The 2004/2005 Outlook for the U.S. Hot Beverage Market (With Long-Term Forecasts Through 2009)

TABLE OF CONTENTS

INTRODUCTION

Scope of the Report i

Sources and Methodology i

CHAPTER I: OVERVIEW OF THE HOT BEVERAGE MARKET

Introduction 1

The U.S. Beverage Industry 1

Survey of Adult Coffee Drinkers 4

Demographics of Tea and Hot Cocoa Drinkers 5

New Product Introductions 6

Packaging of Hot Beverages 7

Say Good-Bye to the Metal Coffee Container 8

"Taster' s Choice"  Gets New Packaging 8

Disposable Beverage Carafes 9

The Coffee "Tea"  Bag 9

Not All Coffee Packaging Innovations Were a Success 10

A New Tea Bag? 10

Induction Sealing 11

Grounds for Your Garden 11

CHAPTER II: THE U.S. MARKET FOR HOT BEVERAGES

Overview 13

U.S. Manufacturers'  Sales of Hot Beverages 14

Fair Trade 17

CHAPTER III: THE U.S. MARKET FOR COFFEE

History of Coffee in the U.S. 21

Types and Sources of Coffee Beans 22

Types of Coffee 23

U.S. Manufacturers'  Sales of Roasted Coffee 24

Latin Influence on Coffee 29

Low-Caffeine, Low-Carbohydrate, and Low-Calorie Coffees 29

U.S. Per Capita Consumption of Coffee 30

World Coffee Supply 31

Coffee Production, by Region 34

An Easier Way to Exclude Bad Beans? 36

Decaffeinated Coffee Doesn' t Grow on Bushes, or Does It? 37

Coffee and Dessert, a Perfect Relationship 37

Coffee-Flavored Cold Beverages and Ice Creams 38

Coffeemakers 41

CHAPTER IV: THE U.S. MARKET FOR TEA

History of Tea 45

Types of Tea 46

Where is Tea Grown? 48

U.S. Manufacturers'  Sales of Tea 48

U.S. Manufacturers'  Sales of Tea, by Type 51

Not All Health News is Good 52

Matcha Tea 52

U.S. Per Capita Consumption of Tea 53

Ready-to-Drink Tea 54

CHAPTER V: THE U.S. MARKET FOR HOT COCOA

History of Hot Cocoa 55

U.S. Manufacturers'  Sales of Cocoa 56

Cocoa Production 59

CHAPTER VI: FACTORS AFFECTING DEMAND FOR HOT BEVERAGES

Overview 62

The Economy 62

Population Trends 68

Nonresidential Building Construction 79

Hot Beverage Prices 81

Milk Prices 83

Positive Health News 83

Caffeine 84

Low-Carbohydrate and Low-Calorie Coffees 85

The Weather 86

Turmoil in the Middle East 86

Fast Food and Multi-Unit Restaurant Industry 87

Coffeemakers 89

Consumer Spending 92

CHAPTER VII: DISTRIBUTION OF HOT BEVERAGES

Overview 97

Finding Space for Coffee and Tea 98

The Computer Cashier 99

Retail Sales of Hot Beverages 99

Retail Sales of Roasted Coffee 102

Retail Sales of Tea 102

Wholesale Sales of Tea 103

Retail Sales of Cocoa 103

Supermarket Sales of Hot Beverages 104

Sales of Liquid Coffee at Wal-Mart 105

BJ' s Breaks the Mold When it Comes to Coffee and Tea 106

Convenience Store Sales of Hot Beverages 106

Convenience Store Shopping Behavior for Hot Dispensed Beverages 108

TeaSource Brings Its Passion for Tea to Others 112

Vending Sales of Hot Beverages 112

Office Coffee Services 116

Retail Sales of Private-Label Hot Beverages 119

Ground Coffee Market Leaders 120

Tea Market Leaders 123

Coffee Shops 124

Starbucks and Music 129

The Starbucks Card 129

Dunkin'  Donuts and Krispy Kreme Doughnuts Team Up With Wal-Mart 130

Krispy Kreme Doughnuts Purchases a Coffee-Roasting Company 130

Tearooms Growing in Popularity 131

Hotels and Coffee 132

Distribution of Coffeemakers 132

CHAPTER VIII: ADVERTISING TRENDS FOR HOT BEVERAGES

Advertising of Hot Beverages Over the Years 134

Media Outlays 135

Leading Advertisers 140

MindShare Grabs Nestle S.A.' s United Kingdom Advertising 149

Kraft Foods Targets Young Adults 150

Starbucks and Pouring-Rights Deals 150

Advertising and Packaging 151

Starbucks Advertises its Ready-to-Drink Coffees 152

