Coffee in the U.S.: Retail, Foodservice and Consumer Trends

Table of Contents

Chapter 1: Executive Summary

• Scope of Report: Foodservice and Retail Markets
• Product Breakouts
• Report Methodology

The Market

• 2007 Sales Approach $44 Billion
• Foodservice Is Largest Channel in Dollar Sales
• Figure 1-1: Share of Total U.S. Dollar Sales of Coffee: Foodservice vs. Retail, 2003 vs. 2007 (percent)
• Ground Coffee Dominates Retail Sales
• Market Outlook
• Looking Ahead
• Coffee Popular Worldwide

The Marketers

• A Complex Marketing Structure
• Hundreds of Marketers
• Kraft, Procter & Gamble Dominate Mainstream Coffee

Marketing and New Product Trends

• Cross-Branding Foodservice and Retail Brands
• Licensed Brands Another Popular Option
• New Products Proliferate at Retail
• Figure 1-2: Number of New Coffee Introductions, 2003-2008
• The Top Retail Trends: Upscale, Organic/Natural, Single-Serve, Fair Trade
• Higher Quality Coffee in Foodservice
• Coffee for a Cause
• Hybrid Coffee/Energy Drinks
• New Entries Brewing in Ready-to-Drink Coffee

Distribution and Sales Channels

• Explosion of Foodservice Locations
• Starbucks the No. 1 Coffeehouse
• QSRs Perk Up Their Coffee Offerings
• Types of Retail Outlets

The Consumer

• Coffee Tops List of America' s Favorite Beverages
• The Coffee Generation Gap
• Foodservice Coffee Drinkers
• Packaged Coffee Purchasers
• One Out of Four Households Use Folgers Ground or Whole Bean Coffee
• Figure 1-3: Leading Packaged Coffee Products and Brands by Usage Rates, 2007 (percent of U.S. households)
• Consumer Attitudes and Shopping Behavior

Chapter 2: The Products

Introduction

• Scope of Report: Foodservice and Retail Markets
  • Dollar Sales Based on Retail Value
• Excluded Products

Product Breakouts

• Product Types
  • Coffee Brewed and Served by the Cup
  • Ground Coffee
  • Whole Bean Coffee
  • Single-Serve Pods and Capsules
  • Instant/Freeze-Dried Coffee
  • Instant Cappuccino and Specialty Coffee Mixes
  • Liquid Coffee Concentrates
  • Packaged Ready-to-Drink (RTD) Coffee Beverages
• IRI Categories
• Additional Descriptors
  • Coffee-Growing Countries
• Figure 2-1: World Coffee Production, Marketing Years 2003/04-2007/08 (number of bags in millions)
  • Arabica vs. Robusta
  • Decaffeinated Coffee
  • Types of Roasts
  • Espresso: A Brewing Process as Well as a Roast
  • Blends vs. Varietals
  • Estate Coffee
  • Flavors
  • Organic Coffee and Sustainably Grown Coffee
  • Fair Trade Coffee
  • Shade-Grown Coffee

Chapter 3: The Market

Market Size and Growth

• Higher Coffee Prices Drive Dollar Sales Growth
• 2007 Sales Approach $44 Billion
• Table 3-1: Total U.S. Sales of Coffee, 2003-2007 (in millions of dollars)
• Foodservice Sales Top $38 Billion
• Table 3-2: U.S. Sales of Coffee Through Foodservice Channels, 2003-2007 (in millions of dollars)
• Retail Sales of Coffee Near $5.7 Billion
• Table 3-3: U.S. Sales of Coffee Through Retail Channels, 2003-2007 (in millions of dollars)

Market Composition

• Foodservice Is Largest Channel in Dollar Sales
• Figure 3-1: Share of Total U.S. Dollar Sales of Coffee: Foodservice vs. Retail, 2003 vs. 2007 (percent)
• Ground Coffee Dominates Retail Sales
• Figure 3-2: Share of U.S. Retail Dollar Sales of Coffee by Product Type, 2003 vs. 2008 (percent)
• Decaffeinated Coffee Just 10% of Retail Coffee Sales
• Figure 3-3: Share of U.S. Retail Dollar Sales of Ground Coffee: Regular vs. Decaffeinated, 2003 vs. 2008 (percent)
• Figure 3-4: Share of U.S. Retail Dollar Sales of Instant Coffee: Regular vs. Decaffeinated, 2003 vs. 2008 (percent)
• Private Label About 8% of Retail Sales
• Figure 3-5: Share of U.S. Retail Dollar Sales of Coffee: Branded vs. Private Label, 2003 vs. 2008 (percent)
• Specialty Coffees 30% of the Market
• Foodservice Sales Strongest in Restaurants
• Figure 3-6: Share of U.S. Foodservice Dollar Sales of Coffee by Venue, 2008 (percent)
• Supermarkets Are Primary Retail Sales Channel
• Figure 3-7: Share of U.S. Retail Dollar Sales of Coffee by Channel, 2008 (percent)
• Retail Sales Highly Seasonal
• Regional Sales

