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The Work-From-Home Coffee Binge

With many US companies finally mandating a return to the office after Labor Day, some companies that have continued to ride the remote work wave may see sales slow.  In today’s Insight Flash, we look at the impact working from home has had on direct delivery coffee companies, seeing how incumbent Nespresso has fared versus newer brands in terms of spend growth, retention, and new customer acquisition.

An explosion of new direct coffee brands have seen extremely strong growth on a three-year basis over the last three months.  However, even legacy player Nespresso has managed to maintain direct spend growth on par with the general subindustry at 75%.  In fact, with growth off a low base pumping the numbers for newer brands on a three-year basis, only Death Wish Coffee is showing stronger direct spend growth than Nespresso year-over-year.  One-year growth for Bones Coffee and Trade Coffee are on par with the Swiss OG, while Black Rifle growth is lagging.

Top Company Growth

Note:  91 days ended 8/31/22; Direct-to-consumer spend only, including online shipments, company-branded retail stores, and company-branded cafes; wholesale sales via third parties not included

With many shoppers placing recurring orders to have coffee delivered to their homes (supplemented by offline visits to branded cafes or retail stores), retention is an important metric for these companies.  Trade Coffee has shown the highest initial loyalty with over two-thirds of customers who first bought coffee from them in calendar 2020Q1buying again the next quarter.  But Nespresso has eked out a stronger following nine quarters after the first purchase, with 23% of customers returning versus only 21% for Trade.

Retention

Note:  Direct-to-consumer spend only, including online shipments, company-branded retail stores, and company-branded cafes; wholesale sales via third parties not included

Not only has Nespresso had more success retaining customers, it also has the highest percentage of new shoppers.  Compared to early on in the pandemic in calendar 2020Q2, Nespresso actually had more new customers in 2021Q4 and 2022Q1.  In the most recent calendar quarter, its new customer levels versus 2020Q2 were the highest of our five tracked brands, despite the other four companies being newer to the field.

New Shoppers

Note:  Direct-to-consumer spend only, including online shipments, company-branded retail stores, and company-branded cafes; wholesale sales via third parties not included