People are consuming much more coffee at home these days, and that’s not a great sign for chains such as Dunkin’ and Starbucks, which have already been impacted from store closures following the Covid-19 outbreak.
During the 13-week period ending May 30, U.S. sales of packaged coffee were up 20.1% compared to the same period last year, according to the latest numbers from Nielsen. Ready-to-drink coffee beverages have seen year-over-year growth of 15%.
Starbucks, by contrast, revealed in late April that same store sales during its latest quarter were down 3% in the Americas.
In late April, CPG giant Nestle stated that its coffee division, which includes Nespresso, Nescafé and a line of Starbucks products, experienced high single-digit quarterly growth in North America.
On Thursday, the J.M. Smucker Company reported that sales within its U.S. retail coffee segment climbed to $581.6 million, marking an 11% year-over-year increase. Not only that, but more than 1 million new households bought Smucker’s line of Folgers, Dunkin’ or Café Bustelo coffee brands throughout the pandemic, with 75% of those households buying Folgers for the first time in the past 12 months, said chief executive Mark Smucker during an earnings call with analysts.
“In general, I’ve become more bullish on the packaged food space because I think there will be some lasting impact of this stay-at-home phase that will linger,” said Robert Moskow, a senior analyst at Credit Suisse.
While the country’s unemployment rate has improved to 13.3% in May, down from 14.7% in April, total economic recovery from the pandemic is still a long way away. Households on a budget are more likely to shop at the grocery store than they are to dine out.
Even when people do return to work and school, Moskow noted, it will likely be a staggered return, with various organizations aiming to operate at a limited capacity. Earlier this week, Wells Fargo senior analyst John Baumgartner echoed this point, noting that “until you have a vaccine, you’re going to continue to have changes in where and how people consume food.”
Based on the likelihood that at least some degree of remote work and online school arrangements will continue into next year, Moskow said there’s a solid chance people will continue brewing their own coffee, as opposed to paying a visit to one of the nation’s coffee chains.
“What’s baked into expectations right now is that the at-home coffee industry will have an anomalously strong year this year, and then it all goes away in 2021,” he said. “I think what we’ll have instead is an anomalous year this year, but more repeat benefit than expected in 2021.”