Starbucks, PepsiCo Hold Sales Lead In U.S. RTD Coffee Market

The North American Coffee Partnership, a joint venture set up by Starbucks and PepsiCo, announced that it continues to hold a commanding lead in the U.S. ready-to-drink (RTD) coffee market sales, with a 72 percent off-trade value share in 2012. The company did see its off-trade value share decline from 77 percent in 2011, as it faced competition from Monster Beverage and new entrant WhiteWave Foods Co.

The company’s Frappuccino was the first mover in RTD coffee, with a flavor approximating to the popular Starbucks blended drink of the same name. The brand also has a large advantage in terms of distribution from its first mover status, and new entrants often struggle to gain entry into national chained stores. However, Starbucks Corp. has been challenged by a sharp decline in its signature iced Frappuccino franchise in recent years, according to the company’s release. To combat the issue, it has taken several measures, including introducing more RTD coffee varieties.

RTD coffee has been able to grow in the U.S. as manufacturers capitalize on consumers’ love affair with sweet flavors. Not all Americans like the bitter taste of brewed coffee; however, many have become familiar with iced coffee drinks such as Starbucks Frappuccino through visits to coffee houses. As a premium priced, indulgent drink, RTD coffee was particularly vulnerable to the consumer shift in spending that occurred during the recent economic downturn. Off-trade value sales declined by 6 percent in 2009. An improvement in the U.S. economy led to an 8 percent value gain in 2011, followed by a 17 percent gain in 2012. Off-trade volume sales grew by 25 percent in 2012, a huge increase from the 8 percent (compound annual growth rate) CAGR of the review period.

Despite an increase in health and wellness awareness, RTD coffee sales are expected to continue growing strongly. Off-trade value sales of RTD coffee are expected to grow by 27 percent between 2012 and 2017, to reach U.S. $1.9 billion. Total volume is expected to grow by 22 percent over the forecast period to reach 358 million liters, compared to growth of 41 percent over the review period. The slowdown in sales is typical of a maturing category. Sales are expected to continue growing, as manufacturers are expected to launch more products that emphasize the healthy aspects of the beverages.

Though they are positioned as a caffeinated indulgent beverage choice for adults, many of the products do contain protein and calcium. Americans’ interest in protein has helped drive sales of Greek yogurt. More lower calorie RTD coffees are expected as well. The April 2013 launch of Starbucks Iced Coffee Coffee+Milk (Low Calorie), with only 50 calories, is a step in that direction. Ferolito, Vultaggio & Sons Inc.’s Joltin’ Joe, launched in September 2012, is sweetened with stevia and contains 100 calories per 16 ounce can.

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