COVID-19, Coffee and the Evolving Consumer

Interview with Simon Hague, Tea, Coffee & Cocoa Category Lead, Kerry, APMEA

COVID-19 has presented interesting opportunities and intense challenges for both chain and independent coffee companies. Simon Hague, Kerry’s Tea, Coffee and Cocoa Category Lead for the APMEA region, talks us through how he’s addressing these opportunities and challenges with customers to ensure a bright future for the coffee culture of the region.

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Interview notes:

Damien: From your interaction with customers, what are the signals about consumer preferences between value, indulgence and health as we start to move past COVID-19? 

Simon: So, I think the first thing we need to realize is that consumers are not the same, they're all different. It also depends geographically where you are in the world. I know from Western lifestyle, from being a Brit, that eating healthily is not necessarily the most cost-effective way to live in the UK. Usually fruit and veg is more expensive, sometimes, than fast food. If you look in ANZ, one of the world's most famous chicken chains had one of their best days of sales ever the day after lockdown ended and all people wanted was something they haven't had for three months. The familiarity, the indulgence, and sometimes it's about partaking in a meal that everybody wants. We know that snacking, for instance in retail, is slightly down in APMEA, due to the mum shopping without the kids nagging them, or “pester power”. However, you want to describe it. So people are starting to eat less snacking items—crisps and chocolate and that kind of thing. But when it comes to out of COVID-19, there's definitely drive from consumers to speed up the drive to natural, healthy products, with the belief that eating healthier will help you through the COVID-19 situation and for the future. But I do believe that it's down to your income, that would drive your decision. A lot of the consumers in our region are paid by the hour or per piece. When there's no work, there's no pay. That does drive their decision on how and what to eat. Indulgence in food and beverage is very easy. It's cheaper than buying a Gucci handbag. So in times when you want to have something that makes you feel better, it’s an easy upgrade to a chocolate milkshake or a Frappuccino. So, consumers are looking for all three. Health is definitely a growth area, but don't believe that just because of COVID-19, all customers are eating healthy, because it just simply isn't the case.

Damien: I guess the economic recession gives us a value segment for sure. The underlying concern that consumers have about their health post COVID-19 and the complications of that gives us health. But what does indulgence look like over the next couple of years? Is it a boost because we want to indulge after being away from foodservice for so long, but dies away by Christmas, or is indulgence likely to be a significant trend over the next couple of years? 

Simon: I mean, I don't know about yourself Damien, but I always like a treat. I don't think any consumers are different to me. If you compare the way that people consume beverages, the lines are becoming more blurred, so consumers are definitely crossing the line. You've seen the acquisitions of coffee chains by some of the big bottlers, moving from in-store experience to in-home experience and the growth of the coffee pods and beverages that are consumed in the home. So there's definitely a drive to consumers mixing boundaries and that kind of boundary mix means that also customers are looking for other experiences in the home. Indulgence is definitely one of them. You've seen the rise of the use of dairy content and we have a great plethora of history in Southeast Asia of creaminess, which I think is connected to indulgence. So adding butter to the roasting process for coffee, for instance, to elevate the dairy tones. We've seen in North Asia, the rise of dairy and moving to named dairy or provenanced dairy, like hokkaido milk and the benefit that has. People are driving provenance, they’re driving indulgence, they’re loading it with dairy. And there definitely is a health connotation in Asia, maybe different to Europe, about dairy being a healthy thing to have in the diet and it drives the health lifestyle.  

Damien: In terms of these taste profiles and mixing of boundaries, it seems to me that you’re one of those people who is curating those for large coffee, tea and cocoa companies in APMEA. When I have been to tea and beverage tastings, it usually involves a lot of tasting off a little spoon, but the real win is when you have an expert like you who says no, now feel this or listen to that or how does that feel your mouth? When you’re trying to explain new tastes to customers, how do you do that in a socially distance COVID-19 world?  

