Formats, Trends, Benchmarks on the Global Coffee Market

The production of premium coffee (specialty coffee) is the fastest growing segment of the coffee industry. Coffee houses open in large numbers around the world, they have become, in many respects, benchmarks in the retail sector having long been not just places for a snack or meeting with friends, today’s coffee houses are multi-format spaces, the main product always being coffee. In this article, we will consider what is specialty coffee and how to define the 3rd wave of coffee are, current have cafe formats and examples of positioning of the best coffee houses in the world. Prepare a cup of your favorite drink in advance to fully immerse yourself in the context.

First, you need to understand the main products and trends of the coffee market existing at the moment. It is believed that there have been 3 waves in the coffee market over the past 100 years. The first wave appeared in the distant 1800s, when entrepreneurs realized that the production and sale of coffee has a certain potential. The main task was to make coffee a widespread easy-to-use product, the taste and quality of the beans at that time did not matter much. However, innovations in packaging, processing and marketing have made this drink truly popular. A hundred years later, the main focus in consumer goods was on speed and ease of use — this is how instant coffee appeared, which was consumed in every household  until the 1980s.

At this time, the second wave was gaining strength — buyers began to learn more about coffee drinks and wanted to know more about the origin of the beans and the methods of preparing the drink. Cappuccino, espresso, latte have become favorite and absolutely familiar in the daily routine. The most prominent player of the time was Starbucks, which created an entire empire around the process of roasting, making and selling coffee. The social consumption was put at the forefront: coffee shops as a place to see friends, a work area or a meeting place with business partners turned into an ideal format, but the product was not yet the cornerstone. Remember the super popular 90s TV series Friends, where one of the main places for meetings, conversations and even work of one of the heroines was the famous coffee shop “Central Perk”?

In the early 2000s, the third wave appears and finally the coffee and its taste became the thing. Today you can trace the origins of the contents of your cup down to a specific farm, growing height, find out where and how the beans were roasted and choose one of a dozen methods of brewing in a coffee shop.

Thus, in the first wave, the emphasis was on consumers and on ease of preparation, in the second wave, marketing and socialization dominated, and in the current third wave, the product and its special qualities became the thing, a culture of coffee consumption was formed and grew almost as big as traditions of drinking wine.

Specialty coffee is not the whole idea of the third wave but is only an integral part of it being all about the experience of consumption. Specialty coffee is basically an exceptional coffee, a product of a specific microclimate and soil, unique production practices and careful processing. Any coffee is evaluated according to the Q grade system, which determines the quality of particular coffee beans and assigns them certain points, the maximum grade is 100 points. Bulk coffee or one that can be bought in an average coffee shop usually equals 60 points, and specialty coffee starts from 80 and above. These beans are almost free from defects and, unlike the «bulk» coffee, which is purchased at auctions, specialty is bought directly from farmers in Africa, South America and other growing regions. To prepare specialty coffee alternative brewing methods are used: french press, aeropress, moka (geyser coffee maker), siphon, cold brew and many others. The main advantage of coffee made from selected beans is that it opens up the possibility of obtaining many flavor variations: different degrees of roasting, processing methods and varieties give different aromas and tastes, from light fruity to cream and chocolate.

The industry of specialty coffee houses has only been gaining momentum in recent years, and the development of a culture of coffee consumption logically leads to the emergence of those formats that are popular now.

Coffee House Formats

At the moment, 4 formats of coffee houses and cafes can be distinguished: 1) grab & go — a small area or a window selling coffee to go, which does not imply a “long sitting”, the key function is to quickly serve a client (examples: Mark & Spencer food, Tesco coffee) ,

2) grab & seat — you can either take coffee and food with you, or sit as long as you need (examples: Starbucks, McCafe, Costa coffee),

3) seat & order — you sit at a table, the waiter brings the menu and receives the order, this is not yet a restaurant but no longer just a coffee to go (example: Paul, Le pain quotidien),

4) dining & celebrate is already a full-fledged restaurant, a place where you can have a meal and adequate for a special occasion. A couple of years ago, the most popular format was grab & seat. However, after several waves of the economic crisis, when average income fell dramatically, the grab & go format became no less popular. Specialty coffee shops are mostly grab & seat formats and sometimes seat & order.

Let’s take a look at the main benchmarks and what the brightest specialty coffee houses around the world focus on. Popsop identifies 5 key communication focuses and 5 key trends that can be observed in the coffee market in 2020. Let’s start with trends.

