A Hot - and Cold - Segment

November 1, 2007
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A Hot – and Cold – Segment

Sarah Theodore

Coffee is big business these days, as shown by the success of this month’s cover company, Starbucks, and its CPG ventures with PepsiCo, Kraft and many others. It also was the subject of a standing-room only session at the NACS Show early this month. Convenience store operators packed the session that discussed the demographics of today’s coffee consumers and what they can do to capture those sales. The speakers emphasized many of the same points you’ll read in the Starbucks profile — consumers are more knowledgeable than ever about coffee, they are trending toward espresso-based products and are looking for quality and consistency, whether they get their coffee at the local convenience store, fast food restaurant or coffeehouse.
One of the most interesting points the speakers emphasized was the growing popularity of iced coffee. The biggest segment for iced coffees and cappuccinos, including frozen drinks, is 18- to 24-year-old consumers, according to Margaret Heery, vice president of national accounts and strategic marketing at Bunn. Sales of iced coffee among younger twentysomethings skew higher than average in every region of the country, from about three index points in the Northeast, where iced coffee sales are highest overall, to 168 points higher in the Midwest and 179 points in the South, where iced coffee is a less mature market.
“Many stores sell iced coffees and cappuccinos — have you considered it?” she asked NACS attendees, pointing to retailers such as Dunkin’ Donuts, 7-Eleven and Starbucks. Iced/frozen coffee is typically ordered for breakfast or for an afternoon treat, Heery said. The primary reason for ordering is, “I’m treating myself.” She also pointed out that younger consumers who currently order these types of products aren’t suddenly going to stop when they turn 25; they will take those preferences with them.
Most of the session dealt with dispensed iced coffees, but the ready-to-drink segment also is grabbing attention. Coca-Cola has set up three coffee ventures targeting the segment. It recently announced a deal with Italy’s Illy Café, and last year teamed with both Caribou Coffee and Godiva to create RTD coffees. And check out what Starbucks has done in the world’s largest RTD coffee market, Japan, on page 32 of this issue.
The interest shown by the c-store retailers at NACS and the innovation we’ve seen during the past year shows that coffee, one of the world’s oldest beverage segments, continues to be one of the most important. To Heery’s point, part of that is likely because it spans everything from high energy to indulgence, which consistently show up as top trends. It’s definitely on my list of things to watch for in the upcoming year.
Cover Story — Monster Energy Drink
Category Focus — Coffee & RTD coffee
Beverage R&D — Lab testing showcase
Global Report — South America
Packaging — Best Packages of 2007
Bottler of the year — Swire Coca-Cola USA
Category Focus — Juice & juice drinks
Beverage R&D — 2008 New Product Development survey
Packaging — Caps and closures
Channel Strategies — Vending

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