Simon: So, we recently have just partaken on a project, which we call “Beverages in the New Normal”. It's an online virtual tasting. We ran it at the end of July, it was the first of its kind for us. We believe it's one of the first of its kind in the business to business world. It is something that a lot of the big brands are doing at the moment. Sharing kits with customers and trying to bring them into a sales experience when they can't go to their stores. So we kind of copied the idea from a B2C world. We've created a curated box of five beverages. We've got a live link up on the website now and we've got about 50 customers a day joining that session to partake with us in a live lifestyle. It's as close as I can get to our customers, and I'm always told in the businesses is try and make it easier for our customers to do business with us. And one of those ways is taking samples to the door, so we have customers having packs delivered to their houses to taste with us on live camera and the session will be with speakers from Singapore, Thailand and Japan. So I think something that has happened in COVID-19, it really has started to bring engagement further down organisations and allows people to really get involved, which I think actually is a positive. I think we've for a long time looked at the negatives of COVID-19, but there are some positives. Family time, engaging more people in the business, enabling people to attend meetings in multiple locations. There are definitely positives out of it, but it's not to take away from the kind of stresses and problems that a lot of our SMEs, small franchises and independent owners have gone through, and they really have struggled.  

Damien: The level of innovation that we have seen, I think, is extraordinary, and what you've just in terms that experience is pretty extraordinary. One of the things about the particular category that you're involved in—tea, coffee and cocoa—is that most of the places where I buy those products have been closed for three months. One of the pleasures has been able to go back. And of course they closed at very short notice, so they must have three months of stock left behind on the shelves. Is that the case and how have you been working with those customers to help them to, obviously to buy the new products that you are selling, but also to rundown their stocks profitably and also in a way that helps them to meet customer needs?

Simon: I mean, it depends where you are in the world, obviously the cycles are very different. I want to give you the best example I know, which is Australia. Nearly 96% of Australian coffee houses are independently owned and even if you look at some of the big guys’ names above the doors, actually they are small franchisees that have one or two stores, so actually they're all SMEs. That process is replicated pretty much around the world. The UK and the U.S. are probably two examples that would be outliers in terms of people that have large numbers of stores or large groups of stores. But ultimately, whether it's a big brand above the door or a local brand above the door, most of them are independent stores and it has been very hard for them. Not having customers for a few months, not having turnover in some markets, not even having government support to pay staff and staff being laid off or being at home with nothing to do. But what you learn and what you find out is that entrepreneurs, which I believe all these guys are, they're not stupid people. They develop clever ways of using stock and push themselves forward. We have customers making kits. The move to online. I've been lucky enough to help a few customers to use our online platforms to sell their goods through to make sure that they had income and were supported. And from a business perspective, this is a partnership. We work with customers all across APMEA and we have to help them through this situation. Pushing new product and pushing LTOs when the customers are trying to survive. We need to reign it in and think about what to do. So some LTOs are the right thing to do and we’ve pushed it where it's possible. We’ve helped people bring in new customers through the door. And where it isn't, we've used stock up. So we're blending flavours, we’re blending syrups, we’re blending powers and syrups and sauces, stock items. We’re reducing menu sizes. We’re driving value through the core and we're doing everything that we should do as a partner so that these guys come through it healthily. There is going to be some drop in store count, but if they come through the other side, we supported them through it and we've acted as a partner. For me, that's long term business relationships and that sets them up for success for next year and the following years and it's sets us up for success as well.  

Damien: Yeah, I like how you described that, Simon. I guess the women and men who lead these businesses are very definitely the lifeblood of the recovery that we’re all relying on. Simon, thanks so much for your time. I appreciate your time and your expertise. We have been On the Horizon. Stay safe, stay well and see you next time. Thank you very much.  

About Simon:

Simon is the lead for Tea, Coffee and Cocoa for the Asia Pacific, Middle East and Africa Region. Simon has over a decade of experience in beverage development, food ingredients and flavours and is a specialist in food marketing. Simon’s passion is beverages with a specific interest in coffee and consumer anthropology. He combines a unique set of skills across multiple facets to bring a different viewpoint to beverage development and creation and delivers it with passion. His belief is that coffee and its history are what has made it into one of the world’s most consumed beverages. Simon is driven to provide customers and consumers with an unrivalled experience, understanding that it’s not just what we deliver, but how it is delivered that creates successful launches. He has worked across Europe, the Middle East, Asia and the Pacific Region finessing his understanding of consumers and consumption to create a perspective that delivers for our customers and their consumers.

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