The Millennial Marketplace: Shifting Values

By Heather Ward, SCAA

torbakhopperFrom a market perspective, the mushrooming Millennial generation is taking the spotlight. Many business resources are devoted to learning how to address this target audience. We’ll talk more about that, but first, let’s take a look at who makes up this demographic that seems to be the talk of the town.

So, who are Millennials? It’s challenging to clearly define and pin down an age range, as researchers are still analyzing the characteristics of this group. Many sources define Millennials as young adults born between the early 1980s and late 1990s. As of January 2015, the U.S. Census Bureau defined the Millennial generation as ages 18-34. So, what makes this generation so different from those that preceded it?

First off, Millennials are influential. This digital generation makes up approximately 23 percent of the population, according to the U.S. Census Bureau. It is expected to number over 75 million young adults in 2015, surpassing the Baby Boomers and becoming the largest living generation. Its purchasing power is approximately $200 billion annually, and its members are approaching their peak earning and spending years (Fromm & Garton, 2013). This group is not to be ignored, and the sooner we become aware of its habits and motivations, and engage with them, the better off we’ll be as an industry.

For those who work in coffee, this conversation is particularly relevant. The reality is that Gen M-ers drink more specialty coffee than any other generation. As specialty coffee professionals, how do we make sure we are giving them the attention they need? What information will help us become more connected and capture their loyalty? The answer will require more than researching and digging to find statistics.

Numbers on paper will never tell us as much about Millennials as in-person interaction. Members of this generation are personable. They want to be heard and engaged. They desire opportunities to connect with other, and they value experiences above all. At the counter, around the roaster, or even on online platforms—engaging with them on many fronts has become a necessity in specialty coffee business strategy.

Millennials have shifted the value proposition, placing their experience above the product. They derive value from being engaged in product development, advertising, social interactions, and other facets of the marketing process (Fromm & Garton, 2013). They are concerned with company beliefs and behaviors, and choose to purchase from companies they can respect and relate to. Studies show that 50 percent of Millennials say they are more likely to buy a brand they know supports a cause (Fromm & Garton, 2013). They are the most skeptical coffee-drinking group, and are more likely to question company ethics. They are also significantly more likely than other generations to have heard of Rainforest Alliance, Shade Grown, and Conservation International (NCA, 2013).

Furthermore, the digital nature of this generation—a result of proliferating technologies—means that once Millennials interact with a product, they turn to social media to review or ask friends for advice on making a purchasing decision. From a Millennial’s perspective, you do not make a decision without your friends. (Fromm & Garton, 2013). This is a group of young adults who were raised to be tech-savvy and embrace a fast-paced lifestyle. Technology is more than a want for them; it is a need.

Coffee-consumer behavior is shifting in general, but the Millennial generation is drinking more coffee than any previous generation of the young adult cohort. Based on the National Coffee Association’s 2014 Annual Drinking Trends report, daily coffee consumption among ages 18-24 more than doubled (to 51 percent) in 2014, up from 25 percent in 2000. Daily consumption among ages 25-39 increased to 62 percent in 2014, up from 42 percent in 2000. This is an indication of a long-term trend. Not only is the percentage of those drinking coffee increasing, but the number of cups consumed per day is also increasing. In 2014, the average for cups consumed per day was significantly higher among ages 18-24 at 3.3 cups, up from 2.3 in 2013. Among ages 25-39, 3.2 cups were consumed, up from 3.0 in 2013 (NCA, 2014).

Drilling down to specialty coffee consumption, 35 percent of people ages 18-24 and 42 percent of ages 25-39 drink specialty coffee daily. Millennials are more likely than older generations to consume specialty coffee beverages. The increase in specialty coffee consumption appears to be driven by espresso-based beverages, the favorite of this generation. The NCA’s report shows that 21 percent of people ages 18-24 and 25 percent of ages 25-39 drank espresso-based beverages daily (NCA, 2014).

Place and time of consumption is shifting as well. Almost half of the population under 40 is more likely to consume coffee outside of the home. Millennials are most likely to make changes to their away-from-home coffee habits, including: buying less expensive brands of coffee, switching locations for better value, buying smaller cups, etc. They are significantly less likely than all other generations to drink coffee at breakfast, and more likely to drink coffee at lunch, afternoon, dinner, and evening.

Specialty coffee consumption is on the rise and research indicates continued growth. Along with the next generation of coffee professionals who are entering the workforce and influencing the direction of the industry, we’re seeing the influence of their cohort on the consuming side—and the impact it is having on how we talk and think about specialty coffee.

Heather is SCAA’s research analyst and is responsible for providing leadership and vision in gathering analyzing and reporting coffee related industry research. Before moving into the coffee industry, she completed her MBA at Point Loma Nazarene University in San Diego with studies focusing on the economics of coffee. She has a passion for coffee, market analysis, and helping the coffee community better understand the landscape of the industry.