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

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 McCaf�s

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 Caf� W; Licensed Caf�s and Kiosks

Books Go Better with Caf�s

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; McCaf�s 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; Caf�s and Foodservice
Competitor Profile: Nestl� USA, Inc.: Company Overview; Nestl� Leads Instant Coffee Market; Nestl� 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)