Market Outlook

• Economic Downswing Not Good News
  • Consumer Behavior Changing
  • Impact on Coffee
• A Shift to Gourmet/Specialty Coffee
• "Friendly Service" a Top Foodservice Driver
• Four Out of Five Americans Drink Coffee
• Competition from Other Beverages
• Table 3-4: Coffee in Context: Comparative Penetration of Beverages, 2003-2007 (% of U.S. adults)
• PR Keeps Coffee' s Health Benefits in the News
• Coffeemakers Lead in Small Electric Kitchen Appliances
• Figure 3-8: Unit Shipments of Coffee-Related Small Electric Kitchen Appliances, 2006-2010 (in thousands)
• Single-Serve Systems Begin to Take Off
• Wholesale and Retail Coffee Prices Fluctuate Up and Down
• Figure 3-9: Average U.S. Retail Coffee Prices for Roasted Coffee, 2003-2007 (in dollars)
• Figure 3-10: Consumer Price Index and Producer Price Index for Coffee, 2000-2008
• Coffee Pricing Volatile
• Raw Coffee Prices Soar into 2008
• Table 3-5: Composite Green Coffee Prices, 2005-2008 (in cents per pound)

Looking Ahead

• Importance of Environmental and Social Responsibility Will Grow
• Opportunities for Coffee with Health and Wellness Benefits
• Opportunities to Market Coffee to Hispanic Consumers
• Figure 3-11: Projected Hispanic Population as Percent of Total U.S. Population
• Table 3-6: High-Index Coffee Products and Brands Among Hispanic Consumers, 2007 (index)

Projected Market Growth

• Coffee Sales Will Surpass $59 Billion by 2012
• Table 3-7: Projected Total U.S. Sales of Coffee, 2007-2012 (in millions of dollars)
• Foodservice Sales to Near $52 Billion
• Table 3-8: Projected U.S. Sales of Coffee Through Foodservice Channels, 2007-2012 (in millions of dollars)
• Retail Sales Will Grow to Almost $7.8 Billion
• Table 3-9: Projected U.S. Sales of Coffee Through Retail Channels, 2007-2012 (in millions of dollars)

International Perspective

• Coffee Popular Worldwide; U.S. Consumes One-Fifth
• Table 3-10: Per Capita Consumption of Coffee in Top 10 Importing Countries vs. the United States, 2003-2007 (in kilograms of coffee beans)
• U.S. Coffee Imports and Exports
• Opportunities for U.S. Players
• New Product Trends
  • New in Japan
  • Functional Coffee Drinks
  • U.S. Potential a Mixed Bag

Chapter 4: The Marketers

Competitive Overview

• A Complex Marketing Structure
• Hundreds of Marketers
• Major Coffee Marketers
  • Foodservice Cross-Over
• Specialty Coffee Marketers
• Hispanic-Style Coffee Marketers
• Joint Ventures Provide Synergies
  • The North American Coffee Partnership
  • Coca-Cola, Godiva, Caribou and More
• Mergers, Acquisitions and Divestures Shape Industry
• Competitive Positioning