CHAPTER IX: PRICING TRENDS FOR HOT BEVERAGES

Overview 155

The Effect of Fair Trade on Prices 155

The European Union Asks for Help from the U.S. 156

Producer Prices 157

Whole-Bean and Ground Roasted Coffee 157

Instant Coffee 159

Tea in Consumer Packages 160

Cocoa Beans 161

Consumer Prices for Coffee 162

Retail Prices for Roasted and Instant Coffees 163

Voters Turn Down 10-Cent Espresso Tax 165

Increase in Dairy Prices May Result in Higher Coffee Prices 166

CHAPTER X: STRUCTURE OF THE U.S. HOT BEVERAGE INDUSTRY

Coffee and Tea Industry 167

Industry Sales 167

Payroll and Material Costs 168

Value Added and Vertical Integration 171

Employment Trends 173

New Capital Expenditures 179

Ending Inventories 181

Plant Capacity Utilization Rates 182

Number of Establishments 183

Chocolate and Confectionery from Cocoa Beans Industry 187

Operating Structure 187

Employment Trends 191

New Capital Expenditures 197

Ending Inventories and Plant Capacity Utilization Rates 199

The Plant Manager' s Workbook 202

How to Use This Section 202

Gathering Your Data 203

Developing Your Ratios 204

How Does Your Plant Stack Up? 205

Explanation of Terms 210

CHAPTER XI: THE GLOBAL MARKET

Global Coffee Consumption 216

Global Tea Consumption 219

U.S. Balance of Trade for Coffee and Tea 220

U.S. Apparent Consumption of Coffee and Tea 222

U.S. Imports of Coffee and Tea 224

Brazilian Coffee Goes Organic 233

More Ethiopian Farmers Turn to Other Crops 234

Indian Coffee 234

U.S. Exports of Coffee and Tea 235

Starbucks Invades the World 243

McDonald' s and Nestle S.A. Launch Overseas Coffee Shops 246

China, One of the Fastest-Growing Markets in the World 246

Coffee in Canada 248

Tea in Canada 248

Coffee Shops in Canada 250

U.S. Balance of Trade for Chocolate and Confectionery from Cocoa Beans 251

Leading U.S. Trade Partners for Chocolate and Confectionery from Cocoa Beans 252

CHAPTER XII: COMPANY PROFILES

Introduction 264

Associated British Foods plc 265

Chocoladefabriken Lindt & Sprungli AG (The Ghirardelli Chocolate Company) 266

Community Coffee Co. L.L.C. 268

ConAgra Foods, Inc. 270

Diedrich Coffee, Inc. 271

Green Mountain Coffee Roasters, Inc. 273

The Hain Celestial Group, Inc. 275

Hershey Foods Corporation 277

Kraft Foods Inc. 278

Melitta USA, Inc. 280

Nestle S.A. (Nestle USA, Inc.) 282

New World Restaurant Group, Inc. 284

Peet' s Coffee & Tea, Inc. 286

The Procter & Gamble Company 289

R.C. Bigelow, Inc. 292

Reily Foods Company 293

Sara Lee Corporation 294

Starbucks Corporation 296

Tata Tea Limited (Tata Tea Inc.) 299

Unilever 300

CHAPTER XIII: DIRECTORY OF SELECTED U.S. MANUFACTURERS OF HOT BEVERAGES

Introduction 303

Directory 304

LIST OF TABLES

Table I-1 U.S. Per Capita Consumption of Selected Beverages 4

Table I-2 Distribution of New Product Introductions in the U.S. Beverage Industry, by Market 6

Table I-3 U.S. Beverage Container Demand, by Type 7

Table II-1 U.S. Manufacturers'  Sales of Hot Beverages 16

Table II-2 U.S. Manufacturers'  Sales of Hot Beverages, by Type 16

Table II-3 Product Mix of U.S. Manufacturers'  Sales of Hot Beverages 17

Table III-1 U.S. Manufacturers'  Sales of Roasted Coffee 28

Table III-2 U.S. Manufacturers'  Sales of Roasted Coffee, by Type 29

Table III-3 Product Mix of U.S. Manufacturers'  Sales of Roasted Coffee 29

Table III-4 U.S. Per Capita Consumption of Coffee 32

Table III-5 World Coffee Supply and Distribution for Producing Countries 34

Table III-6 Coffee Production in Selected Countries, by Region 36

Table III-7 Distribution of Coffee Production in Selected Countries, by Region 37

