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Coffee - US - September 2008

SCOPE AND THEMES
What you need to know
Definition
Data sources
Sales data
Consumer survey data
Abbreviations and terms
Abbreviations
Terms
EXECUTIVE SUMMARY
Market performance
Coffee market faces competition from coffeehouses, energy drinks, and tea
Tight race for market share between Kraft and P&G
Coffee sticks and green coffee drive innovation
Retail channels
The market must accommodate younger tastes
Roasted coffee is still most popular in U.S. homes but this may change
Hispanics, Asians key to future growth
INSIGHTS AND OPPORTUNITIES
Would you like a shot with that DoubleShot?
Beauty-enhancing coffee
Premium three-in-one mixes
Ethnic flavors
Charity affiliations
Rebranding to compete with energy drinks
FAST FORWARD TRENDS
 TREND 1: SIMPLICITY AND CONVENIENCE
What’s it about?
What we've seen
 TREND 2: A PLAY ON BRANDS
What's it about?
What we've seen
How does this relate to coffee?
MARKET SIZE AND FORECAST
Key points
Dollar sales outpace volume sales
Economic slowdown to force consumers to make coffee at home
Figure 1: Total U.S. retail sales of coffee, at current prices, 2003-13
Figure 2: Total U.S. sales and forecast of coffee, at inflation-adjusted prices, 2003-13
Wal-Mart sales
COMPETITIVE CONTEXT
At home vs. on-the-go coffee
Starbucks is losing money and closing stores, which opens a door for traditional retail coffee brands
Energy drinks
Tea
Bottled and canned tea
SEGMENT PERFORMANCE
Key points
Roasted coffee is still the preferred form of coffee
Instant coffee lags due to premiumization but is popular among Hispanics
Hispanics, Asians, young people influence RTD segment performance
Retail sales of coffee
Figure 3: Retail sales of coffee, by segment, 2006 and 2008
SEGMENT PERFORMANCE—ROASTED COFFEE
Key points
Coffee prices rise along with consumer demand for premium coffee
Economic downturn may invigorate home sales
What can manufacturers do?
Retail sales of roasted coffee
Figure 4: U.S. sales and forecast of roast coffee*, at current prices, 2003-13
Figure 5: U.S. sales and forecast of roast coffee*, at inflation-adjusted prices, 2003-13
SEGMENT PERFORMANCE—INSTANT COFFEE
Key points
Instant coffee sales slow down
Hispanics drive instant coffee growth
Instant coffee has an image problem in the U.S.
What can manufacturers do?
Retail sales of instant coffee
Figure 6: U.S. sales of instant coffee, at current prices, 2003-13
Figure 7: U.S. sales of instant coffee, at inflation-adjusted prices, 2003-13
SEGMENT PERFORMANCE—READY-TO-DRINK COFFEE
Key points
Fastest-growing segment in the market
Figure 8: U.S. sales of ready-to-drink coffee, at current prices, 2003-13
Figure 9: U.S. sales of ready-to-drink coffee, at inflation-adjusted prices, 2003-13
RETAIL CHANNELS
Key points
Supermarkets and supercenters compete for shoppers
Total sales of coffee by retail channel
Figure 10: U.S. sales of coffee, by retail channel, 2005 and 2007
RETAIL CHANNELS—SUPERMARKETS
Key points
Supermarket coffee sales growth outpaced by that of market overall
FDMx supermarket sales of coffee
Figure 11: FDMx sales of coffee in supermarkets, 2002-08
RETAIL CHANNELS—MASS MERCHANDISERS AND OTHER
Key points
One-stop shopping and economic worries benefit mass merchandisers
Wal-Mart offers organic coffee
Retail sales of coffee in mass and other
Figure 12: U.S. sales of coffee in mass and other channels, 2002-08
RETAIL CHANNELS—DRUG STORES
Key points
Drug stores profit from RTD sales growth
FDMx sales of coffee in drug stores
Figure 13: FDMx sales of coffee in drug stores, 2002-08
NATURAL CHANNEL/SPINS
Key points
Sales of coffee and ready-to-drink coffee in the natural channel
Figure 14: Natural supermarket retail sales of coffee, at current prices, 2006-08
