Dive Brief:
- Walmart has started offering a lineup of organic coffee produced by Colorado manufacturer Boyer's Coffee. According to Bloomberg, the Mash-Up Coffee brand is exclusively available at more than 1,200 Walmart retail outlets across the country and online.
- An 11-ounce bag of Mash-Up will sell for about $7, which Bloomberg noted is close to the higher-cost Starbucks brands that Walmart sells.
- Jason Barrow, co-owner of Denver-based Luna Gourmet Coffee & Tea Co., which bought Boyer's in 2015, told Bloomberg that Walmart contacted the company last year to find out about the so-called "third wave" of coffee premiumization. "They looked to us to educate them. We knew it had to be competitive with Starbucks to work for them," he said.
Dive Insight:
The popularity of premium coffee seems to know no bounds as consumers continue to seek out higher-quality — and more upscale — sources of caffeine. Besides appealing to more such shoppers, Walmart may also be using the Mash-Up Coffee lineup to compete with Amazon and its Whole Foods premium coffee items, Bloomberg reported.
Coffee is right up there with bottled water and tea as the most sought-after beverages in the U.S., according to a National Coffee Association survey cited by Reuters this past March. The survey also found that 64% of American adults drink a cup of coffee each day — up 2% from 2017 and the highest level since 2012. And, as younger coffee drinkers demand more cold-brew, ready-to-drink and gourmet coffee products, consumption figures are further bumping up, with 48% of millennials saying they had consumed a gourmet cup of coffee the previous day.
Big Food companies such as Nestlé and Smucker are buying minority stakes in coffee companies and introducing higher-end brands, and 7-Eleven has gotten into the act by offering fresh-brewed premium coffees from African beans under its Seven Reserve brand. Going forward, the Dr Pepper Snapple and Keurig Green Mountain merger completed last month is likely to influence on-trend specialty coffee product launches.
Sales continue to reflect this rising demand. Statista research projects coffee sales will hit nearly $13 billion this year and increase at a compound annual growth rate of 3.1% from 2018 through 2021. The U.S. is the leading global consumer of coffee, with Americans drinking 400 million cups per day.
Walmart has been getting into more premium and specialty products as a way to battle for market share with Amazon, Kroger and Albertsons. The retail giant, which hasn't traditionally been known for stocking unique products, recently introduced three different styles of meal kits and has been competing for higher-income shoppers considered more likely to buy deli items.
Exclusively introducing a premium organic coffee brand is a smart strategy to entice customers into brick-and-mortar stores, where they're likely to purchase other items before departing. Product exclusives tend to set retailers apart and allow for publicizing launch events for shoppers interested in exploring new items. For Boyer's Coffee, exposure at a limited number of Walmart stores is probably a dream come true and could catapult the brand into nationwide recognition. For Starbucks, this move could serve as a wake-up call that, despite its ubiquitous presence, the popular brand should still watch its back.
