2013 State of the Industry: Coffee & RTD coffee
Premium offerings fueling coffee growth
The premium market for coffee continues to gain ground, according to an August 2012 report from Santa Monica, Calif.-based IBISWorld. “Consumers educated themselves more about coffee beans and traded up in quality over the five years to 2012,” the report stated.
Estimating 2012 sales for the overall coffee market at $10.7 billion in its October 2012 “Coffee” report, Chicago-based Mintel noted that the market peaked in 2011 and 2012 with growth rates of 17.9 and 19.2 percent, respectively, due to retail price increases and strong growth in the single-cup segment. However, after a period of stabilization, the market research firm predicts that the market will return to growth levels between 2 and 4 percent from 2015 to 2017 and forecasts 2017 sales of nearly $12.7 billion.
Although it is still the category leader, ground coffee sales decreased 2.4 percent for $4.4 billion in sales for the 52 weeks ending May 19 in U.S. supermarkets, drug stores, mass market retailers, military commissaries, and select club and dollar retail chains, according to Information Resources Inc. (IRI), a Chicago-based market research firm. Now in the market for more than a year, Kraft Foods Group Inc.’s premium brand Gevalia had the largest gains with 284.4 percent sales growth, IRI reports.
Mintel reported that the single-cup coffee segment showcased historic growth rates by expanding from $103 million in 2007 to an estimated $1.8 billion in 2012. The market research firm predicts that the segment will continue to grow through 2017, however, not at the same rates reported between 2010 and 2012.
At an approximately 65 percent growth rate, single-cup coffee sales totaled more than $1.9 billion for the 52 weeks ending May 19 in IRI-measured channels. Earlier this year, Waterbury, Vt.-based Green Mountain Coffee Roasters (GMCR), manufacturers of the Keurig single-cup brewer, and Seattle-based Starbucks Coffee Co. announced a new five-year-minimum agreement that will add brands and varietals to the Starbucks K-Cup and Vue pack portfolio for the Keurig including Seattle’s Best Coffee and Torrefazione Italia coffee.
The segment also saw the emergence of private label offerings with the expiration of GMCR’s patent on its signature K-Cups. Private label coffees were up 7,375.8 percent for approximately $35.2 million in sales, according to IRI data.
Noting the dominance of the single-serve offerings in the ready-to-drink (RTD) coffee segment, Mintel reported that the future could lie in the emergence of ready-to-pour, multi-serve products such as Dean Foods subsidiary WhiteWave Foods’ International Delight Iced Coffee. Categorized by IRI as a refrigerated RTD coffee, International Delight Iced Coffee sales were $100 million in the 52 weeks ending May 19. Launched in March 2012 in Mocha, Vanilla and Original varieties, the products combine coffee, real milk and cream in a ready-to-serve half-gallon carton.
However, the RTD single-serve coffee segment also continues to make strides, growing 6.2 percent for more than $1.1 billion in sales in the 52 weeks ending May 19, according to IRI data. Starbucks Coffee Co. added to the mix with the launch of a line of RTD iced coffees. Starbucks Iced Coffee drinks are made from 100 percent Arabica coffee beans and blended with 2 percent milk.