5  Trends in the Coffee Shop Market

Sustainable development and conscious consumption
This multi-layered macro trend has made its way into the restaurant industry. It affects the food, beverages, and packaging that the coffee shop produces. Thus, the use of plastic is reduced (abandoning plastic lids and straws and replacing them with those made from biodegradable materials, for example, bamboo), cups and bags are made from recyclable materials. Many coffee shops have introduced a campaign to reduce the cost of a drink if it is poured into a cup or bottle that the customer brought with him. Reducing energy consumption is another item on this agenda. The more disposable cups are produced, the more energy is consumed, which causes carbon dioxide emissions. This topic is vast and will gain influence over the years, and in 2020 more than one reputable coffee chain should not ignore the factor of sustainable development.

More and more specialists (especially due to covid-19) are to work remotely or become freelancers, which means they need a workspace. One of their options is coworking, but cafes and coffee houses are also often used for this purpose. Therefore, now it is not enough to make an instagrammable design, you also need excellent WI-FI, the possibility of private business meetings (some cafes have separate rooms-offices), comfortable furniture and a menu with snacks so that you can spend more than one hour inside.

No Cash
Some coffee shops in Asia (especially China) have long stopped using cash. For example, in the Luckin coffee you can pay for a drink through the WeChat messenger or the chain’s own application. This was done primarily to save time and increase the speed of customer service. Covid-19 added extra precautions, many establishments canceled cash payments during the pandemic since paper money is not sterile. There is reason to believe that this trend will continue to develop and add gamification through applications (promotions, cashback, different grades of membership, etc.).

Coffee Subscriptions 
More and more specialty coffee shops offer the option of buying beans through a subscription: once a month or quarterly, a customer can pay the subscription price (usually 3 packs of coffee) and receive coffee packages delivered to their door. Some coffee shops have a choice of 2-3 varieties, and some try to add to the selection every 1-3 months. So the taste of your favorite coffee which previously could only be obtained in a coffee shop has now become available in every home (of course, taking into account the items necessary for alternative brewing).

Product Innovations
The product line of coffee drinks is also being updated and some of the drinks become popular at certain intervals. For example, in 2017, raf and flat white were quite trendy, and in 2019 was all about drinks based on matcha (Japanese green tea). Meanwhile, cappuccino is still the most popular drink in most coffee houses.

An important direction in this trend is the replacement of cow’s milk with plant milk: almond, coconut, soy and oat. Sales of the latter increased by 425% (according to the results of the Café Pulse survey in 2017) and in the next 5 years the category will grow rapidly. More and more consumers prefer this milk not so much for dietary reasons or lactose intolerance but because of fashion and its unusual taste.

Another novelty in food trends is coffee-based ready-made drinks: cold brew, espresso, Frappuccino and many others. Essentially, it is cold coffee in a convenient package that rivals the category of ice teas and caffeinated sports drinks.

5 tricks in communication and positioning

Let’s see what they say and how the most interesting branding cases of specialty coffee shops around the world.

Nothing but coffee
Since the product is the key within the 3rd wave and specialty coffee, many coffee houses have made this the cornerstone of their communication. They are not distracted by marketing tricks and special service models, as the focus is always on beans and how they are prepared. In these coffee shops, you can find a corner selling various accessories for alternative brewing, lectures and cuppings (tastings) of coffee, books and magazines, a choice of packs available for purchase by subscription. Outstanding representatives of this communication: The Blue Bottle (USA), Truth Coffee (South Africa), Coffee Collective (Denmark), Bonanza Roastery Café (Germany), Noc Coffee (Hong Kong).

Blue Bottle was founded in 2002 and is considered one of the pioneers of the third wave of coffee: they started in the garage, and in 2017 they were bought as the brightest player in the category by Nestlé. The brand chose an uncharacteristic color and style of interior decoration for the category, which is why it was very different from the rest at one time. They oppose themselves to «commercial» coffee, rely on fresh roasts, quality raw materials and fair trade.

Coffee Collective is a Danish coffee chain founded in 2007. They have a team of baristas of different nationalities united by a passion for coffee, true professionals. They share the same values, a desire to achieve a quality product and great taste. Openness is a key business feature of this network. Sustainable development )in order to improve the lives of local farmers through their work) lies in the DNA of the brand. Each year, the team puts out a detailed financial report, tells about trips to farmers and the process of selection and purchase of raw beans. In general, this behavior is quite typical for Scandinavian brands but still rare among coffee brands.

