Coffee - US - December 2009

SCOPE AND THEMES
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Advertising creative
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
Market continues to grow, despite recession
Roasted drives overall growth as additives and RTD decline sharply
Private label products boost grocery channel sales, while drug stores post declines
Aging population and growth of Hispanic segment drive market growth
Brand share—Roasted coffee
Brand share—Instant coffee
Brand share—Ready-to-drink coffee
Brand share—Coffee additive/flavoring, substitutes and concentrates
Incidence of use remained between 77% and 79% from 2002-09
Most are not brand loyal but Folgers and Maxwell House dominate market
Grocery stores, Walmart and coffeehouses are most popular channels
Desire to relax, gain energy, and improve concentration drive usage
Hispanics are heavy users and many prefer instant
INSIGHTS AND OPPORTUNITIES
Target young adults by teaching how to create fun drinks and experiences
Leverage bulk to target upper-income households and create value
Coffee as a better-for-you beverage
A mixed bag?
INSPIRE INSIGHTS
 TREND: BRAND TRIBE
What it’s about: To be successful, a brand doesn’t need a user base. It needs a tribe
Create community around the brand with stories and gatherings
Taking it to the streets
 TREND: CUSTOMIZATION
What it’s about: Getting what you want, the way you want it
Playing with flavor and caffeine to create unique offerings
MARKET SIZE AND FORECAST
Key points
Sales expected to grow in 2009, despite recession
Coffee sales and forecast
Figure 1: Total U.S. retail sales of coffee, at current prices, 2004-14
Figure 2: Total U.S. retail sales of coffee, at inflation-adjusted prices, 2004-14
Walmart sales
COMPETITIVE CONTEXT
QSRs positioned to compete more directly with retail
Energy drinks and shots could undermine future growth
Natural or “better for you” alternatives to coffee coming online
SEGMENT PERFORMANCE
Key points
Ground roasted packaged coffee drives category growth
Figure 3: FDMx sales of coffee, by segment, 2008 and 2009
SEGMENT PERFORMANCE—ROASTED COFFEE
Key points
Roasted category drives overall category growth
Sales and forecast of roasted coffee
Figure 4: Total U.S. sales and forecast of roasted coffee, at current prices, 2004-14
SEGMENT PERFORMANCE—INSTANT COFFEE
Key points
Sales of instant expected to grow slightly in 2009
Sales and forecast of instant coffee
Figure 5: Total U.S. sales and forecast of instant coffee, at current prices, 2004-14
SEGMENT PERFORMANCE—READY-TO-DRINK (RTD) COFFEE
Key points
RTD sales plummet in the face of recession
Sales and forecast of ready-to-drink coffee beverages
Figure 6: Total U.S. sales and forecast of ready-to-drink coffee, at current prices, 2004-14
SEGMENT PERFORMANCE—COFFEE ADDITIVE/FLAVORING, SUBSTITUTES, AND CONCENTRATES
Key points
Sales of additives suffer as consumers focus more on value
Sales and forecast of coffee additive/flavoring, substitutes and concentrates
Figure 7: Total U.S. sales and forecast of coffee additive/flavoring, substitutes, and concentrates, at current prices, 2004-14
RETAIL CHANNELS
Food stores gain an edge on Mass in 2009
Figure 8: U.S. retail sales of coffee, by channel, 2007 and 2009
RETAIL CHANNELS—FOOD STORES
Key points
Grocery wins with premium private label products and convenience
Food store sales of coffee
Figure 9: U.S. food store sales of coffee, at current prices, 2004-09
RETAIL CHANNELS—DRUG STORES
Key points
Growth decelerates as consumers search more for bargains and variety
Drug store sales of coffee
Figure 10: U.S. drug store coffee sales, at current prices, 2004-09
RETAIL CHANNELS—MASS AND OTHER
Key points
Sale at mass expected to grow in 2009
Mass merchandiser sales of coffee
Figure 11: U.S. mass merchandiser sales of coffee, at current prices, 2004-09
NATURAL CHANNEL/SPINS
Sales of branded items dip but there are still opportunities in bulk
Figure 12: Natural product supermarket retail sales of coffee, at current prices, 2007-09
Figure 13: Natural product supermarket retail sales of coffee, at inflation-adjusted prices, 2007-09
Natural channel sales by segment
Figure 14: Natural product supermarket retail sales of coffee, by segment, 2007 and 2009
Brand share
Figure 15: Select manufacturer brand natural supermarket sales of coffee, 2007 and 2009
Organic coffee sales
Figure 16: Natural product supermarket retail sales of coffee, by organic/non-organic, 2007 and 2009
MARKET DRIVERS
Key points
Rise in number of 55-74s drives growth, for now
Figure 17: Population by age, 2004-14
Rapid growth of Hispanic segment drives growth
Figure 18: Population by race and Hispanic origin, 2004-14
Affinity for coffee and need for energy drive increased consumption
Figure 19: Reason for drinking more coffee than last year, September 2009
Lifestyle changes and other beverages drive down consumption
Figure 20: Reason for drinking less coffee than last year, September 2009