Table III-8 Retail Sales of Ready-to-Drink Coffee and Tea, by Brand 42

Table III-9 Market Shares of the Leading Coffeemaker Manufacturers 45

Table IV-1 U.S. Manufacturers'  Sales of Tea 51

Table IV-2 U.S. Manufacturers'  Sales of Tea, by Type 52

Table IV-3 Product Mix of U.S. Manufacturers'  Sales of Tea 53

Table IV-4 U.S. Per Capita Consumption of Tea 55

Table V-1 U.S. Manufacturers'  Sales of Cocoa 59

Table V-2 U.S. Manufacturers'  Sales of Cocoa, by Type 59

Table V-3 Product Mix of U.S. Manufacturers'  Sales of Cocoa 60

Table V-4 World Cocoa Bean Production, by Region 61

Table V-5 Distribution of World Cocoa Bean Production, by Region 62

Table V-6 Average Cocoa Bean Prices 62

Table VI-1 U.S. Gross Domestic Product 65

Table VI-2 U.S. Gross Private Domestic Investment 65

Table VI-3 U.S. Disposable Personal Income 66

Table VI-4 U.S. Per Capita Disposable Personal Income 66

Table VI-5 U.S. Personal Consumption Expenditures 67

Table VI-6 U.S. Per Capita Personal Consumption Expenditures 67

Table VI-7 Consumer Confidence Index 68

Table VI-8 U.S. Civilian Labor Force, by Gender 68

Table VI-9 U.S. Resident Population Trends and Projections 72

Table VI-10 U.S. Population, by Gender 73

Table VI-11 U.S. Population Trends and Projections, by Age Group 74

Table VI-12 Age Distribution of the U.S. Population 75

Table VI-13 U.S. Population and Household Trends and Projections 76

Table VI-14 U.S. Resident Population Projections, by Region 76

Table VI-15 U.S. Resident Population Projections, by State 77

Table VI-16 Distribution of the U.S. Population, by State 79

Table VI-17 Value of New Private Nonresidential Building Construction, by Type 81

Table VI-18 Annual Prices on the New York Market for Selected Types of Coffee 83

Table VI-19 Sales in the Fast Food and Multi-Unit Restaurant Industry, by Segment 89

Table VI-20 Leading Coffee/Snack Establishments and Convenience Stores 89

Table VI-21 Household Saturation Levels of Coffeemakers, by Type 91

Table VI-22 U.S. Shipments of Coffeemakers 91

Table VI-23 U.S. Shipments of Coffeemakers, by Type 92

Table VI-24 U.S. Shipments of Coffee Grinders and Espresso Makers 92

Table VI-25 Average Annual U.S. Spending on Coffee 94

Table VI-26 Average Annual U.S. Spending on Roasted Coffee 95

Table VI-27 Average Annual U.S. Spending on Instant or Freeze-Dried Coffee 96

Table VI-28 Average Annual U.S. Spending on Tea 97

Table VII-1 Product Preference Study for Coffee and Tea 99

Table VII-2 Retail Sales of Hot Beverages 102

Table VII-3 Retail Sales of Hot Beverages, by Type 105

Table VII-4 Supermarket Sales of Hot Beverages, by Type 106

Table VII-5 Foodservice Sales at Convenience Stores, by Type 109

Table VII-6 Convenience Store Sales of Foodservice Hot Dispensed Beverages, by Type 109

Table VII-7 Convenience Store Shopping Behavior for Hot Dispensed Beverages 111

Table VII-8 Vending Sales of Hot Beverages 115

Table VII-9 Product Mix of Vending Sales of Hot Beverages 115

Table VII-10 Product Mix of Vending Sales of Coffee 116

Table VII-11 Distribution of Vending Prices for Hot Beverages 116

Table VII-12 Product Purchases by Office Coffee Services 118

Table VII-13 Product Purchases by Office Coffee Services, by Type 118

Table VII-14 Coffee Service Equipment Used by Office Coffee Services, by Type 119

Table VII-15 Average Market Distribution Served by Coffee Service Operations 119

Table VII-16 Private-Label Retail Dollar Sales of Selected Hot Beverages 120

Table VII-17 Private-Label Retail Dollar Sales of Selected Hot Beverages, by Type 121

