled water, soda or iced tea. Fewer than 25% bring coffee or juice from home. Younger females (18-34) are reportedly the demographic most likely to bring coffee drinks from home. Harris Interactive found only minor lifts in the number of employees bringing drinks from home over the past year, primarily bottled water and coffee.
The poll also found that employees are somewhat more likely to purchase beverages on the way to work, or during a break or lunch hour, than to bring them from home. They are most likely to buy soda and iced tea outside of work, with bottled water and coffee being the second most-likely options. Tea and hot chocolate fall at the other end of the spectrum, being the drinks employees are least likely to purchase to bring back to the office. Over the past year, the number of employees likely to purchase beverages on the way to work has dropped by 5% to 10%.
Survey respondents said the primary reasons they bring coffee from home or buy it en route is that the from-home options are superior, or that coffee isn't readily availability in the office. Regarding soda, consumers considered for-charge soda and iced tea, when provided in workplaces, as more expensive than pre-purchased options.
Survey respondents said they bring juice from home or purchase it en route because it is too expensive at work or not available there. Overall, from-home and en-route purchases were considered fiscally equal options, both appealing to consumers.
DIFFERENTIATING THE DRINKERS
Harris Interactive identified four coffee-drinking segments in the workplace. "Heavy" coffee drinkers (26%) drink coffee at work several times a day; "daily" coffee drinkers (15%) consume coffee at work once a day; "occasional" coffee drinkers (22%) partake infrequently, from a few times a week to less than once a month; and non-coffee drinkers comprise the remaining 36%.
Young workers are most prominent among the non-coffee drinkers, and are evenly split by gender. "Heavy" consumers skew towards an older demographic (late 40s) and are predominantly male (67%). The majority of heavy users (76%) receive free coffee at work.
The speaker noted that heavy coffee drinkers have increased consumption at work over the past year, while occasional coffee drinkers (evenly male and female, and slightly more likely to be middle aged) consumed slightly less. Coffee consumption among daily coffee drinkers, who are slightly more likely to be female and in their mid-40s, has remained fairly stable.
The research suggests that heavy coffee drinkers tend to consume more beverages of all kinds at work than the groups that consume coffee less often. In addition to their frequent coffee consumption, 48% of heavy users said they drink bottled water more than once a day. "Heavy coffee drinkers are heavy consumers of beverages in general -- which is risky, because if they don't like the coffee, they have lots of choices of what else to consume," Bouchard pointed out. "They seldom drink other hot beverages at work."
Daily coffee drinkers also show a significant preference for bottled water, with 48% drinking it daily. Occasional coffee drinkers consume fewer beverages of all types than the other groups; bottled water is their preferred beverage, with 36% drinking it daily. This group is also the most likely to occasionally consume specialty coffee drinks.
Although all segments of coffee drinkers cite the energy boost as their primary reason for drinking coffee at work, the heavy coffee drinker is much more likely to choose coffee for a break from the workflow and as a "de-stressor" than less heavy consumers are, according to Bouchard.
When it comes to bringing coffee from home, there is no difference in behavior among coffee segments, with one-third of all employees reporting that they do so. Occasional coffee drinkers are the most likely to purchase coffee en route. All three segments of coffee drinkers are driven to buy coffee outside work because they perceive they can get a better product elsewhere.
In summary, Bouchard said Harris Interactive sees beverage consumption being driven by social, physical and emotional incentives, and hypothesizes that the social element is especially important.
"You have to talk at the functional level, about the ability to de-stress and manage physical and emotional state; you need to press both buttons," she suggested. "Obviously at the crux is that it has to taste good, and price and convenience are important, but you won't win the competition on that basis. Find the personal value to them; tap into it, and become infused in their day-to-day. If you can play to the physical benefits, the taste, how it quenches their thirst and enhances their temper, you will provide the most powerful marketing message."
Putting the survey data into a context in which OCS operators can use it to their advantage, Kitchen emphasized that nearly 25% of employees don't have coffee available at work, either free or for purchase. She suggested operators use data from the study both to open doors in prospecting for new business, and to reinforce their relationships with current customers.
She added that the recent study, and previous ones conducted by Harris Interactive, indicate that coffee drinkers, especially frequent consumers, consider availability of coffee at work to be very to extremely important.
"It makes them feel that their employer cares about them and wants to give them something back, making them feel appreciated and valued at work," she commented. "It also reinforces their sense of stability, confirming that they are working for a successful firm -- which is important in these times of economic uncertainty. And it provides an opportunity to get to know their coworkers, which helps build a sense of community and team within the work environment."
An inference that can be made from the study results: Employees use coffee to manage their mental and physical states. The speaker noted that some value the energy boost it provides to power them through the day, while others rely on it to provide a brief break from their workloads. The ability to manage their moods makes them more productive at work, she reminded operators.
"Given the heavier workloads that many employees are carrying nowadays, with recent downsizing and layoffs, we should not underestimate the value of beverages that make us more productive," emphasized Kitchen. "Companies are constantly looking for ways to increase the productivity of their workforce; they may just need to be reminded of the impact of coffee on productivity and, therefore, net profits."
She added that the stress-reduction value of coffee may also be a useful element in a healthier positioning of coffee overall.
The presenter also emphasized the importance of remembering that not all coffee drinkers are the same. Heavy coffee drinkers depend on coffee and other beverages to get through their days. They are also most likely to be the most appreciative of coffee availability in general, and even more so if it is free. "Companies that provide this benefit should communicate and leverage the value to their employees," she emphasized. And since older employees are reportedly the largest coffee consumers, the energy boost and stress reduction associated with the beverage may be even more important to companies with older workforces.
Another encouraging trend identified by the survey is that younger consumers, currently the least frequent drinkers, are beginning to drink more coffee at work. By exploring the reasons behind this change in behavior, operators may find marketing opportunities to build on this trend. "Younger employees have a different view of where to get an energy lift and there's a lot of R&D on other all-natural energy-boosting alternatives," Kitchen remarked. "Keep coffee a relevant choice for that energy boost. You don't want coffee to increasingly lack relevance to the new generation."
A particularly positive finding for office coffee service providers is that the majority of employees depend on coffee that's available at work rather than coffee purchased outside or brought from home, noted Kitchen. Operators also should benefit from the current trend of employees purchasing fewer beverages en route, which the speaker pointed out may be a function of the economic crunch.
"There is an opportunity here for employers to gain the enhanced productivity that coffee provides, as well as increase employee morale, by ensuring the availability of coffee at work," she observed.
The fact that employees who bring coffee from home or buy it on the way to work say they are "looking for a better product" points to an opportunity to upsell clients, Kitchen suggested. Additionally, she called operators' attention to the potential for providing a broader selection of coffee drinks in place of the hot chocolate and tea offerings, which the survey suggests do not attract a broad audience. Previous Harris research confirms that coffee drinkers would prefer to have a wider variety of coffee choices, she concluded, saying that OCS providers should optimize product mixes to suit contemporary consumers' growing demand for variety in this segment.