Coffee takes a premium
Consumers continue to turn to coffee as one of their many sources of caffeine. Steady growth could be found in coffee segments such as ground coffee, which posted an increase of 1.2 percent with more than $2.4 billion in sales in food, drug and mass merchandise outlets excluding Wal-Mart for the 52 weeks ending Oct. 3, according to SymphonyIRI, Chicago. Ready-to-drink (RTD) coffee also showed steady growth with a 2.6 percent increase in sales, during the same period.
Folgers ground coffee maintained its No. 1 position in market share at 27.8 percent, but saw a decrease in sales of 1.8 percent. Coffeehouse brands saw an increase in ground coffee sales with Starbucks’ ground coffee showing about a 9.2 percent increase and Dunkin’ Donuts’ ground coffee posting a 16.8 percent increase.
“We certainly see Folgers, Dunkin’ Donuts, Maxwell House and Starbucks all performing really well in the last year,” says Bill Patterson, senior market analyst at Mintel International, Chicago. “I think in particular with the Folgers and Dunkin’ Donuts brands, those reflect demand for competitively priced coffee where as we see the Starbucks brand, for example, satisfy the need for more premium-type coffee.”
The demand for a premium taste could become a growing trend in the market of ground coffee sales. Ty Law, research associate at Euromonitor International, Chicago, sees this as a shift in consumer preference.
“What we’re seeing is that people are leaning to more premium-priced products, so coffee is the one thing, or one of several things, that has done well during the recession and during this down economy so people seem like they still need their coffee,” he says.
New product releases of premium blends within the last year include Starbucks Natural Fusions, a line of naturally flavored coffees made with Arabica coffee beans specifically roasted and blended to naturally incorporate vanilla, caramel or cinnamon flavor. Starbucks released the coffees in 11-ounce bags in U.S. grocery stores.
Peet’s Coffee & Tea also announced the permanent launch of its Uzuri African Blend from East Africa. Uzuri, which translates to “excellent” and “beautiful” in Swahili, offers floral and aromatic flavors that are bold and smooth with undertones of dark berry, the company says. Uzuri African Blend is available in national grocery outlets in a 12-ounce bag and retails between $8.99 and $9.99. This is Peet’s first permanent launch in eight years, the company says. Among the Top 10 ground coffees in dollar sales, Peet’s Coffee saw the largest increase in ground sales with a 22.3 percent uptick.
Shifting to this premium market also could be a switch to focusing on a younger demographic.
“I think the consumer is becoming more sophisticated in their coffee right now,” Mintel’s Patterson says. “The older [consumer] is keeping going with what they’ve got. The younger consumer is demanding better coffee and wanting better products.”
However, appealing to the younger demographic could be a challenge considering the many options such as energy drinks, energy shots, sports drinks, soft drinks and teas. Euromonitor’s Law foresees ways of targeting the Millenial generation will be about switching their preference from energy drinks to RTD coffee.
“It’ll be more of a specific targeting - targeting them to get them to switch over to ready-to-drink coffee with energy,” he says. “Yeah, its ready-to-drink coffee, but more focused on marketing the fact that it provides them energy.”
One such example of this hybrid trend is Whynatte Latte, which combines coffee with added energy ingredients, including taurine, B vitamins, L-carnitine, panax ginseng and guarana seed extract.
Euromonitor’s Law sees the RTD coffee market as stagnant in growth, with even a little decline, but thinks the coffee plus energy drink segment has seen positive results.
“The Starbucks Doubleshot + Energy and Java Monster with energy have been doing really well,” he says. “So that’s been pushing that category toward the positive side, where the rest of the category seems to be pretty stagnant for the most part.”
Although Starbucks Frappuccino maintains a strong market position with 86.3 percent market share, SymphonyIRI reports, Seattle’s Best Cappuccino drinks emerged in the Top 10 RTD coffee drink category at No. 5. This year, Seattle’s Best Coffee, through the North American Coffee Partnership, introduced RTD iced latte coffee drinks available in Iced Latte, Iced Vanilla Latte and Iced Mocha flavors.
Researchers are seeing consumers in the United States turning their attention to the instant coffee market. SymphonyIRI reports that instant coffee saw a 2 percent increase in measured channels for the year ending Oct. 3. Mintel’s Patterson points out that although instant has seen recent increases, when you look at the past five years it’s actually been on the decline.