Retail Marketer and Brand Shares

• Methodology
• Kraft, Procter & Gamble Dominate Mainstream Coffee
• Folgers Captures One Out of Four Dollars
• Figure 4-1: Top Packaged Coffee Brands by Share of Retail Dollar Sales, 2008 (percent)
• P&G, Kraft Lead Ground Coffee Category
• Figure 4-2: Top Brands of Regular Ground Coffee by Share of Retail Dollar Sales, 2008 (percent)
• Ground Decaf Tips Scales at $258 Million
• Figure 4-3: Top Brands of Ground Decaffeinated Coffee by Share of Retail Dollar Sales, 2008 (percent)
  • The Up-and-Comer: Pods
• Figure 4-4: Top Three Coffee Pod Brands by Share of Retail Dollar Sales, 2008 (percent)
• Starbucks and Eight O' Clock Top Whole Bean Brands
• Figure 4-5: Top Whole Bean Coffee Brands by Share of Retail Dollar Sales, 2008 (percent)
• Instant Coffee a Declining Category
• Figure 4-6: Top Brands of Regular Instant Coffee by Share of Retail Dollar Sales, 2008 (percent)
• Instant Decaf Plunging Even Faster
• Figure 4-7: Top Brands of Instant Decaffeinated Coffee by Share of Retail Dollar Sales, 2008 (percent)
• Starbucks Dominates RTD Coffee
• Figure 4-8: Top Brands of Ready-to-Drink Coffee by Share of Retail Dollar Sales, 2008 (percent)
• Liquid Coffee Concentrates a Tiny Business at Retail
• Table 4-1: Top Marketers and Brands of Packaged Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-2: Share of IRI-Tracked Sales of Packaged Coffee by Marketer and Brand, 2003-2007 (in millions of dollars)
• Table 4-3: Top Marketers and Brands of Regular Ground Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-4: Share of IRI-Tracked Sales of Regular Ground Coffee by Marketer and Brand: 2003-2007 (in millions of dollars)
• Table 4-5: Top Marketers and Brands of Ground Decaffeinated Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-6: Share of IRI-Tracked Sales of Ground Decaffeinated Coffee by Marketer and Brand: 2003-2007 (in millions of dollars)
• Table 4-7: Top Marketers and Brands of Whole Bean Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-8: Share of IRI-Tracked Sales of Whole Bean Coffee: 2003-2007 (in millions of dollars)
• Table 4-9: Top Marketers and Brands of Regular Instant Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-10: Share of IRI-Tracked Sales of Regular Instant Coffee: 2003-2007 (in millions of dollars)
• Table 4-11: Top Marketers and Brands of Instant Decaffeinated Coffee by RI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-12: Share of IRI-Tracked Sales of Instant Decaffeinated Coffee: 2003-2007 (in millions of dollars)
• Table 4-13: Top Marketers and Brands of Ready-to-Drink Coffee by IRI-Tracked Sales and Share: 2007 vs. 2008 (in millions of dollars)
• Table 4-14: Share of IRI-Tracked Sales of Ready-to-Drink Coffee: 2003-2007 (in millions of dollars)

Chapter 5: Marketing and New Product Trends

Marketing Trends

• Cross-Branding Foodservice and Retail Brands
• Licensed Brands Another Popular Option
• Sampling and Giveaways
• Celebrity Spokespeople
• Product Customization Is Customary
• Packaging Innovations Emphasize Fresh, Convenience, Branding

New Product Trends

• New Products Proliferate at Retail
• Figure 5-1: Number of New Coffee Introductions, 2003-2008
• The Top Retail Trends: Upscale, Organic/Natural, Single-Serve, Fair Trade
• Figure 5-2: Number of New Coffee Introductions by Top Package Tags/Claims: 2006 vs. 2007
• Chapter 5: Marketing and New Product Trends [Cont.]
• Table 5-1: Number of New Coffee Introductions by Package Tags/Claims, 2003-2007
• Higher Quality Coffee in Both Foodservice and Retail
• Coffee for a Cause
• Light vs. Dark Roasts
• Flavored Coffees Becoming More Sophisticated
• Single-Origin Coffees
• Limited Editions
• Hybrid Coffee/Energy Drinks and Other Spins
  • Java Monster
  • Coca-Cola' s Full Throttle
  • C-Store Push Includes 7-Eleven' s Fusion Energy
  • Other Coffee Hybrids
• Coffee the Latest Functional Beverage
• Iced Coffee Hot in Foodservice
• New Entries Brewing in Ready-to-Drink Coffee
• In Retail, Private Label Has Room to Grow
• Marketers Extending Single-Serve Coffee Options
• Some Coffees Trade on the Novelty of their Names
• Instant Coffee and Instant Specialty Coffee Bank of Convenience
• Liquid Coffee Concentrates