Figure 15: Natural supermarket retail sales of coffee, at inflation-adjusted prices, 2006-08
Natural channel sales by segment
Figure 16: Natural supermarket retail sales of packaged coffee, by segment, 206 and 2008
Natural channel sales of packaged coffee
Figure 17: Natural supermarket retail sales of packaged coffee, at current prices, 2006-08
Figure 18: Natural supermarket retail sales of packaged coffee, at inflation-adjusted, 2006-08
Natural supermarket channel sales, ready-to-drink coffee
Figure 19: Natural supermarket retail sales of RTD coffee, at current prices, 2006-08
Figure 20: Natural supermarket retail sales of RTD coffee, at inflation-adjusted, 2006-08
Manufacturer and brand sales
Figure 21: Manufacturer and brand sales in natural supermarkets, 2006 and 2008
Natural channel sales of packaged coffee by organic
Figure 22: Natural supermarket retail sales of organic and non-organic packaged coffee, 2006 and 2008
MARKET DRIVERS
Key points
Young people are not turning to coffee like they have in the past
Older consumers maintain market but market won’t grow without new young coffee consumers
Population projects for coffee consumption
Figure 23: U.S. population and projections and consumption of coffee, by age, 2003-13
Increase in Hispanic population to benefit the market
Figure 24: Population, by race and Hispanic origin, 2003-13
Figure 25: Buying power, by ethnicity, 1990-2011
Coffeehouses both positive and negative driver
Economic uncertainty and over-expansion hit Starbucks hard, but people will still buy coffee—and more often to have at home
LEADING COMPANIES
Key points
Kraft and P&G lose market share to smaller manufacturers
An adventurous consumer base makes room for new coffeemakers
FDMx sales of leading coffee manufacturers
Figure 26: FDMx sales of leading coffee companies, 2007 and 2008
BRAND SHARE—ROASTED COFFEE
Key points
Folgers, Maxwell House lose market share due to lack of young consumers
Kraft has slight lead with coffeehouse brands
FDMx roasted coffee brand sales
Figure 27: FDMx brand sales of roasted coffee, 2007 and 2008
BRAND SHARE—INSTANT COFFEE
Key points
Nescafé Clasico and General Foods International growing sales and share
Upscaling the image of instant coffee
FDMx instant coffee brand sales
Figure 28: FDMx brand sales of instant coffee, 2007 and 2008
BRAND SHARE—READY-TO-DRINK COFFEE
Key points
Pepsi/Starbucks joint venture is the brand to beat
Newcomers to the market
FDMx ready-to-drink coffee brand sales
Figure 29: FDMx brand sales of roasted coffee, 2007 and 2008
BRAND QUALITIES
Folgers
Folgers introduces premium brands, alongside traditional favorites
Folgers partners with public health and service organizations to serve the community
Maxwell House
Maxwell House goes all arabica
Maxwell House introduces new, better packaging
Maxwell House tries new slogan
Is it working?
Who buys Maxwell House?
Nostalgia and familiarity are keys to Maxwell House’s success
What about the new slogan?
INNOVATION AND INNOVATORS
Key points
Coffee sticks
Green coffee
Nutraceutical coffee
Positioning against energy drinks
Seasonal blends
Coffee pods
ADVERTISING AND PROMOTION
Folgers
Figure 30: Folgers Classic Roast television ad, 2008
Figure 31: Folgers Black Silk television ad, 2008
Figure 32: Folgers Gourmet Selections television ad, 2008
Maxwell House
Figure 33: Maxwell House television ad, 2008
Figure 34: Maxwell House television ad, 2008
Figure 35: Maxwell House television ad, 2008
Starbucks
Figure 36: Starbucks Christmas Blend ad, 2007
COFFEE CONSUMPTION IN HOUSEHOLDS
Key points
Household usage of coffee remains high
Trended household consumption of coffee
Figure 37: Trended household consumption of coffee, 2002-08
Most adults drink coffee, but attracting younger adults to drink brewed coffee at home is a challenge
What should marketers and manufacturers do?
