As the U.S. economy slid deeper into recession during 2009, coffee marketers and foodservice operators moved in the opposite direction, digging out of the trench of 2008 with a variety of strategies designed to capitalize on the fact that even upscale coffee is a relatively thrifty luxury that offers comfort during stressful times. Two success stories were the rebound of Starbucks on the foodservice side and the revitalization of the former P&G retail coffee portfolio by J M. Smucker. Although the era when the coffee market grew effortlessly through premiumization may have ended, such upscale trends as the shifts towards specialty coffee beverages, gourmet beans and ethical consumerism are still clearly in force. What’s more, there’s ample opportunity for companies to capitalize on such trends as the economy recovers—not by ignoring the tougher times or reversing strategy, but by crafting an image that’s both upscale and responsive to consumers’ stronger-than-ever demand for value.
Packaged Facts’ Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition offers a comprehensive look at this $47.5 billion market, examining both the retail and foodservice sides of the business as well as the growing overlap of the two. On the retail side, the report analyzes coffee sold for future brewing—beans and ground, and instant—as well as RTD coffee drinks (à la Frappuccinos), as well as coffee enthusiast’s new brewing method of choice: single-serve (pod) coffee. Positive upscaling trends that slowed during the weak economy will gradually regain the upper hand, the report predicts, resulting in increasing annual percentage sales gains lifting sales by 23% by 2014 to reach $58.3 billion. The report examines sales across the entire retail universe, using Information Resources, Inc. InfoScan Review data and SPINSscan data to extensively chart performance, market composition and marketer/brand performance for the mass-market and natural supermarket channels.
Comprehensive coverage is also devoted to the vast foodservice market for coffee, including the expansion of specialty drinks at such mass-market venues as McDonalds, Dunkin’ Donuts and, most recently, Burger King with its planned 2010 roll-out of Starbucks’ Seattle’s Best. Supplementing the market tracking and forecasting of previous editions, Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition pays special attention to trends in new product development, inclusive of valuable global perspective; details competitive opportunities, including via in-depth company profiles; explores winning marketing methods including Web-based activity; and provides detailed consumer profiling using Experian Simmons data for 2009.
Read an excerpt from this report below.
Market Insights: A Selection From The Report
Foodservice Sales Gain in Restaurants
The foodservice coffee business consists of coffee and specialty coffee drinks sold by the
cup, as well as packaged ready-to-drink coffee beverages that are sold through foodservice
venues. Such venues include restaurants, coffeehouses, convenience store foodservice,
cafeterias and office coffee service, roaster/retailers, coffee bars and kiosks, vending
machines, mobile coffee carts, complimentary coffee provided on airlines and in hotel rooms,
institutional sales, and other foodservice venues. Restaurants—from fast-food to donut shops
to fine dining—comprise the greatest share of foodservice coffee sales. And that share is
growing, Packaged Facts estimates, with the restaurant share increasing from 36% in 2008 to
38% in 2009. This growth is based on an increased number of outlets serving specialty
coffee. Next in line are coffeehouses with a 22% share in 2009, down 2 points from 2008
levels, due to the struggles of various premium coffeehouse outlets in the midst of the
Supermarkets Lose Share to Cheaper Alternatives
Packaged coffee is sold in an ever-broadening range of venues, including mainstream supermarkets and grocery stores, mass merchandisers and supercenters, warehouse clubs, gourmet/specialty food stores (including coffee bean stores), natural food supermarkets and stores; convenience stores, drugstores and direct-sales channels (including catalogs, online and mail subscription services). The products are also sold through a host of alternative channels, including vending machines, department stores, kitchenware stores, bookstores, clothing boutiques and farmers’ markets. Packaged Facts estimates that supermarkets and grocery stores lead the market for packaged coffee, accounting for 54% of retail dollar sales in 2009. However, that was a slip of 2 percentage points from the previous year’s totals. Supercenters are a distant second with an estimated 17% share of sales, having picked up 3 points.In the News
U.S. Coffee Market a Tale of Two Macrotrends as Upscaling Continues to Drive Sales During Period of Consumer Thriftiness
New York, March 10, 2010 — Positioned as a relatively inexpensive luxury, upscale coffee sales continue to thrive even as many other industries suffer from consumer cutbacks on nonessential purchases, according to market research publisher Packaged Facts in Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition.
Packaged Facts estimates that total coffee market sales, including foodservice and retail, rose to $48 billion in 2009, with annual growth of 4% in 2008 and 2009. Sales in foodservice—everything from Dunkin’ Donuts’ select blends to McDonald’s medley of McCafé mochas, lattes, and cappuccinos—reached $42 billion, accounting for 87% of the coffee market.
“With the advent of the so-called ‘Great Recession’ in 2008, the central question facing the coffee market was whether a product that saw sales growth through upscaling could continue to progress in the face of a severe economic downturn,” says Don Montuori, publisher of Packaged Facts. “By and large, the answer is yes. Even if marketers must now scuffle for every percentage point of sales growth they get.”
As opposed as the economic downturn is to the upscaling thrust (i.e., shifts toward specialty coffee drinks, specialty coffee varietals, single pod coffee, and fair trade and triple certification coffee), the former doesn’t negate the latter but rather interacts with it. Instead of settling for cheap ground coffee, consumers and their growing "coffee connoisseurship” have been willing to make difficult tradeoffs to stay within their means while indulging in premium beverages that provide many with a source of comfort during stressful times.
Accordingly, marketers who have found success discovered ways to respond to the downturn—not by ignoring it or reversing strategy, but by incorporating its impact on consumer behavior as a factor among others that help them drive the daily value choices consumers make. Common claims for new coffee drinks since 2009 play up the “premium” angle and relatively downscale coffee venues continue to introduce luxurious coffee beverages at comparatively thrifty prices.
Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition examines both the retail and foodservice sides of the U.S. coffee market, as well as the growing overlap of the two. On the retail side, the report analyzes coffee sold for future brewing—beans and ground, and instant—and ready-to-drink coffee drinks (à la Frappuccinos), as well as coffee enthusiasts’ new brewing method of choice: single-serve (pod) coffee. Examination of the vast foodservice market for coffee includes the expansion of specialty drinks at such mass-market venues as McDonald's, Dunkin’ Donuts and Burger King with its planned 2010 roll-out of Starbucks’ Seattle’s Best.
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