Iconic brands such as Folgers and Maxwell House are reviewing their portfolios and launching products to meet enhanced consumer expectations for high-quality coffee. In 2006, Folgers launched a premium line extension, Folgers Gourmet Selection, with eight varieties.
Similarly, Sam’s Club’s Bom Dia’s Marques de Paiva – a Fair-Trade certified brand – has tripled in sales since it launched in 2003. The brand is priced at $9.88, a 47 percent discount to Starbuck’s displayed next to it in the shelf.
As such, the report noted, consumers will be met with an expanding array of higher-quality coffees at prices that straddle the current premium-regular chasm, boosting revenue for the traditional, old-line brands, and putting pressure on current premium offerings.
THE HEALTH FACTOR
Increasing research and media attention to coffee’s health-promoting benefits may drive growth, the report noted.
Scientists are increasingly exploring the health-promoting benefits of coffee. Research performed in recent years is likely to benefit the coffee market in the future much in the same way as such studies have benefited the tea market.
Total U.S. sales of coffee are predicted to increase 35 percent at current prices and to increase 19 percent at constant prices from 2007 to 2012. By comparison, from 2002 to 2007, total U.S. sales of coffee increased by 36 percent at current prices and increased 19 percent at constant 2007 prices.
COMPETITIVE BEVERAGES COULD IMPACT FUTURE SALES
The forecast for U.S. sales of coffee will be affected by changes in the following factors:
- Competition from other beverages: Alternative drinks to coffee including tea and energy drinks are competitors to coffee in the broader market of stimulating beverages. The forecast recognizes that demand for and sales of coffee during the next five years will be affected by the preferences of consumers for these alternatives. If there were an increased switch to alternatives to coffee during the forecast period, whether for taste, price, lifestyle, or other factors, it would be likely that sales of coffee would be less than forecast.
- Competition from coffeehouses and restaurants: The coffee market is primarily a do-it-yourself market that implies additional work by consumers to obtain the end product of a cup of coffee. Time-starved consumers, seeking convenience and consistent, high-quality coffee, have increasingly turned to coffeehouses and restaurants to purchase ready-made coffee, both near their workplaces and homes. If there were a greater than expected reliance by consumers on coffee purchased at coffeehouses and restaurants during the next five years, ready-to-drink sales will exceed the forecast.
- Health factors: Any new scientific research on the health benefits or risks of coffee consumption will likely shift consumption of coffee and cause future sales to differ from the forecast accordingly. As has happened in the tea market, research that suggests that antioxidants in caffeine and lower risk of cirrhosis of the liver among high-frequency coffee drinkers will potentially cause sales of coffee to increase. If there were future medical studies during the forecast period that suggest clear benefits or risks of coffee consumption, future sales would be expected to differ from the forecast.
- Price changes: Consumer demand for coffee is inelastic: any percentage increase in price will result in a lower percentage decrease in units sold with the result that total dollar sales will increase. This was the scenario during the steep price increase of 2005.
Coffee prices are expected to increase during the next five years. Any unexpected rise or fall in the price of coffee during the next five years would be expected to cause future sales to exceed or fall short of the forecast, respectively.
The number of new organic coffee products increased steadily during 2002 through 2004, but appears to have cooled down in 2006 and 2007. Shoppers looking for products free from chemical additives, preservatives and pesticides are consuming natural and organic foods.
ORGANIC SALES TO INCREASE
According to Mintel’s Organic Beverages, another research report released in 2007, 51 percent of consumers purchased organic foods or beverages in the past year. Despite the lower offerings in 2006/2007, organic brands have found a favorable consumer response.