Retail coffee on the rise

retail coffee

Supermarkets are welcoming a new wave of specialty coffee and locally roasted beans. With retail sales spiking over the past months, BeanScene asks how these new buying habits will shape coffee drinkers and the wider industry for years to come.

‘Specialty’ is well and truly entrenched in the Australian coffee culture. It is the domain of independent cafés, restaurants and bakeries across the country. Even fast food and convenience stores are said to serve coffee a cut above the rest of the world.

But there is one market that, until recently, seemingly missed the third wave, and a ‘super’ one at that. Steve Wrightson, Sales Director for Suntory Coffee Australia and New Zealand, tells BeanScene that supermarket chains are looking at how they can accelerate sales by providing their customers with café-quality fresh coffee.

“We’re seeing a lot of interesting plays and exciting news in the supermarket aisle. First, Starbucks launched its capsule range which created a lot of buzz, and now, we’re even seeing premium café brands enter the market for the first time,” Steve says.

“The consumer all of a sudden has choice, and it’s not just of big brands with low prices.”

When the coronavirus pandemic brought lockdowns and restrictions with it in March, some cafés had to close their doors. But their customers still required a coffee fix and many turned online or to their local shops to get it. Steve says sales of the Urban Coffee Culture brand Suntory, developed in collaboration with Coles and launched in 2019, grew almost five times throughout April and May.

retail coffee
Campos Coffee in now available in 990 Woolworths stores nationwide.

“We’ve seen the consumer uptake of Urban Coffee Culture grow over time, but then it just exploded. We couldn’t keep up with stock and can only assume new customers started buying fresh coffee from supermarkets during that period,” he says.

But consumers weren’t just looking for a caffeine hit. Many wanted to recreate what they were missing about cafés, and they were willing to pay top dollar for that level of quality. Espresso machine manufacturer La Marzocco says interest in its Home range skyrocketed over March and April.

“We saw people trying to replicate that café experience at home a lot more than they had previously, because they didn’t have the option to go to cafés they had previously,” La Marzocco Australia Marketing Manager Jets Anita Langlands says. “There was more of a necessity. It was a shift from ‘would be nice to have’ to ‘need to have’ and people that were teetering on the edge decided to take the leap. Other brands in brewing equipment or retail coffee we’ve talked to saw a similar shift.”

The La Marzocco Home range sits at the higher end of the domestic model spectrum, in terms of ability and price. Despite this, Brand Director Andy Di Donato says La Marzocco has seen an “unprecedented rise” in the number of people engaging with the brand across its platforms.

“We find that we’re talking to a more diverse mix of consumers. We’re used to working with coffee drinkers who are further along in their home coffee journey. Now, there’s a broad range of customers – some of whom are absolutely new to the concept of home coffee – thinking about what their solution would look like,” he says.

“Some consumers still have a long way to go on their coffee education journey, but we embrace that at La Marzocco. The more that people appreciate specialty coffee, the better platform it provides the industry.”

Jets agrees, adding that the greater introduction of local and specialty coffee brands into supermarkets will play a role in that education, like it did in her native New Zealand.

“For years, they’ve had really good specialty coffee in their supermarkets and I think that came from consumer demand for high-quality coffee,” she says.

“In Australia, we also want coffee that is freshly roasted, and there is an understanding and demand from people to have high quality products that are Australian made. Especially with the economy as it is, there’s a real understanding of provenance and supporting local.”

Aldi is one supermarket ahead of the curve when it comes to fresh and local coffee options. Since 2014, the German-born chain has partnered with Black Bag Roasters in Richmond to procure and produce its Lazzio Coffee range.

retail coffee
Local business Black Bag Roasters has produced Lazzio Coffee for Aldi since 2013.

Lazzio Coffee now features nine products, including different blends and rotating single origins, roast styles, and serving formats. While the range has grown in popularity over the last six years, the partnership really paid dividends for the two businesses when panic buying set in earlier this year.

Sales of the Lazzio Coffee range jumped by 50 per cent over the period, a boom for Black Bag Roasters and its parent company Nomad Coffee Group. Black Bag Roasters General Manager Lance Brown puts the success of Lazzio Coffee down to Aldi’s willingness to listen, learn, and collaborate.

“The relationship is far more than just transactional. It is a true partnership in every sense of the word, from the Managing Director of Aldi Australia through to the buying teams at all levels,” Lance says.

“Aldi from the very start recognised the importance of coffee in Australia and wanted to ensure it could provide an amazing quality product at a fair price for the home user.”