Average retail price declines slightly as consumers embrace value brands
Figure 21: Average quarterly retail price paid for roasted and ground coffee in the U.S., Q3 2008-Q2 2009
LEADING COMPANIES
J.M. Smucker Co. posts strong growth after Folgers merger
Kraft fends off recession with Maxwell House
North American Coffee Partnership loses share as RTD sales plummet
Figure 22: Select manufacturer FDMx sales of coffee, 2008-09
BRAND SHARE—ROASTED COFFEE
Key points
Well-known, mid-range brands drive category growth
Driving category growth: Folgers, Dunkin’ Donuts and Private Label
Manufacturer and brand sales of roasted coffee
Figure 23: Leading FDMx brand sales and market share of roasted coffee, 2008-09
BRAND SHARE—INSTANT COFFEE
Key points
Category growth flat but some established brands post growth
Manufacturer and brand sales of instant coffee
Figure 24: Leading FDMx brand sales and market share of instant coffee, 2008-09
BRAND SHARE—READY-TO-DRINK COFFEE
Key points
NACP losses ground as Bolthouse gains slightly with wellness position
Manufacturer and brand sales of ready-to-drink coffee beverages
Figure 25: Leading FDMx brand sales and market share of ready-to-drink coffee, 2008-09
BRAND SHARE—COFFEE ADDITIVE/FLAVORING, SUBSTITUTES AND CONCENTRATES
Key points
Sales of additives decline as consumers focus more on mid-range
Manufacturer and brand sales of coffee additive/flavoring, substitutes and concentrates
Figure 26: Leading FDMx brand sales and market share of coffee additive/flavoring, substitutes and concentrates, 2008-09
INNOVATION AND INNOVATORS
Instant coffee goes upscale: Via by Starbucks
Luigi Lavazza leverages the ethical trend
Supporting the troops with a Cup: The Coffee Bean and Tea Leaf campaign
Leveraging the home cocktail trend: A Coffee Martini blend
BRANDS AND THE ADVERTISING LANDSCAPE
Overview of the brand landscape
Folgers: The power of value, Americana and high awareness
Figure 27: Brand analysis of Folgers
Figure 28: Folgers morning energy ad, 2009
Figure 29: Folgers young family ad, 2009
Folgers Online
Maxwell House: Freshness and value for the masses
Figure 30: Brand analysis of Maxwell House, 2009
Figure 31: Maxwell House flavor lock lid ad, 2009
Figure 32: Maxwell House taste ad, 2009
Maxwell House Online
Nescafé
Figure 33: Nescafé Hispanic ad, 2009
CONSUMPTION
Key points
Incidence of use remains steady
Figure 34: Household consumption of coffee, 2002-09
Continue to appeal to heavy users (aged 45+), but need to reach younger segments too
Figure 35: Personal coffee consumption and frequency of consumption, September 2009
Lifestyle changes and health concerns drive down usage among some
Figure 36: Coffee consumption compared to last year, by age, September 2009
Most drink caffeinated coffee; decaf usage highest among elderly
Figure 37: Coffee preferences, caffeinated vs. decaffeinated, by age, September 2009
Target young adults with sweet drinks and bold names
Figure 38: Coffee preferences, cream and sweet coffee drink usage, by age, September 2009
BRAND PREFERENCES
Key points
Most drinkers experiment with brands
Figure 39: Coffee brand loyalty, by age, September 2009
National brands far more popular than gourmet and private label
Figure 40: Types of coffee brands purchased for at home consumption, 2006-09
Older Americans tend to prefer national brands
Figure 41: Types of coffee brands purchased for at home consumption, by age, September 2009
Lower-income consumers drive sales of dominant national brands
Figure 42: Brands of ground and whole bean coffee used in the household, by HH income, April 2008-June 2009
Folgers and Maxwell House dominate the instant segment
Figure 43: Brands of instant coffee used in the household, by HH income, April 2008-June 2009
Figure 44: Flavors of instant flavored coffee used in the household, by HH income, April 2008-June 2009
Starbucks closely associated with espresso/cappuccino
Figure 45: Household consumption of espresso/cappuccino, by HH income, April 2008-June 2009
PURCHASE HABITS
Key points
Many young adults shop coffeehouses and C-stores
Figure 46: Coffee purchase locations—at home usage, by age, September 2009
Figure 47: Coffee purchase locations—at home usage, by HH income, September 2009
Fair trade and organic appeal primary to young adults
Figure 48: Types of coffee purchased, by age, September 2009
ATTITUDES AND OPINIONS
Key points
Mature adults more likely to associate drinking coffee with relaxation
Figure 49: Positive perceived effects of coffee, by age, September 2009
Young adults considerably more likely to see coffee as a bad habit
Figure 50: Negative attitudes towards coffee, by age, September 2009
About one in five users view coffee as an element of their social life
Figure 51: Coffee as an important part of social life, by age, September 2009
IMPACT OF RACE AND HISPANIC ORIGIN
Key points
Hispanics report the highest incidence of use