Figure 38: Incidence of coffee consumption in the household, by age, February 2007-March 2008
TYPES OF COFFEE USED IN HOUSEHOLD
Key points
Ground coffee remains most popular for home use
How can manufacturers drive sales and consumption of whole bean coffee?
Instant/freeze-dried coffee is declining in popularity
Espresso and cappuccino are younger adults’ drinks
Figure 39: Type of coffee used in household, by age, February 2007-March 2008
Type of coffee used in household varies by income
Figure 40: Type of coffee used in household, by household income, February 2007-March 2008
Most coffee drinkers hit the caffeine but decaf is popular as well
Figure 41: Daily household coffee consumption, caffeinated and decaffeinated, February 2007-March 2008
BRAND PREFERENCES
Key points
Ground and whole bean coffee brand preferences by age
Figure 42: Household usage of whole bean/ground coffee brands, by age, February 2007-March 2008
Ground and whole bean coffee brand preferences by household income
Figure 43: Household usage of whole bean/ground coffee brands, by household income, February 2007-March 2008
Instant coffee brand preferences by age
Figure 44: Household usage of instant coffee brands, by age, February 2007-March 2008
Instant coffee brand preferences by household income
Figure 45: Use of instant coffee brands, by household income, February 2007-March 2008
FREQUENCY AND QUANTITY OF COFFEE CONSUMPTION: ADULTS
Key points
For most, coffee is a daily drink
Figure 46: Number of cups of coffee consumed by daily coffee drinkers, by age, July 2008
Figure 47: Number of cups of coffee consumed by daily coffee drinkers, by household income, July 2008
COFFEE DRINKING AT HOME
Key points
Where do consumers shop for coffee?
Figure 48: Where consumers buy coffee for home consumption, by age, July 2008
What are consumers buying to have at home?
Figure 49: Types of coffee purchased for home consumption, by age, July 2008
How popular are fair trade and organic coffees?
Figure 50: Incidence of fair trade and organic coffee purchase, by age, July 2008
Consumer attitudes about coffee prices
Figure 51: Price beliefs about coffee, by age, July 2008
Brand loyalty and coffee consumers
Figure 52: Brand loyalty and coffee consumers, by age, July 2008
ATTITUDES AND BELIEFS ABOUT COFFEE
Key points
Coffee is still a morning beverage…even among hipsters
For many, coffee remains an at-home beverage
Can coffee be considered functional?
Figure 53: General attitudes about coffee, by age, July 2008
Health beliefs about coffee
Figure 54: General health beliefs about coffee, by age, July 2008
CHANGES IN COFFEE CONSUMPTION
Key points
Coffee consumption stabilizes after age 35
Figure 55: Changes in coffee consumption in last year, by age, July 2008
Why consumers drink less coffee
Figure 56: Reasons for drinking less coffee this year, by age, July 2008
Why consumers drink more coffee
Figure 57: Reasons for drinking more coffee this year, by age, July 2008
COFFEE CONSUMPTION: TEENS
Key points
Coffee drinking starts young, and it isn’t all at the coffeehouse
Figure 58: Incidence of coffee consumption among teens, by gender, July 2008
Where are teens drinking coffee?
Figure 59: Locations for teen coffee consumption, by gender, July 2008
What are teens drinking?
Carbonated soft drinks and energy drinks resonate with teen boys
Figure 60: Teen coffee and beverage preferences, by gender, July 2008
Why are teens drinking coffee?