Table VII-18 Retail Sales of Ground Coffee, by Company 123

Table VII-19 Retail Sales of Ground Coffee, by Brand 124

Table VII-20 Retail Sales of Tea Bags/Loose Tea, by Brand 125

Table VII-21 Number of Coffee Shops in the U.S. 128

Table VII-22 Leading Coffee Shop Chains Worldwide 128

Table VII-23 Worldwide Retail Sales of Coffee Shop Chains 129

Table VII-24 Average Coffee Shop Owner' s Profit for a Double Cappuccino 129

Table VIII-1 Media Outlays for Hot Beverages 139

Table VIII-2 Media Outlays for Hot Beverages, by Type 141

Table VIII-3 Top 10 Advertisers of Hot Beverages 142

Table VIII-4 Top 10 Advertised Brands of Hot Beverages 143

Table VIII-5 Media Outlays for Coffee, by Company and Brand 144

Table VIII-6 Media Outlays for Tea, by Company and Brand 149

Table VIII-7 Media Outlays for Hot Cocoa, by Company and Brand 150

Table VIII-8 Advertising Agency Affiliations of Selected Manufacturers of Hot Beverages 154

Table IX-1 Producer Price Trends for Whole-Bean and Ground Roasted Coffee 159

Table IX-2 Producer Price Trends for Whole-Bean and Ground Roasted Coffee, by Type 160

Table IX-3 Producer Price Trends for Instant Coffee 161

Table IX-4 Producer Price Trends for Tea in Consumer Packages 162

Table IX-5 Consumer Price Trends for Coffee 163

Table IX-6 Average Annual U.S. Retail Prices for Roasted Coffee 165

Table IX-7 Average Annual U.S. Retail Prices for Instant Coffee 166

Table X-1 Operating Structure of the Coffee and Tea Industry 170

Table X-2 Gross Operating Margin in the Coffee and Tea Industry 171

Table X-3 Materials Consumed in the Coffee and Tea Industry, by Type 172

Table X-4 Value Added by Manufacture in the Coffee and Tea Industry 173

Table X-5 Vertical Integration Index for the Coffee and Tea Industry 174

Table X-6 Employment Structure of the Coffee and Tea Industry 175

Table X-7 Total Labor Costs in the Coffee and Tea Industry 176

Table X-8 Average Hourly Earnings of Production Workers in the Coffee and Tea Industry 177

Table X-9 Cost of Living Index for Production Workers in the Coffee and Tea Industry 178

Table X-10 Labor Productivity in the Coffee and Tea Industry 179

Table X-11 Indexes of Real Labor Productivity in the Coffee and Tea Industry 180

Table X-12 New Capital Expenditures by the Coffee and Tea Industry 181

Table X-13 Plant vs. Equipment Expenditures by the Coffee and Tea Industry 182

Table X-14 Ending Inventories in the Coffee and Tea Industry 183

Table X-15 Plant Capacity Utilization Rates in the Coffee and Tea Industry 184

Table X-16 Number of Coffee and Tea Manufacturing Establishments 185

Table X-17 Number of Establishments, Number of Employees, and Payroll in the Coffee and Tea Industry, by State 186

Table X-18 Number of Coffee and Tea Manufacturing Establishments, by Employment Size 187

Table X-19 Operating Structure of the Chocolate and Confectionery from Cocoa Beans Industry 189

Table X-20 Gross Operating Margin in the Chocolate and Confectionery from Cocoa Beans Industry 190

Table X-21 Value Added by Manufacture in the Chocolate and Confectionery from Cocoa Beans Industry 191

Table X-22 Vertical Integration Index for the Chocolate and Confectionery from Cocoa Beans Industry 192

Table X-23 Employment Structure of the Chocolate and Confectionery from Cocoa Beans Industry 193

Table X-24 Total Labor Costs in the Chocolate and Confectionery from Cocoa Beans Industry 194

Table X-25 Average Hourly Earnings of Production Workers in the Chocolate and Confectionery from Cocoa Beans Industry 195

Table X-26 Cost of Living Index for Production Workers in the Chocolate and Confectionery from Cocoa Beans Industry 196

Table X-27 Labor Productivity in the Chocolate and Confectionery from Cocoa Beans Industry 197

Table X-28 Indexes of Real Labor Productivity in the Chocolate and Confectionery from Cocoa Beans Industry 198

Table X-29 New Capital Expenditures by the Chocolate and Confectionery from Cocoa Beans Industry 199

