- Over 50% of Starbucks’ customers visit competitor chains
- But brand loyalty is also falling in the specialty coffee sector, with convenience driving consumer values
- Consumers are less likely to buy from a single brand but from a set of brands that meet their values
COFFEE COMPANIES invest heavily in building their brands because establishing a loyal customer base is crucial for driving growth.
“If you can flip that switch in a customer’s head and become the brand that they define their choice of coffee around, their loyalty can be incredibly powerful,” says Dale Harris, 2017 World Barista Champion with 13 years of experience with Hasbean and Ozone Coffee.
Repeat customers become loyal when they emotionally connect with brands based on factors beyond price. However, brand loyalty appears to be more important for older consumers.
“When you’re younger, you’re a little more open to trying things out,” says Dale. “Older customers tend to find the right fit for them for a while and tend to change less often.”
There is a perception that young people value brands. This is the case in other industries, such as fashion – but it might not hold true in the coffee industry. Instead, younger consumers – i.e. Generation Z and millennials – prioritise values like price and convenience.
Additionally, online spaces are becoming increasingly important. Younger consumers often conduct thorough research to find the right product for them. For the coffee industry, online platforms provide a way for customers to engage more deeply with the coffee they purchase – a situation that has been amplified by the Covid-19 pandemic.
However, this doesn’t mean they are loyal to one brand. On the contrary – customers are more likely to shop around.
Additionally, a growing number of consumers are opting for online coffee subscriptions, receiving coffee from multiple brands. This aligns with the “set it and forget it” mindset which is so common among younger consumers.
Even with subscriptions from a single brand, Dale suggests that this reflects a different kind of loyalty: “That’s less about a tangible emotional relationship with a customer and more of a convenience,” he says.
“While that is financial loyalty, or economic loyalty – which is what a business wants – I don’t think it’s as powerful as emotional loyalty.”
Novelty, not longevity
Most would argue that innovation is one of specialty coffee’s core values. This results in a constant stream of new products being developed from a variety of brands – products that consumers want to try. This diminishes their loyalty to specific brands.
“There’s a large segment of customers of specialty coffee that get into it because they want to try new things all the time,” Dale says. “That’s a broadly positive thing if it helps you find your preference, but it does make loyalty harder to hold onto.”
As a result, new brands have the advantage of novelty, rather than relying on longevity – especially in such a competitive market.
Let’s look at coffee roasters. This market segment has become increasingly saturated. This means that historically, consumers had a smaller pool that they picked from. Now, with so many emerging in major consuming markets, they can hop from one to another in search of the next “new thing”.
“Now the level is much higher across the board in terms of range, diversity, sustainability, so I think you’re able to stay true to your values and your flavour preferences and still shop around between different brands,” Dale says.
But it’s not just consumers who play a part here. We also see brand promiscuity in a B2B marketplace, too. According to Dale, cafés used to have stronger ties with a “resident roaster”. Increasingly, however, they have started to rotate their options to showcase new roasters. More coffee shops than ever work with a “guest roaster” that rotates every week or two, for instance. This shift can impact how customers perceive coffee – as something defined by choice and innovation rather than loyalty.
“If you’ve been exposed to 50 roasters because of your favourite café, I think you’re much more likely to want to shop around with roasters,” Dale adds.
Brands have a choice to make
Consumers are increasingly recognising that multiple brands offer the same coffees – especially when it comes to particularly prominent farms and regions. This makes it less “unique” when one roaster or coffee shop stocks a certain desirable coffee – and gives you less of a reason to stick with one brand for the cool new lots.
At the same time, we’re also seeing more and more specialty coffee brands become homogenous – especially as the market is so saturated and the identity and values that specialty coffee focuses on are so specific. As such, consumers are less likely to buy into a single brand, but a set of brands that meet their values.
This is a trend that isn’t just unique to specialty coffee, though. Even major commercial coffee shop chains don’t hold this kind of monopoly – for example, more than half of Starbucks’ customers visit competitor chains.
Nevertheless, what this shift means for specialty coffee remains to be seen. According to Dale, self-awareness will be crucial for brands in the months and years ahead. He says that those focusing on innovation must embrace it, while brands looking for a loyal customer have to lean into that, instead.
“If you’re not innovating, you need to find the more stable customers,” Dale says. “Both of them are viable directions, but getting stuck in the middle is really dangerous.”