According to a Business Planner study, attendance at conventional cafes (coffee shops with snacks) in Russia has decreased by 11%. Leading analysts in the HoReCA segment have also recently noted a decrease in the average check in such places, which is the most important criterion for cafes and restaurants. According to Knight Frank analysts, these statistics are the natural result of declining purchasing power of their customers.
In the current heyday of the Internet era, consumers are much better versed in prices and promotions; they monitor good offers and make their choice in favor of better prices. This has led to a trend to introduce various loyalty plans, promotions and discounts.
This also applies to regular coffee shops. The demand for coffee is as high as ever and even tends to grow – the Russian coffee market includes 5,000 outlets and is estimated at RUR 130 bln ($2 bln), according to Knight Frank. At the same time, coffee houses tend to move to a lower price segment.
In the general food service market, coffee is included in every third order, and its consumption is growing, according to NPD Group. Moreover, while earlier coffee was mainly ordered at coffee shops, cafes and restaurants at the end of dinner, now it is drunk in fast food, street food, retail and canteens. From April 2018 to March 2019, more than half of coffee orders (52%) were made in fast food places.
Also in 2019, coffee-to-go traffic increased by 23%. This is directly associated with a cup of coffee to go being cheaper than the same drink in a cafe. People are not willing to pay for rent and maintenance, which are regular pricing components at full-size coffee shops. The coffee-to-go format is the most democratic, affordable and most suitable for people with a dynamic lifestyle, especially young consumers.
Meanwhile, the average coffee-to-go check is increasing. The Coffee Like chain has reported a RUR 38 ($0.6) growth in the past 2.5 years: in 2017, the average check went up by RUR 12, in 2018 by RUR 11.6, and during this year’s first five months it grew by RUR 14.3.
Today, we see a new generation that chooses coffee-to-go, with little attention paid to its price. The majority of coffee-to-go shops customers are those aged between 21 and 27, mostly students and career starters. This format is also preferred by more mature and wealthier people aged between 28 and 35, who amount to 32% of Coffee Like visitors.
Coffee-to-go shops are popular in regions where a RUR 150 ($2.4) cup of coffee may initially seem wasteful. Yet, despite this stereotype, this format is much preferred in small cities. Even more, according to a research conducted by KLD Coffee Importers, 52% of residents would like their cities to open more such shops. Coffee culture in cities is correlated to being satisfied with life; the growth in coffee consumption has a positive effect on both its tourist and life attractiveness.
Russian coffee market experts note that the coffee-to-go concept allows local players and independent chains to efficiently compete with each other.
We are optimistic about the market prospects, despite the general reduction in people’s income and purchasing power. Russia’s coffee market is only in its developing stage. According to Allegra World Coffee Portal, a Russian citizen consumes an average of 1.6 kg of coffee per year, while a European citizen drinks 7.8 kg. We are not much different from Europeans as regards taste preferences, and we expect about a 1.5-fold growth in our coffee market within the next five years. Successful implementation of the coffee-to-go concept will positively affect Russia’s coffee business in general.
By Alexei Gusakov, CEO of the international chain of coffee-to-go shops, Coffee Like