Hot Drinks in the US

Abstract

Why buy this report

• Get insight into trends in market performance
• Pinpoint growth sectors and identify factors driving change
• Identify market and brand leaders and understand the competitive environment

Product coverage

Coffee; Other hot drinks; Tea

Executive summary

Premiumisation trend is most evident in coffee

Coffee remained the largest sector in the US hot drinks market by a large margin in 2007. Supply shortages coupled with steep increases in energy and transportation costs drove most coffee manufacturers to raise their unit prices during the year. This supported healthy growth in retail current value sales but limited growth in volume terms. Strong growth in current value sales was also attributable to a general trend towards premium products, especially more novel organic, fair-trade, and Rainforest Alliance brands. Standard mid-priced coffee brands like Folgers and Maxwell House struggled to maintain their sector positions as competition from smaller premium brands intensified. The launch of Folgers Gourmet in 2007 signals that the premiumisation trend is even filtering down to brands that have traditionally had a mass-market positioning.

Rising awareness of health benefits drives the positive development of tea

In 2007, increasing health concerns among US consumers spurred new interest in tea, particularly antioxidant-rich green, white and red tea products. During the review period, several studies reinforced consumer awareness of the health benefits of certain types of tea. Manufacturers sought to capitalise on this trend by launching new tea products containing antioxidant-rich ' superfoods' such as pomegranate, blueberry, and acai. While white, rooibos and oolong tea products have long lined the shelves of specialist tea outlets in the US, growing consumer interest allowed them to penetrate mainstream retail outlets towards the end of the review period. In 2007, most major grocery retailers chains carried a wide range of green, white, red, rooibos and oolong tea products.

Functional products aim to stem decline in other hot drinks consumption

Chocolate-based flavoured powder drinks and malt-based hot drinks continued to suffer from a lack of interest among US consumers in 2007. During the review period, both categories showed consistent declines in retail volume sales, as the traditionally high sugar and calorie content of products did not sit well with the wider trend towards healthier lifestyles. ConAgra Foods Inc tried a new approach in 2007 with the launch of its Great Start and Pick Me Up Swiss Miss variants, both of which contain added functional ingredients: the former contains added vitamins and minerals, while the latter contains added caffeine. While products fortified with calcium and vitamins have been launched by flavoured powder drinks manufacturers in the past, these have usually been targeted at parents seeking healthier alternatives for their children. The new Swiss Miss products launched in 2007 are targeted at adults, primarily women. If successful, this new approach should help to slow the decline in chocolate-based flavoured powder drinks consumption over the forecast period.

Diverse on-trade offerings drive consumer interest in coffee

Specialist coffee shops outlets like those in the Starbucks chain remained the most popular on-trade locations for US consumers to buy coffee during the review period. Other foodservice chains like 7-Eleven, Dunkin Donuts, Burger King and McDonald' s took note and invested heavily in upgrading the quality of their coffee offerings in an attempt to win over consumers. McDonald' s announced perhaps the most ambitious strategy to date, with the rollout of café complete with lattes, mochas and trained baristas planned for its US outlets in 2008. Looking to replicate the success of the Starbucks brand at the retail level, in 2007 Dunkin Donuts and Caribou Coffee became the latest on-trade operators to launch fresh ground coffee and fresh coffee beans products in supermarkets/hypermarkets and other off-trade channels. On-trade outlets were also the source of several innovations in coffee towards the end of the review period, from functional coffee with added guarana to new flavour variants adaptable to regional preferences. Over the forecast period, on-trade outlets are poised to play an increasingly important role in shaping consumer tastes for hot drinks products of all kinds in the US.