Table X-30 Plant vs. Equipment Expenditures in the Chocolate and Confectionery from Cocoa Beans Industry 200

Table X-31 Ending Inventories in the Chocolate and Confectionery from Cocoa Beans Industry 201

Table X-32 Plant Capacity Utilization Rates in the Chocolate and Confectionery from Cocoa Beans Industry 202

Table XI-1 Per Capita and Total Consumption of Coffee in Selected Countries 219

Table XI-2 U.S. Balance of Trade for Coffee and Tea 223

Table XI-3 U.S. Apparent Consumption of Coffee and Tea 224

Table XI-4 U.S. Imports of Coffee and Tea as a Percentage of U.S. Apparent Consumption 224

Table XI-5 U.S. Exports of Coffee and Tea as a Percentage of U.S. Manufacturers'  Sales 225

Table XI-6 U.S. Imports of Coffee and Tea 226

Table XI-7 Dollar Market Shares of the Top 20 U.S. Import Sources for Coffee and Tea 228

Table XI-8 Unit Market Shares of the Top 20 U.S. Import Sources for Coffee and Tea 230

Table XI-9 Dollar Market Shares of the Top 20 U.S. Import Sources for Coffee 231

Table XI-10 Unit Market Shares of the Top 20 U.S. Import Sources for Coffee 232

Table XI-11 Dollar Market Shares of the Top 20 U.S. Import Sources for Tea 233

Table XI-12 Unit Market Shares of the Top 20 U.S. Import Sources for Tea 234

Table XI-13 U.S. Exports of Coffee and Tea 236

Table XI-14 Dollar Market Shares of the Top 20 U.S. Export Destinations for Coffee and Tea 238

Table XI-15 Unit Market Shares of the Top 20 U.S. Export Destinations for Coffee and Tea 240

Table XI-16 Dollar Market Shares of the Top 20 U.S. Export Destinations for Coffee 241

Table XI-17 Unit Market Shares of the Top 20 U.S. Export Destinations for Coffee 242

Table XI-18 Dollar Market Shares of the Top 20 U.S. Export Destinations for Tea 243

Table XI-19 Unit Market Shares of the Top 20 U.S. Export Destinations for Tea 244

Table XI-20 Top Coffee Shops in Canada 251

Table XI-21 U.S. Balance of Trade for Chocolate and Confectionery from Cocoa Beans 252

Table XI-22 Dollar Market Shares of the Top 20 U.S. Import Sources for Cocoa Beans 254

Table XI-23 Unit Market Shares of the Top 20 U.S. Import Sources for Cocoa Beans 255

Table XI-24 Dollar Market Shares of the Top 20 U.S. Import Sources for Unsweetened Cocoa Powder 256

Table XI-25 Unit Market Shares of the Top 20 U.S. Import Sources for Unsweetened Cocoa Powder 257

Table XI-26 Dollar Market Shares of the Top 15 U.S. Import Sources forSweetened Cocoa Powder 258

Table XI-27 Unit Market Shares of the Top 15 U.S. Import Sources forSweetened Cocoa Powder 259

Table XI-28 Dollar Market Shares of the Top 7 U.S. Export Destinations for Cocoa Beans 260

Table XI-29 Unit Market Shares of the Top 7 U.S. Export Destinations for Cocoa Beans 260

Table XI-30 Dollar Market Shares of the Top 20 U.S. Export Destinations for Unsweetened Cocoa Powder 261

Table XI-31 Unit Market Shares of the Top 20 U.S. Export Destinations for Unsweetened Cocoa Powder 262

Table XI-32 Dollar Market Shares of the Top 20 U.S. Export Destinations for Sweetened Cocoa Powder 263

Table XI-33 Unit Market Shares of the Top 20 U.S. Export Destinations for Sweetened Cocoa Powder 264

LIST OF FIGURES

Figure VIII-1 Media Outlays for Hot Beverages 137

Figure VIII-2 Distribution of Media Outlays for Hot Beverages, by Type 139

Figure XI-1 U.S. Balance of Trade for Coffee and Tea 221

Figure XI-2 Dollar Market Shares of the Leading U.S. Import Sources for Coffee and Tea 226

Figure XI-3 Unit Market Shares of the Leading U.S. Import Sources forCoffee and Tea 228

Figure XI-4 Dollar Market Shares of the Leading U.S. Export Destinations for Coffee and Tea 236Figure XI-5 Unit Market Shares of the Leading U.S. Export Destinations for Coffee and Tea 238