It’s no surprise to anyone in the coffee business that the last 5-year trend has been one of growth. In 2007, coffee sales through all retail channels reached $6.5 billion, growing 36 percent in current prices and 19 percent after accounting for inflation from 2002 to 2007.
The good news is the next 5-year period is expected to follow this trend, as consumers enjoy the convenience of ready-to-drink coffee and as coffee roasters and service providers continue to expose consumers to more variety.
These are some of the key insights of a 2007 market study on coffee by the Mintel Group, a research organization. The report was based on responses to questionnaires sent to 1,554 consumers 18 years and older in late 2007 over the Internet
Worksite coffee providers are winning their fair share of the coffee market, the report indicates. However, worksite coffee providers continue to face stiff competition for consumers’ coffee purchases, and alternative beverages are beginning to invade the space that coffee has historically held as an energy booster.
HIGHER PRICING AND OTHER FACTORS DRIVE GROWTH
Factors driving the growth include:
- Premium/specialty products (higher price points);
- Continued growth and popularity of coffee houses;
- Higher prices;
- Popularity of ready-to-drink (RTD) coffee.
Ready-to-drink coffee sales increased by 102 percentage points in the 5-year period, compared to ground, instant and whole bean sales, which grew by 15 percentage points.
Key factors driving the growth of ready-to-drink sales are the convenience and the ability to relive the coffeehouse experience outside of the coffee house.
The report noted that single-cup coffee systems are an attempt to target consumers who like a “perfect cup” of fresh coffee matching that of professionally brewed coffee.
WHERE THEY DRINK COFFEE
Although 83 percent of coffee-drinking respondents say they drink coffee at home, the home faces competition from numerous venues, with coffeehouses as the biggest competitor (40 percent).
Respondents aged 18- to 34-years old are least likely to prepare coffee at home; this group is 55 percent more likely than the average to visit coffeehouses.
Although respondents from all income groups exhibit similar incidence of drinking coffee at home, the incidence of drinking coffee at coffeehouses increases with household income of respondents. This suggests that affluent coffee drinkers, who are more likely to use premium brands, are drinking coffee at home less frequently.
Hispanics are 53 percent more likely than the average coffee-drinking population to visit coffeehouses. This population group is experiencing double-digit population growth, and sales won by coffeehouses translate into lost sales for coffee for home consumption.
WORK PLACE IS COMPETITIVE WITH OTHER CHANNELS
Chart 2 indicates that the work place is competitive with other away-from-home channels.
The younger groups are more frequent consumers of the coffee houses. This partly reflects the freedom these consumers have with their time. But it also indicates where they are picking up their consumption habits.
The younger consumers are also more frequent consumers of convenience stores and donut shops, which reflects the marketing that these channels have been doing.
The chart also indicates that work place providers are relying more on the younger age groups.
Looking at income levels, the most affluent consumers are doing the most buying at the coffee houses.
The work place providers are relying more on the more affluent consumers as well.
REASONS FOR DRINKING COFFEE
Taste is the most frequent (74 percent) reason respondents drink coffee — a reason that becomes more likely as respondent age increases, demonstrating a higher degree of loyalty among older respondents, who may have the coffee habit.
Coffee has traditionally been associated with waking up and enhancing efficiency, which is why a majority of respondents (64 percent) identify it as a get-me-going tool in the morning.