The partnership began when an Aldi buyer met with the Nomad Coffee Group at the Melbourne International Coffee Expo, where they were looking for a local alternative to the chain’s imported coffee.

“Even though the product was great, by the time it reached Australia the concept of ‘freshly roasted coffee’ was not quite the same. We decided to partner with a local supplier to ensure we sold the freshest coffee to suit the taste profiles of an emerging Australian coffee marketplace,” says Varun Raheja, Buying Director at Aldi Australia.

“We have an Australia-first buying policy, so knowing that our partnership with Black Bag Roasters is supporting employment and investment back into Australia is a significant benefit.”

Varun says the other benefits of working with local roasters is the speed to market and the freshness of the product. Lance adds that Aldi’s “very Germanic” and efficient system ensures seamless delivery, distribution, and instore turnover.

“They don’t sit on a whole lot of stock in their warehouse,” Lance says. “I could tell you day in, day out, exactly how many coffee beans have been sold by bag of each Lazzio product. So we know what we’re roasting every week, and that way, what’s on the shelf stays fresh.”

retail coffee
Black Bag involves Aldi in the curation and development of its coffees and blends.

Despite such a high volume, Lance says simple quality assurance practices just need to be done at scale to maintain consistency. This includes post-blending so each individual origin is at its optimum roast quality before being added to a blend.

The Lazzio Coffee range also bolsters the amount of coffee Nomad Coffee Group can buy from coffee producers while procuring for its specialty coffee arm.

“Imagine one of the green bean buyers going to origin – India, Brazil, Colombia, Peru, or Honduras – on a mission to buy some specialty green. They might buy half a container of the farmer’s highest-grade single origin, which the farmer thinks is fantastic, then they add five containers of their commercial grade product,” Lance says.

“It means using everything the farmer has to offer and really supporting them. Our legacy is about supporting coffee farmers towards a sustainable future.”

Lance attributes the growing demand for fresh and high-quality coffee in supermarkets to the performance and popularity of its cafés, which is unlikely to change in the long-term.

“We have this amazing culture in Australia where fresh is best. A customer will pick up a bag, look at the best before and roast dates, and think ‘this is months old, why would I drink this?’ Because they know what stale coffee tastes like,” Lance says.

“Post-COVID, people will be quite happy to make coffee at home. About 47 per cent of homes in Australia now have some sort of coffee machine. We’ve moved away from wet spoons and instant coffee to espresso and filter, which is where we want to be.”

While other supermarket chains Coles and Woolworths have featured locally roasted commercial coffee brands on their shelves for years, they have only recently embraced the freshness and artisanal approach Australian roasters can offer, with the likes of St Remio also joining the shelves in 2019.

retail coffee
Coles partnered with Suntory Coffee Australia to launch Daley St following the success of its Urban Coffee Culture range.

Following the success of Urban Coffee Culture at Coles, Suntory’s Steve says the two businesses started thinking about what’s next the retail space. Landing on premiumisation as a key trend going forward, they released the Daley St brand in May.

“Daley St is very much focused around telling the story of the origin, but just as importantly, introducing high-grade quality beans into the supermarket aisle,” Steve says. “It’s about providing a special coffee moment for the coffee consumer at home, and that they can share with friends.”

Suntory Coffee Australia sees Daley St as an opportunity to also educate the consumer on everything that goes on behind the scenes to create a great cup of coffee. Even the local name, taken from the street running behind its Preston roastery, is intended to connect the consumer to the roaster.

“There’s a perception from consumers that coffee is a long-life product, but through Daley St, we’re trying to educate consumers that it’s an agricultural product,” Steve says.

“Australia has some the most sophisticated coffee drinkers in the world, but there’s an opportunity here to bring fresh coffee to the masses.”

Coles’ newfound interest in Australian coffee is also in part due to a growing demand for local produce across its aisles. The supermarket unveiled the Coles Local concept in 2018, with wider expansion in 2020, reworking its store format to highlight convenience, sustainability, and locally sourced products.

These stores offer more ready-to-eat and plant-based products, local produce, and barista-level coffee thanks to Eversys Cameo automatics and coffee from dc Specialty Coffee Roasters.

Rob Stewart, General Manager of dc, says the roaster has worked with the Coles Local team to “redefine the space of coffee” since 2018.

“We developed an overall experience that breathed new life into the category and presented a product to the standards you would find in any specialty café,” he says. “The initial store concept was highly successful, suggesting there were a significant number of consumers who wanted to buy specialty coffee as a part of their grocery shop.”

retail coffee
dc Specialty Coffee Roasters has worked with Coles to help develop and expand its Coles Local concept.