“Overall, it’s been declining, but just recently we’ve started to see an uptick,” he says. “The reason for that is we’re expecting the Hispanic market to be an increasingly important factor in sales of instant coffee because ... Hispanics do have a higher preference for drinking instant.
“But also don’t forget we’ve got Starbucks heavily promoting the Via product,” Patterson continues. “And sales of Via have actually been doing really well in supermarkets, and what you’ll find, in fact, to some extent it’s possible the Via product is cannibalizing Starbucks ground coffee sales. The volume is not huge yet, but certainly seems to be a success for Starbucks.”
Starbucks Via Ready Brew posted a 4,356.3 percent increase equating to more than $14.4 million in sales for the year ending Oct. 3. In May, Starbucks expanded the distribution of its Colombia, Italian Roast and Decaffeinated Italian Roast Via varieties beyond its 12,000 stores and into 25,000 retail locations, including Wal-Mart, Target, CostCo and Safeway stores.
“We are continuing to drive steady increases in Starbucks Via distribution, channel by channel, continent by continent, country by country,” says a Starbucks company spokesperson.
Starbucks also continues to expand the Via line with this summer’s release of a lightly sweetened Starbucks Via Iced variety. Starbucks also recently expanded the Via Ready Brew line with the addition of Vanilla, Mocha, Caramel and Cinnamon Spice varieties, which are available in six-packs at Starbucks stores.
“We believe Starbucks Via Ready Brew is perfect for busy customers on-the-go, and provides an entry point for new customers,” says a Starbucks company spokesperson.
Not all researchers are convinced that instant coffee will become a new trend for coffee drinkers.
“I think for the most part, I have a feeling in the U.S. it’s not going to do so well,” Euromonitor’s Law says. “I think people buy instant for now, but I think it will be more or less a fad versus a trend. … There’s just so many coffee shops and Starbucks in particular, too, around the area, so a lot of people aren’t going to need this instant coffee because they can just walk outside and get coffee themselves.”
Coffee for one
Instant coffee isn’t the only product that is satisfying the coffee drinker who is looking for their personal cup of coffee.
One area that has seen growth is single cup coffee, which posted a 104.8 percent increase during the time period in measured channels, according to SymphonyIRI, Chicago.
Although the single-cup market has seen substantial growth, Patterson says, it still accounts for only 4 percent of the overall market.
“Everything we talk about in single cup has to be put into that context,” he says. “However, having said that, it has grown well and the issue here seems to be consistent quality.”
Single cup, similar to instant coffee, is a measured product that offers a large variety in coffee choices. Law cites the growing popularity of Green Mountain Coffee Roasters’ Keurig Single-Cup Brewing System for this uptick in sales.
Green Mountain Coffee Roasters Inc., Waterbury. Vt., recently announced it will acquire all outstanding shares of LJVJ Holdings Inc., known as Van Houtte Inc., Montreal. Van Houtte’s single cup coffee, No. 7 in single cup coffee sales, posted a 1,044.3 percent increase during the time period in measured channels, SymphonyIRI reports.
Of the Top 10 Single Cup Coffee sales, seven are either owned or licensees of the Keurig System: Green Mountain, Tully’s, Newman’s Own Organics, Keurig Caribou Coffee, Van Houtte, Gloria Jeans and Café Escapes.
Recently, Green Mountain Coffee Roasters, Keurig Inc. and Boston Market announced the distribution of Keurig’s gourmet single-cup coffee brewing systems in more than 400 Boston Market locations nationwide. Restaurants will feature the Keurig B140 Brewer and selections of Green Mountain products. This roll-out began in October and will be completed in early 2011, the company says.
“Our new distribution with Boston Market demonstrates the explosive growth of Keurig single-cup brewing in homes, businesses and restaurants across the United States,” said Dave Manly, vice president and general manager of Keurig’s Away From Home Division, in a statement. “Boston Market understands the demand for the quality and convenience of single-serve coffee brewing, and we are excited to bring the Keurig experience to their guests.”
Dunkin’ Donuts also recently introduced its Dunkin’ One Cup products for coffee pods. The Dunkin’ One Cup is available in five varieties: Original Blend, Dunkin’ Decaf, French Vanilla, Hazelnut and Dunkin’ Dark. Each is available in boxes of eight and is sold in select Dunkin’ Donuts. BI
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