Bonanza Roastery Coffee opened in Germany in 2006. It is the quality of the product that is the basis of the business, they track it at all stages of selection-production-roasting. This means exclusive contracts with farmers and an impressive taste in the output, and this drives the whole team. Bonanza also closely monitors the setting of really fair, in their opinion, prices for a high-quality product, without exorbitant markups and interest.

Quality Service
Some coffee shops fully dedicate themselves to deliver the best possible service. For example, the British Department of Coffee and Social Affairs (England) and the American Coffeebar.

The positioning of Americans from Coffeebar is based on the idea that they are primarily responsible for the mood and mood of the guests, and only then they are baristas and chefs. The guys were inspired by the Italian culture of coffee bars and wanted to bring the model to the California coast. Making guests feel comfortable and good at their coffee shops is a top priority. And this positive charge, received in the morning in a coffee shop, can “make” the whole day.

The Department of Coffee and Social Affairs takes this positioning in a different vein. They guarantee the high quality of the product at all stages of production, as well as the stable good service, quality and taste of food and drinks in every coffee shop. The guys believe that their coffee shops are first of all a meeting place so, for example, you can also rent their coffee shops for events. More attention is paid to the menu with snacks and food compared to other chains.

Location, Location, Location
The other focus can be to the geography. Some of the prominent representatives of this group are the Mexican chain Tierra Garat and the brand from Hong Kong — The Coffee Academics.

Tierra Garat have their plantations in Mexico and focus on the location: “Inside our seeds is a whole spectrum of tastes and aromas that convey the true essence of this ground.” They say they make high quality coffees which originate from the farms of the first coffee districts in Mexico to create a balance between taste, acidity and aroma, as demonstrated in every variety of beans. Well, in general, they try to emphasize the Mexican flavor in the design, communications, colors that they use.

The Coffee Academics are also playing on the geography. Founded in 2010 in a fashion district in Hong Kong, the first coffee shop gathered around the most fashionable youth who were united by a love of coffee, parties, art jams, master classes in photography and, for example, leather dressing — any interesting topics to explore within the walls of the coffee shop … This was the beginning of a platform that brings together completely different people through coffee. From that moment, The Coffee Academics began to produce coffee themselves and to do local experiments on its preparation. Local craft production is what the guys emphasize in their communication. The design of each coffee house is different from another, so that each object organically fits into the space where it is located. The guys pass on their vision and knowledge through training in Asia and other regions.

How Big Brands Behave 
Big brands that have caught and moved up on the second wave of coffee do not want to be left behind either, emphasizing their attention to the product and understanding of its value. The most obvious example of such brands is Starbucks and its Reserve Roastery, Store and Bar. These are the flagship formats of the famous chain, multi-format and grocery. Roastery, for example, is a multi-functional space from a coffee shop and theme park to get to know the coffee making process: you can see everything from roasting to preparation. A large area, a space stylized as a factory and a lot of things from which the eyes run up create a wow effect for the visitor. The Store accordingly houses the largest merchandising store mixed with a coffee shop. The Bar has a more premium format compared to a regular coffee shop, has a menu with unique branded drinks and pays more attention to service.

Why do big brands need it? They understand the need to create a unique experience for visitors, demonstrate their relevance and modernity, show all the capacities, demonstrate the product. This does not apply to their positioning focus, but the big players cannot be ignored.

The Voice

Sometimes brands detach themselves from competitors due to their character and values, as well as the unique voice and tone of communication, this is also found among coffee houses. Notable examples are the Australians Single Origin and the Americans Joe & the Juice.

Joe & the Juice focused on working on the special atmosphere of their establishments, a vibrant team and the transmission of shared values. They primarily sell lifestyle and mood, not just drinks and food. There are playlists and music selections, atmospheric videos about the team and the community and there is a bright language of communication. What many people remember about the network — its bright copyright and tone of communication — is young, bold, with humor.

Single Origin, the aussies, use a lot of local slang, acronyms, live words and expressions. Handwritten inscriptions on the website and packaging, living language, non-staged photos of the team and institutions set their own tone and atmosphere.

If you are thinking about where to start when opening a coffee shop, first decide which format and which model is most beneficial for you from a business point of view: you are shaped for fast customer service and automation of processes or for a long pastime of a visitor (in this case, the emphasis will need to be put on design and creation of the atmosphere). As a rule, everything related to speed, automation also works for selling franchises, but this is unlikely to be a specialty coffee shop. But in the case when it is more important to work on creating loyalty to your brand, your community and atmosphere, then we can talk about both mass and specialty coffee shops. Also, do not forget to consider the trends that we talked about, and the benchmark examples can inspire you to borrow some elements or come up with something local.

By Anna Kulysova