Coffee a New Area of Focus for Australian Pubs

Once anathema to drinkers, useful only for its supposed – now thoroughly disproven – sobering abilities, coffee has long moved in different circles to pubs in Australia.

Given the cross-category competition rife within the foodservice industry – fast food positioning itself against restaurants through the premium fast casual trend, specialist coffee shops branching out into breakfast and unexpected foodservice players looking to take market share from bars and pubs by selling alcohol – it shouldn’t come as a surprise that pubs in Australia would be considering diversifying their menus and appeal by offering an in-house and/or takeaway coffee option.

Indeed the lines between pubs and cafés, and even pubs and restaurants, are blurring as Australian pubs are increasingly embracing high-quality menus with a gourmet-yet-casual “cheap eat” theme. This is not restricted to midday and evening dining either; however, the real stumbling block for pubs hoping to attract the morning trade is that the brew of choice for early risers these days is more likely to be coffee rather than beer or a Bloody Mary.

Australians’ love of coffee moves beyond the coffee shop

Once a proud nation of beer drinkers, Australia is now becoming coffee territory through the on-trade. Per capita beer consumption in Australia decreased by 12% over 2009-14; yet fresh coffee sales through foodservice have experienced steady growth at 5% year-on-year in volume terms over the same period. This represents 27% growth for the period – or in other words, an additional 530 million cups of coffee sold through foodservice alone in Australia during 2009-14.

This is largely due to continued strong growth in coffee shops. Over the past five years, cafés have seen a 4% compound annual growth rate (CAGR) in terms of sales value and specialist coffee shops a 3% CAGR, whereas bars/pubs have only seen a 0.1% increase in CAGR value. In absolute terms, cafés have led the way in terms of dollar value growth over the past five years, with impressive performances being achieved by independent cafés and independent specialist coffee shops in both absolute value gained, and period growth to the tune of 20% and 22% respectively.

A vital addition to any portfolio

Coffee can provide operators with the chance to bring punters back to pubs by offering a little something for everyone, particularly for venues with a kitchen. If a pub can make a name for itself by offering quality coffee, there is added appeal for a range of patrons: brunch crowds, designated drivers, non-drinkers or those wanting the choice to alternate between alcohol and alcohol-free beverages beyond soft drinks.

While “everyone is doing it” has never been a rational argument, there is nevertheless an urge to get on board with cross-category experimentation. Starbucks, perhaps the epitome of a global specialist coffee shop, isn’t immune from dabbling in sales of alcohol, for example. In the United States, the coffee chain has gradually rolled out its “Evenings” programme since 2010, providing its customers with a casual place to unwind with savoury small plates, desserts, beer and wine. This highlights the importance of an anybody/anytime strategy in attracting custom, as the chain can provide solutions no matter what food or beverage is desired, and irrespective of the time of day (provided it’s after 4pm for the alcohol).

A good cup of coffee, anywhere

Australian tastes are certainly becoming more sophisticated, as indicated by the premiumisation trend in liquor sales, the increasing interest in craft beer and the growth of small bars. The nation’s love affair with coffee is just another sign of the times, and one that could be worth tapping into as caffeine is acknowledged simultaneously to be both an everyday necessity and permissible indulgence, particularly as sugary soft drinks slide from favour amongst certain consumer groups.

Despite the competition posed by at-home coffee capsule machines and frugal consumer behaviour, fresh coffee volume sales through foodservice are forecast to increase by a 4% CAGR for the five years from 2014 to 2019. Transaction numbers through specialist coffee shops are expected to increase by a 4% CAGR through to 2019. Increased attention on developing creative restaurant-inspired dining menus over recent years has put pubs in a strong position nevertheless, with the bars/pubs category recording stronger growth in terms of price per transaction than both cafés and specialist coffee shops, a trend which is likely to continue over the short- to mid-term.

First published in Australian Hotelier, May 2015.