Supermarket coffee could be better – but it’s a challenging market

• Lower-quality beans, darker roasts, instant coffee, and capsules often make up the majority of the grocery store coffee offerings.
• Yet as consumer preferences shift, the supermarket coffee aisle is changing. More whole bean specialty coffees are appearing on shelves, and Gen Z’s demand for diverse offerings is giving way to RTDs, espresso concentrates, and matcha products.
• In the US alone, 67% of coffee consumers say they buy coffee in supermarkets, and 9% or fewer purchase directly from roasters and cafés.
• Selling directly to grocery stores can benefit specialty coffee roasters by reaching a much broader audience, but it also presents several challenges and entails significant risk.

A supermarket is not the first place that comes to mind when buying specialty coffee. But in mature markets such as North America, Western Europe, and Australia, coffee aisles in grocery stores are undergoing a transformation.

Once stocked only with low-quality, dark roast coffee products, supermarket shelves are increasingly displaying specialty-grade whole bean, ready-to-drink coffee beverages, espresso and cold brew concentrates, and even matcha powders. Many well-known third wave roasters now have a more established presence in local and national outlets, helping elevate the quality of their offerings.

The overall quality and diversity of grocery store coffee products, however, remain low. Selling to supermarkets can be a highly valuable revenue stream for specialty coffee roasters, expanding their customer base and creating opportunities to innovate and drive higher standards. But it’s a challenging market to navigate, competing with many major brands for shelf space.

Rich Ottenhof at North Roast, Dustin Eck at Upper Left Coffee Roasters, and Ethan Oakes at Fresh Roasted Coffee explain more.

You may also like our article on how roasters set prices for supermarket coffee.

The supermarket coffee aisle is changing

Millions of people around the world buy coffee in supermarkets every single day, whether it’s instant, pre-ground, whole bean, or capsule. It’s a vast market, but typically not renowned for quality.

Traditionally, grocery store coffee consisted exclusively of lower-quality, dark-roasted beans. As a result, within the specialty coffee community, there are negative preconceptions about supermarket coffee.

“In Canada, five large players dominate grocery markets: Loblaws, Sobeys, Metro, Costco, and Walmart,” says Rich, the founder of North Roast Coffee Roasters, one of the first specialty coffee roasters in Kingston, Ontario, Canada. “While there are some spin-off higher-end chains, the aisles of the large five mainly include big players selling undifferentiated coffees competing on price.”

However, a growing consumer focus on quality, sustainability, and diversification has driven changes in this market segment. Supermarkets now offer a broader range of coffee products than ever before.

Overall demand for higher-quality offerings is prompting more specialty coffee roasters to sell whole bean, roast & ground, and capsule formats in supermarkets. 

“I think there have been some significant improvements, particularly in stores that cater to upscale markets,” says Ethan, the head of co-packing and private label sales at Fresh Roasted Coffee, a leading wholesale, co-packing, and private label services supplier in the US.

Some higher-end boutique stores in the US, such as Whole Foods and New Seasons, sell locally roasted beans, offering consumers coffee roasted closer to home to reduce its carbon footprint. With increased interest in buying more local products, smaller independent roasters have a prime market to sell into once they can secure contracts with nearby grocery stores. 

“Supermarkets are focusing on a new generation of coffee drinkers looking for more third wave-style coffee,” says Dustin, the head of coffee for Upper Left Coffee Roasters, a specialty coffee roaster in Portland, Oregon, which celebrated its tenth anniversary this year. “I’m seeing it in the specialty grocery stores here in Portland, both in retail and bulk.” Dustin also notes that in his hometown of Chicago, larger stores are increasingly carrying more specialty brands.

Gen Z’s preferences are also transforming supermarket coffee aisles. This generation’s proclivity for cold coffee has spurred more grocery stores to stock espresso and cold brew concentrates, as well as RTD coffee beverages in refrigerated sections. Notable brands, including Stumptown and Blue Bottle, are a common sight in upscale supermarkets.

Matcha is also popular among Gen Z consumers, driving significant demand not only from coffee shops but also from grocery stores. Whole Foods has a wide range of matcha RTD products and powders, while Perfect Ted and Oatly’s matcha drink collaboration received significant promotion in UK Sainsbury’s stores.

More opportunities for specialty coffee?

It’s evident that the quality of supermarket coffee is increasing in multiple countries, especially where specialty coffee consumption is more established. But there’s still room for improvement. According to the CBI, supermarket coffee in the UK, for instance, is generally low-end or mid-range.

Although many specialty coffee drinkers buy their beans directly from roasters or cafés, an estimated 67% of overall coffee consumers in the US alone purchase coffee from grocery stores. Therefore, selling directly to these stores can help specialty coffee roasters reach new, broader audiences and improve overall quality standards.

“The grocery store is a space where specialty coffee can thrive if brands are willing to put in the work,” Ethan asserts. “The opportunity is there for companies that can balance quality with scalability and meet consumers where they shop every day.”

