Premium Coffee Subscriptions Appeal to Demanding US Consumers
Coffee is in many ways the ideal product for an online subscription because of the way it is both consumable and perishable. Most coffee consumers drink the product regularly in a way that naturally lends itself to a fixed delivery schedule. Additionally, as coffee loses its freshness over time there is no risk of unused coffee accumulating in a similar way to other subscription products such as razor blades.
Yet coffee subscriptions currently play only a niche role in the vast US market despite these inherent advantages. In a country with a Starbucks on every other corner and a Keurig on every other counter, simply being convenient is not enough. Coffee is already extremely easy to obtain. What is not so easy, however, is to get coffees from dozens of different speciality roasters, personalized flavour profiles, or beans shipped immediately after roasting for maximum freshness. These are the requirements a successful coffee subscription service must be able to meet.
Why Coffee is Not like Razor Blades
The Dollar Shave Club is a good example of a subscription service using a combination of price and convenience to rise to prominence. After realising that men were frustrated with the razor-buying experience both because of its cost and the hassles (most notably retailers putting blades behind locked cases), it offers an attractive and affordable alternative and now has three million subscribers.
There is also the Dollar Coffee Club, whose differences with its namesake are quite revealing. Charging a much higher price (the “Dollar” refers to what the customer spends in a day, rather than in month, a considerable difference that is not apparent at first) and recommending the use of complicated brewing equipment such as the Aeropress, it has little in common with Dollar Shave’s stripped-down, mass-appeal approach. The name may be very similar, but the business model is considerably different. This is because the great potential for coffee subscriptions lies not in delivering a large number of people a similar product cheaply and efficiently, but in delivering a high quality product to fewer people with great attention paid to adding a personal touch.
Riding the Third Wave
With the “third wave” of coffee creating greater demand for premium products than ever before, the timing is right for brands to leverage the full possibilities of the subscription model to meet the desires of the more demanding coffee drinker. Many coffee aficionados who have become used to a high standard of coffee when going out are now looking for ways to make similar coffee at home.
Home delivery offers a number of advantages to such consumers. It allows a consumer to sample products from far more specialist roasters than is possible in even the most coffee-saturated areas. Some services can ship products from hundreds of different roasters. It is also the best way to ensure freshness, as most shipments are made immediately after roasting, eliminating the time the beans would otherwise have spent on store shelves.
With the right data analysis and access to so many roasters, services are well-positioned to match each consumer with their ideal coffees. MistoBox, one of the earliest services to launch, offers first-time users a Discovery Box with four coffees. Users select the one they like best and future shipments are based on that choice. Bean Genius takes a more technological approach and uses customer feedback data in a way that the founder compares with Netflix and Pandora. The company creates a constantly improving preference profile for each user in order to ship coffees that they should enjoy but may not otherwise have discovered.
Shipping Education Along with Beans
Many services are selling coffee education as much as they are selling the coffee itself. One interesting approach to the model is the “Angel’s Cup”, which allows subscribers the option of receiving their coffee unlabelled. Using an app, the customer fills out notes on what they detect in the mystery beans and then later compare notes with those of professionals in order to refine their tasting abilities. Drift Away, a competitor, offers real-time help with advanced home brewing problems and has a section of its website dubbed the “Coffeecademy” for educational purposes. For both services, and for many others, the promise that a subscription will led to the customer becoming a more cultured, discerning coffee drinker is a key part of the appeal.
The typical third wave consumer also tends to be interested in making sure that their coffee is fair trade. Whereas a coffee shop or retailer may offer fair trade certification or perhaps display a sign offering information regarding the coffee’s origins, an online service can go into much greater detail. For example, Crema.co has extensive profiles of the grower, roaster and even the geographical region accompanying each of the available coffees on its website, while Atlas Coffee Club includes a postcard about the growing region with each shipment. This approach helps to reassure the consumer that the roaster has a real commitment to fair trade practices.
A Crowded but Promising Future
At present, industry sources describe their typical consumer as a young coffee aficionado with disposable income who is willing to devote considerable time and effort into getting the best at-home cup of coffee possible. Although this is a lucrative demographic it is one that is constrained in size. Consequently, the subscription model will not appeal to more than a small proportion of coffee drinkers for the foreseeable future. To break out of their niche, subscription services would need either major advances in home brewing technology that make the process of making premium coffee far easier, or a shift in American coffee drinking habits that prioritise quality at the expense of convenience. Many services are hopeful this will happen, but such optimism may be misplaced in a market that embraced the ease of the K-cup with such enthusiasm.
Starbucks, ever-attuned to trends in coffee drinking, has made a subscription service a core component of its premium Starbucks Reserve line. Its entry into the market should boost the profile of subscription services and help grow the category as a whole, but it is unlikely to dominate as the brand’s third-wave credentials are not the strongest. This should leave plenty of room for both Starbucks and a number of smaller players. Although they will be fighting for a limited number of potential subscribers, it should become increasingly clear that a subscription is essential to everyone serious about making high-quality coffee at home. As a result, while some services will definitely struggle and fall by the wayside in a crowded environment, the model as a whole should enjoy considerable growth over the next few years.