After some refinement of the concept, dc rolled out a range of its blends to premium Coles store locations nationally pre-coronavirus. While the pandemic has turned many customers from cafés to retail, Rob says having them consume better coffee at home will support the whole industry.

“It will elevate consumer understanding of coffee and increase their appreciation of the amazing work baristas and cafés around the country do to deliver a great product with a special service experience,” he says.

“For every consumer that moves from an entry-level quality coffee experience to a specialty coffee experience, this is one more body that will appreciate coffee quality, and these consumers will seek out this same quality through Australia’s café industry.”

The uptake of local and specialty coffee in supermarkets came to a head at the end of May when Woolworths took a big step up into the arena. The grocery chain has partnered with Campos Coffee to launch its Superior Blend in 990 stores nationwide.

Campos Coffee Founder Will Young calls the partnership a game changer for coffee consumers, and one that was more than a decade in the making.

“It’s always been important for us to get good coffee into as many Australian hands as possible,” Will says. “We thought for a while that grocery would be good for us if we could figure out how to do it, do it well, and make sure the freshness was still there. It was always on our radar, but when COVID came along, it brought it to the forefront.”

Before approaching Woolworths, Campos had a third-party survey of 2500 coffee drinkers to determine demand for their coffee preferences. Will says Campos, the Australian International Coffee Awards 2020 Australian Roaster of the Year, consistently came out on top.

“The Australian public was basically asking for easier access to Campos Coffee, especially during COVID with everyone stuck inside making coffee at home,” he says. “This gives us an easy ability to reach people in their homes whether they’re self-isolating or just drinking more coffee.”

retail coffee
COVID-19 has seen an uptake of people drinking coffee at home.

But before entering the supermarket space, Will says it was important that strong supply chains be in place to guarantee a good flow of quality coffee.

“We’ve spent the last 10 years on the road, building up our relationships and understanding each origin we buy from intimately, which has made this large scale possible,” he says. “We’re really confident about going into grocery now, whereas five or six years ago, we’d feel a bit hesitant over whether or not we could find that much good coffee.”

A downturn in wholesale business has meant Campos had the stock ready to go for initial deliveries to Woolworths, however, Will says its producing partners were “champing at the bit” when Campos let them know it was going to need to buy more coffee.

“There’s a lot of specialty coffee outlets who are suffering because of COVID-19 across the world. Many can’t even open. That means there’s a glut of good coffee out there that isn’t being bought by the usual players. I can’t think of any better time than right now to be buying more,” he says.

The Superior Blend’s cupping score rests at 86 to 86.5 out of 100, which makes Will “doubt there’s anywhere in the world where you can buy such high quality from a national grocery outlet”. To keep this sentiment, Campos Coffee has scaled its quality control procedures to match volume.

“Everything is done to the exact same levels as always, it’s just on a bigger scale. We’ve based our business on keeping a promise of quality, and going into grocery won’t stop us from adhering to what we believe,” Will says.

“I believe that’s true for any specialty coffee company. They’re all so married to quality. That’s what got us into coffee in the first place. Going into grocery almost means we’ll go harder on quality control and keeping that up because we’d never want to disturb our current quality credentials.”

Will sees the supermarket specialty coffee boom as a good thing for the industry, that will raise the general consumer’s awareness and preference for quality coffee. Creating a link between that quality and the signature Campos Coffee rosetta will help the cafés serving its coffee in particular.

retail coffee
Campos has scaled its QC to maintain consistency across the larger volumes that come with retail.

“There are so many specialty coffee brands out there that it’s hard to get saliency in the market. This deal cements Campos as a household name and a known Australian brand. That means there’s more people attracted to the brand, not just in the supermarkets but in cafés as well,” Will says.

“We’d never have made this choice if we didn’t hand-on-heart believe this would ‘float all boats’. We realised that increased brand awareness would help all of our café partners as well, and that’s when we made the call.”

Will sees the availability of Campos – and other specialty brands – in the supermarket as a natural evolution of Australia’s penchant for quality coffee.

“Up until a little while ago, you wouldn’t have talked about specialty coffee going into groceries, but now we certainly are,” Will says.

“But it’s not the coffee that’s changed it’s the grocery stores. It’s really exciting, and it’s just a testament to how important specialty coffee is to Australia and the Australian consumer. They demanded this and now they’re able to get it.”

This article appears in the August 2020 edition of BeanScene. Subscribe HERE.

Send this to a friend