More “traditional” consumers who typically buy dark roasts at supermarkets may not be aware of local roasters in their hometown. This exposure to specialty-grade, lighter roast profiles could introduce them to entirely new coffee experiences and potentially secure roasters new long-term customers.

Local roasters also have an advantage over larger national roasters thanks to location. Freshly roasted coffee will reach shelves quickly, offering consumers a fresher option than larger brands, whose coffee is often in transit for weeks.

With many of the same brands available in grocery stores nationwide, consumers may tire of seeing familiar labels and opt for something different. Packaging plays a key role in this; research from the University of Winnipeg found that consumers form an opinion within 90 seconds of initial interaction with a product, and that 62% to 90% of that decision is based solely on colour.

Specialty coffee roasters are again at an advantage, often selling vibrant, distinctive packaging that stands out on shelves and showcases their brand identity in seconds.

As Gen Z demands higher-quality, sustainable products, specialty coffee roasters are in a stronger position relative to larger brands. Research shows that, on average, Gen Z is willing to spend 10% more on sustainable products. Buying locally-roasted beans that can be traced back to origin then becomes more appealing to younger consumers.

But selling coffee in supermarkets isn’t straightforward

Lighter roasts and single origin coffees are starting to appear in supermarkets, helping pave the way for smaller, independent roasters to enter the retail space. 

But the reality is that this market is challenging to break into and to compete with well-established, large-scale roasters. 

“While it may be flattering to be approached or accepted on a grocery shelf, this is not a vanity project; it’s a business transaction,” Rich says. “We were approached by Costco to supply Eastern Canada with whole bean coffee. It was complimentary, but it would have required us to sideline our existing customer base and prioritise Costco, which was an unacceptable compromise. 

“We have built our business serving our local market (within 30 km), and it takes discipline to stay in our lane and be comfortable and proud in achieving regional excellence, not chasing national mediocrity,” he adds. “It’s critical to understand every clause in the supply agreement, and to safeguard your business against input price spikes.”

Perhaps most importantly, larger-scale supermarket and grocery store distribution channels don’t exactly help maintain coffee freshness and quality – two critical factors in specialty coffee. 

Depending on their distribution channels, products can take several weeks to reach shelves in larger grocery stores and supermarkets. Ultimately, this means it’s unlikely that coffee products sold in grocery retailers are as fresh as possible.

For most grocery stores, empty shelves mean lost sales. While a specialty coffee roaster may prioritise selling fresher coffee (and will therefore have lower stock levels), a supermarket wants ample back stock.

Inevitably, this will reduce sales of fresh coffee from inventory on hand, which means these wholesale clients will need more frequent deliveries. This can be especially frustrating for roasters as the supplier is often responsible for covering costs when a product becomes “out of date”. For roasted coffee, this is typically three to six months after the roast date.

“I shudder when I see coffees labelled as ‘best before’ rather than indicating the roast date,” Rich tells me. “‘Best before’ is normally a requirement in the grocery chain space, and so compromise is baked into the process. 

“Filling a huge supply chain with product results in long periods sitting in warehouses waiting to be moved to the shelves,” he adds. “Success is not guaranteed on the shelf, and you may also be asked to take the product back if it doesn’t sell through at a rate expected by the grocery chain.”

Self-distribution is one option for roasters. To do this successfully, they must maintain direct contact with stores to ensure inventory is managed and prices reflect the coffee’s value. This may require more work on the roasters’ side, but it can help improve profitability, especially in the early stages. 

Roasters can also partner with third-party distributors to organise the delivery and sale of coffee. Roasters simply need to deliver their coffee to a warehouse or distribution centre, which then handles the logistics.

“You can definitely benefit from working with companies that focus on getting you into and managing supermarket accounts,” Dustin says. “Selling in grocery stores is complicated, but with the right approach, it’s not too difficult.”

Pricing can be another challenge, especially given that roasters will compete with major national brands that price their products lower. It is recommended to price match – or at least be within US$1 – of the highest-priced coffee available in store.

“We consider what the supermarkets want to have their coffees priced at, as well as how competing brands set prices, and then we decide how we can best accommodate,” Dustin explains.

Lastly, standing out is an important consideration for roasters when deciding whether to be in grocery stores. Bag design, shelf placement, sample offerings, and the number of products on display all influence how consumers perceive the product and the overall brand.

The supermarket coffee aisle is improving, but there’s still room for further progress. For some specialty coffee roasters, depending on their capacity to scale production, it’s a highly lucrative opportunity to diversify revenue.

However, entering this market entails significant risk that few specialty coffee roasters are willing or able to take.

“Getting into grocery retail requires persistence, patience, and the ability to navigate long review periods,” Ethan concludes. “Even with a great product, it can take years to secure placement on the shelf at a regional grocery chain.”

Enjoyed this? Then read our article on how roasters can sell coffee to supermarkets and grocery stores.

Photo credits: Fresh Roasted Coffee, 90 Degree Media

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