Increased digitisation is changing the way consumers shop
COVID-19 accelerated digital adoption, especially in grocery shopping, and McKinsey have highlighted of all the changes consumers made between 2020-21, this shift in behaviour is the most likely to endure post-pandemic[23].
This trend is further accelerated by the growing consumer base of Gen Z, driving the number of ‘digital natives’ among global consumers.
Coffee subscription sales have increased +105% year-on-year (YoY), with over £500k being spent by customers and an average order value of £34
Millennials and Gen Z now account for ~65% of the global population[24], with spending power valued over $165bn[25] and an increased willingness to spend this through online channels.
61% of UK consumers have downloaded a coffee shop app, with 36% purchasing a beverage to click and collect
An additional factor is the increased pressure on social media platforms to monetise their product. In-app advertising has proven successful but increasingly operators are looking to replicate the WeChat model in China, where social media scrolling, browsing products and shopping can be done from one platform – with brands, platforms and influencers all able to take a cut – e.g. TikTok shop.
Direct to consumer models in the beverage industry are becoming more popular. For example, 12% of Unilever's revenue is through D2C sales on brand websites[26] and more brands are investing in online presence and digital sales channels. Subscriptions are increasingly popular, helping brands achieve repeat purchase and deliver the most cost effective model.
Increasing investment in digital capabilities and supply chains to will also impact beverage products themselves:
‘Deliverable’ formats like ‘Just Add Water’ beverage mixes and concentrates that maximise product to minimise shipping costs are on the rise.
Curated subscriptions seek to surprise and delight consumers by providing new items or highly personalized experiences. This is particularly effective in the tea and coffee categories with different origins, varieties and production processes (e.g. roast type) to explore.
Increasing demand for shelf-stable beverages vs. refrigerated drinks that require a cold-chain.
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Ocado has opened its second Zoom by Ocado site for delivery within one hour. The Customer Fulfilment Centre (CFC) is built using the Ocado Smart Platform (OSP), with 70 robots picking orders from a grid[28].
Uber Eats will use its courier network to implement Tesco's Whoosh service which aims to deliver groceries within one hour [29]. Tesco plan to expand Whoosh to 600 areas across the UK.
Premium juice brand Eager Drinks' new D2C service delivers ambient fruit juice direct to consumers[30]. Their 1 litre cartons are available in multipacks as a monthly subscription or one-off order.
HMSHost International have launched a hot beverage subscription through its Broodzaak cafés in train stations across the Netherlands, allowing customers to buy up to 5 drinks a day[31].
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Major industry players are continuing to invest in their digital capabilities to grow sales, improve consumer loyalty and build powerful consumer behaviour datasets.
Starbucks for example has developed ‘Deep Brew’ AI technology to improve customer personalisation and experience[32]. Their in-app payment option has also positioned Starbucks against technology giants such as Apple and Samsung, for share of mobile payment dollars. It will become increasingly important for brands to offer digital solutions perhaps changing the way we define the world’s beverage giants.
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