Figure 52: Coffee consumption, by race/Hispanic origin, April 2008-June 2009
Whites and Asians more likely to prefer caffeinated and whole bean
Figure 53: Use of caffeinated or decaffeinated ground or whole bean coffee, by race/Hispanic origin, April 2008-June 2009
Figure 54: Use of ground or whole bean coffee, by race/Hispanic origin, April 2008-June 2009
Hispanics and blacks somewhat more likely to prefer national brands
Figure 55: Ground or whole bean coffee brand use, by race/Hispanic origin, April 2008-June 2009
Instant popular with Spanish speakers
Figure 56: Consumption of instant coffee, by race/Hispanic origin, April 2008-June 2009
Figure 57: Consumption of instant coffee, by language spoken in the home, April 2008-June 2009
Figure 58: Instant coffee brand use, by race/Hispanic origin, April 2008-June 2009
RTD coffee drinks garner least usage among white consumers
Figure 59: Use of RTD coffee drinks, by race/Hispanic origin, April 2008-June 2009
Figure 60: Brands of RTD coffee drinks consumed, by race/Hispanic origin, April 2008-June 2009
Blacks less likely to use ethical products
Figure 61: Types of coffee purchased, by race/Hispanic origin, September 2009
Blacks considerably less likely to recognize benefits of coffee consumption
Figure 62: Positive perceived effects of coffee, by race/Hispanic origin, September 2009
Figure 63: Preference for sweetened coffee drinks over coffee, by race/Hispanic origin, September 2009
Blacks and Hispanics flock to value channels
Figure 64: Coffee purchase locations, at home usage, by race/Hispanic origin, September 2009
CLUSTER ANALYSIS
Nationalists (44%)
Premiums (30%)
Decaffeinators (26%)
Cluster characteristics
Figure 65: Coffee clusters, September 2009
Figure 66: Coffee consumption and attitudes, by coffee clusters, September 2009
Figure 67: Frequency of consumption, by coffee clusters, September 2009
Figure 68: Brands of coffee purchase, at home usage, by coffee clusters, September 2009
Figure 69: Attitudes towards coffee, by coffee clusters, September 2009
Cluster demographics
Figure 70: Coffee clusters, by gender, September 2009
Figure 71: Coffee clusters, by age, September 2009
Figure 72: Coffee clusters, by HH income, September 2009
Figure 73: Coffee clusters, by race/Hispanic origin, September 2009
Cluster methodology
CUSTOM CONSUMER GROUPS
Men and parents tend to be heavy drinkers
Figure 74: Custom consumer groups with highest average number of cups consumed on days coffee is consumed, September 2009
Health concerns have little impact on the likelihood of increasing or decreasing consumption
Figure 75: Impact of suffering from or being diagnosed with a health condition on coffee consumption, September 2009
Working class from rural and suburban areas are heavy users
Figure 76: Mosaic segments with highest average consumption of regular/decaf ground or whole bean coffee, April 2008-June 2009
Working class minorities represent majority of instant drinkers
Figure 77: Mosaic segments with the highest average daily consumption of instant coffee, April 2008-June 2009
IRI/BUILDERS PANEL DATA
 OVERVIEW OF COFFEE
 GROUND COFFEE
Consumer insights on key purchase measures
Brand map
Figure 78: Brand map, selected brands of ground coffee, buying rate, by household penetration, 2008
Brand leader characteristics
Key purchase measures
Figure 79: Key purchase measures for the top brands of ground coffee, by household penetration, 2008
 GROUND DECAFFEINATED COFFEE
Consumer insights on key purchase measures
Brand map
Figure 80: Brand map, selected brands of ground decaffeinated coffee, buying rate, by household penetration, 2008
Brand leader characteristics
Key purchase measures
Figure 81: Key purchase measures for the top brands of ground decaffeinated coffee, by household penetration, 2008
 INSTANT COFFEE
Consumer insights on key purchase measures
Brand map
Figure 82: Brand map, selected brands of instant coffee, buying rate, by household penetration, 2008
Brand leader characteristics
Key purchase measures
Figure 83: Key purchase measures for the top brands of instant coffee, by household penetration, 2008
APPENDIX: ADDITIONAL HOUSEHOLD INCOME COMPARISONS
Figure 84: Coffee consumption and preferences, by HH income, September 2009
Figure 85: Consumption of instant coffee, by HH income, April 2008-June 2009
Figure 86: Consumption compared to last year, by HH income, September 2009
Figure 87: Brands of coffee usually purchased, by HH income, September 2009
Figure 88: Coffee channels, by HH income, September 2009
APPENDIX: ADDITIONAL AGE COMPARISONS
Figure 89: Coffee consumption and preferences, by age, September 2009
Figure 90: Consumption compared to last year, by age, September 2009
Figure 91: Brands of coffee usually purchased, by age, September 2009
Figure 92: Coffee purchase locations, at home usage, by age, September 2009
APPENDIX: IRI/BUILDERS PANEL DATA DEFINITIONS
IRI Consumer Network Metrics
APPENDIX: TRADE ASSOCIATIONS