Chapter 6: Distribution and Sales Channels

Foodservice Overview

• Foodservice Venues
• Foodservice Distribution Methods
• Explosion of Foodservice Locations
• Foodservice Sales Strongest in All Types of Restaurants
• Table 6-1a: Share of Dollar Sales of Meals and Snacks Away from Home: By Type of Outlet, 2003-2006 (percent)
• Table 6-1b: Share of Dollar Sales of Meals and Snacks Away from Home: By Type of Outlet, 2003-2006 (percent)
• Restaurant Industry Sales Reach New Record
  • What' s Hot & What' s Not
• Foodservice Competition Grows
• Table 6-2: Major U.S. Quick-Service Restaurants with a Strong Coffee Niche, 2007 (dollars, percent and number)
• Coffeehouses on Every Corner
• Starbucks the No. 1 Coffeehouse
• QSRs Perk Up Their Coffee Offerings
  • McDonald' s Switches to Premium Coffee, Launches McCafés
  • Burger King Pioneers Premium Coffee with BK Joe
  • Dunkin' Donuts Leads QSRs in Coffee Servings
  • Wendy' s Also Aiming to Be a Coffee Destination
  • Jack In The Box Another QSR Competitor
• More Drive-Thrus and Customized Options, But Fuel Costs May Hamper Sales
• Convenience Stores a Lively Competitor
  • 7-Eleven Plays Up Freshness
  • Sheetz Offers Barista-Staffed Coffee Bars
  • At ExxonMobil, ' Serious Gourmet Coffee Without the Fuss'
  • Hess and Pantry Gourmet Offers Co-Branded Takes
  • Walgreen Tests Café W
• Licensed Cafés and Kiosks
  • Books Go Better with Cafés
  • Mountain Mudd Franchises its Concept to C-Stores
• Office Coffee Service an Important Perk
• Vending Machines Lagging Behind
  • Starbucks to Field Vending Machines
• Hotel Coffee Programs
• Airline Coffee Programs

Retail Overview

• Retail Distribution Methods
• Smaller Marketers Work Through Brokers
• Types of Retail Outlets
• Supermarkets Lead Retail Market for Packaged Coffee
• Mass Merchandisers and Supercenters
• Warehouse Clubs
• Gourmet/Specialty Food Stores
  • The Balducci' s Example
• Health and Natural Food Stores
• Internet, Mail Order, and Subscriptions

Chapter 7: Competitor Profiles

Competitor Profile: Caribou Coffee Co., Inc.

• Company Overview
• Expansion Strategy
  • 2008 Initiatives

Competitor Profile: Dunkin' Brands, Inc.

• Company Overview
  • A Competitive Upstart
  • Advertising Push
• The Dunkin' Donuts Consumer
• Dunkin' Donuts Coffee and Donuts at More Locations
• Retail Expansion Also on the Menu
• Strategic Alliances Build a Branded Presence

Competitor Profile: Green Mountain Coffee Roasters, Inc.

• Company Overview
• Balanced, Multichannel Distribution
• The Keurig Connection
• Social Responsibility a Strong Driver

Competitor Profile: Kraft Foods, Inc.

• Company Overview
• Maxwell House
  • The Arabica Advertising Push
• Yuban
• Sanka
• General Foods International Coffee Mixes
• Starbucks Agreement
• Gevalia Kaffe
• Kraft Expands Tassimo Home Brewing System
  • Kraft Launches Advertising "Webisodes"

Competitor Profile: McDonald' s Corp.

• Company Overview
• McDonald' s Upgrades Its Coffee…
• …and Takes on Starbucks
• Advertising Approaches
• McCafés Abroad

Competitor Profile: Massimo Zanetti Beverage USA, Inc.

• Company Overview
• Chock full o' Nuts: A New York Favorite
• Hills Bros. Popular with Heavy Coffee Drinkers
• MJB Premium Coffee in the Pacific Northwest
• Chase & Sanborn Offers Affordable Price
• Cafés and Foodservice

Competitor Profile: Nestlé USA, Inc.

• Company Overview
• Nestlé Leads Instant Coffee Market
• Nestlé Plans to Expand its Nespresso Espresso System

Competitor Profile: Peet' s Coffee & Tea, Inc.

• Company Overview
• It' s All About the Coffee
• Peet' s Retail Stores
• Peet' s Expands to Grocery Channels, and Eastward
• Peet' s in Foodservice

Competitor Profile: The Procter & Gamble Co.

• Company Overview
• Mainstream Folgers the Nation' s Leading Coffee Brand
• Millstone, P&G' s Mass-Gourmet Brand
• P&G Partners with Dunkin' Donuts
• P&G Sells Folgers Unit to Smucker

Competitor Profile: Sara Lee Corp.

• Company Overview
• Sara Lee Exits U.S. Retail Coffee Business…
• …But Keeps Senseo
• Company Is Largest Foodservice Player
• Sara Lee Thrives in Coffee Internationally

Competitor Profile: The J.M. Smucker Co.

• Company Overview
• Smucker Buys Folgers Coffee Business

Competitor Profile: Starbucks Corp.

• Company Overview
• Expansion Through Acquisitions
• The Starbucks Coffeehouse Phenomenon
• Starbucks Expands Drive-Thrus
• Foodservice Operations
• Profitable Partnerships in Consumer Packaged Goods
  • Kraft Markets Starbucks' Ground and Whole Bean Coffee
  • The North American Coffee Partnership
  • Other Partnerships, Other Products
• Starbucks Tests Vending and Self-Serve Kiosks
• Starbucks Reevaluates and Regroups
  • Company Brings Back Howard Schultz, Shutters 600 Stores
  • Starbucks Takes Time Out to Retrain Baristas
  • Strategic Initiatives
• Starbucks Begins Perks for Loyal Customers
• "My Starbucks Idea" Yields Viable Suggestions
• Starbucks Criticized on a Number of Fronts
• Starbucks Lowers Financial Expectations
• Starbucks Launches Pike Place Roast and Other New Products
  • Starbucks Limited Reserve
  • New Products, Including Health/Weight Targeted Ones
• Three New Beverage Platforms for a Transformation Agenda
• Starbucks Boosts Advertising
• Social Responsibility
• Employees Win Lawsuit

Chapter 8: The Consumer

The Consumer

• Coffee Tops List of America' s Favorite Beverages
• 80% of Adults Drink Coffee
• Table 8-1: Annual Consumption of Coffee by Type, 2004-2008 (percent of U.S. adults)
• Daily Consumption of Gourmet Coffee at an Unprecedented High
• The Coffee Generation Gap
• Figure 8-1: Daily Coffee Consumption by Age, 2004-2008 (percent of U.S. adults)
• QSR Magazine Survey of Fast-Food Consumers
• Where Coffee Is Consumed
• How Consumers Get Their Morning Java Jolt
• Figure 8-2: How Consumers Get Their Morning Java Jolt, 2008 (percent)
• Consumers Buy Coffee on Auto-Pilot

Consumer Use and Demographics

• Simmons Consumer Survey
• Foodservice Coffee Drinkers
• Figure 8-3: Leading Fast-Food and Drive-In Chains, 2007 (percent of U.S. adults)
• Packaged Coffee Purchasers
• Figure 8-4: Coffee Usage Rates by Product Type, 2007 (percent of U.S. households)
• Demographic Indicators by Product Type
• Regular vs. Decaf Users
• 27% of All Households Drink Three to Six Cups of Coffee Daily
• Figure 8-5: Trended Use of Ground or Whole Bean Coffee: By Heavy, Average and Light User Households, 2003-2007 (percent of total U.S. households)
• Demographic Indicators for Heavy, Average and Light User Households
• One out of Four Households Use Folgers Ground or Whole Bean Coffee
• Figure 8-6: Leading Packaged Coffee Products and Brands by Usage Rates, 2007 (percent of U.S. households)
• A Detailed Look at Coffee Usage
• Demographic Indicators by Product and Brand
• Consumer Attitudes and Shopping Behavior
• Organic Coffee and Tea Purchasers
• Figure 8-7: Top Organic Grocery Categories, 2008 (percent of U.S. adults)
• Figure 8-8: Top Retail Chains for Organic Grocery Categories: Percent of Organic Grocery Shoppers Purchasing Most Often at That Chain, 2008 (U.S. adults)
• Table 8-2: Top Demographic Indicators for Selected Fast-Food and Drive-In Chains, 2007 (index)
• Table 8-3: Trended Number of Coffee Users by Product Type, 2003-2007 (U.S. households)
• Table 8-4: Top Demographic Indicators for Coffee by Product Type, 2007 (index)
• Table 8-5: Trended Number of Coffee Users, Regular vs. Decaffeinated, 2003-2007 (U.S. households)
• Table 8-6: Top Demographic Indicators for Ground or Whole Bean Coffee Use: By Heavy, Average and Light User Households, 2007 (index)
• Table 8-7: Usage Rates for Packaged Coffee by Product Type and Brand, 2007 (percent of U.S. households)
• Table 8-8: Top Demographic Indicators for Selected Ground Coffee Brands, 2007 (index)
• Table 8-9: Top Demographic Indicators for Selected Ready-to-Drink (RTD) Coffee Brands, 2007 (index)
• Table 8-10: Top Demographic Indicators for Selected Instant/Freeze-Dried Coffee Brands, 2007 (index)
• Table 8-11: Top Demographic Indicators for Selected Espresso/Cappuccino Brands, 2007 (index)
• Table 8-12: Top Demographic Indicators for Selected Instant Specialty Coffee Mix Brands, 2007 (index)
• Table 8-13a: Shopper Indexes by Type of Coffee: Eating and Shopping Attitudes and Behavior, 2007 (U.S. households)
• Table 8-13b: Shopper Indexes by Type of Coffee by Attitudes and Shopping Behavior, 2007 (U.S. households)