Figure 61: Why teens drink coffee and coffee drinks, by gender, July 2008
Teen coffee consumers are not yet using coffee and coffee drinks as a “functional” beverage
Figure 62: Reasons for drinking coffee and coffee drinks among teens, by gender, July 2008
RACE AND HISPANIC ORIGIN
Key points
Coffee consumption in households by race/ethnicity
Figure 63: Incidence of coffee consumption in the household, by race/Hispanic origin, February 2007-March 2008
Types of coffee used in household by race/Hispanic origin
Preference for instant coffee may reflect both price and tradition
Asians and Hispanics drive ready-to-drink, international flavored, and espresso/cappuccino sales
Preference for coffee types by race/Hispanic origin
Figure 64: Type of coffee used in household, by race/Hispanic origin, February 2007-March 2008
Frequency and quantity of household coffee consumption by race/Hispanic origin
Figure 65: Daily household coffee consumption, caffeinated and decaffeinated, by race/Hispanic origin, February 2007-March 2008
Figure 66: Incidence of daily coffee consumption, by race/Hispanic origin, July 2008
Roasted coffee brand preferences by race/Hispanic origin
Figure 67: Household usage of whole bean/ground coffee brands, by race/Hispanic origin, February 2007-March 2008
Instant coffee brand preferences by race/Hispanic origin
Figure 68: Household usage of instant coffee brands, by race/Hispanic origin, February 2007-March 2008
International flavored instant coffee brand preferences by race/Hispanic origin
Figure 69: Household usage of international flavored instant coffee brands, by race/Hispanic origin, February 2007-March 2008
Shopping habits for coffee for home consumption
Figure 70: Types of coffee purchased for home consumption, by race/Hispanic origin, July 2008
Attitudes about coffee prices—fair trade and daily spending
General coffee attitudes
Figure 71: General attitudes about coffee, by race/Hispanic origin, July 2008
Changes in coffee consumption by race/Hispanic origin
Figure 72: Changes in coffee consumption, by race/Hispanic origing, July 2008
CLUSTER ANALYSIS—EVERYDAY JOE DRINKERS, COFFEEHOUSE BON VIVANTS, COFFEE BARGAIN HUNTERS
Everyday Joe Drinkers
Coffeehouse Bon Vivants
Coffee Bargain Hunters
Cluster characteristics
Figure 73: General coffee consumption behaviors, by cluster, July 2008
Figure 74: Incidence of daily coffee consumption, by cluster, July 2008
Figure 75: Number of cups of coffee consumed weekly, by cluster, July 2008
Figure 76: Coffee consumption compared to last year, by cluster, July 2008
Figure 77: Where consumers shop for coffee for home consumption, by cluster, July 2008
Figure 78: Type of coffee purchased for home use, by cluster, July 2008
Figure 79: Brand loyalty, by cluster, July 2008
Figure 80: Mean attitudes and beliefs ratings about coffee, by cluster, July 2008
Cluster demographics
Figure 81: Coffee drinker and purchaser clusters, by gender, July 2008
Figure 82: Coffee drinker and purchaser clusters, by age, July 2008
Figure 83: Coffee drinker and purchaser clusters, by household income, July 2008
Figure 84: Coffee drinker and purchaser clusters, by race/Hispanic origin, July 2008
Methodology
IRI/BUILDERS—KEY HOUSEHOLD PURCHASE MEASURES
Brand map
Ground coffee
Ground coffee buying rate analysis
Figure 85: Brand map, selected brands of caffeinated coffee, by household penetration, *2007
Ground decaffeinated coffee
Ground decaffeinated coffee buying rate analysis
Figure 86: Brand map, selected brands of decaffeinated coffee, by household penetration, *2007
Consumer insights—coffee
Overview of coffee purchases
Ground coffee
Brand leaders by penetration
Figure 87: Key purchase measures for the top brands of ground caffeinated coffee, by household penetration, *2007
Ground decaffeinated coffee
Brand leaders by penetration
Figure 88: Key purchase measures for the top brands of ground decaffeinated coffee, by household penetration, *2007
APPENDIX: IRI/BUILDERS PANEL DATA DEFINITIONS
APPENDIX: OTHER USEFUL CONSUMER TABLES
Figure 89: Form of coffee used in household, by age, February 2007-March 2008
Figure 90: Number of cups of coffee consumed by daily coffee drinkers, July 2008
Figure 91: Number of cups of coffee consumed by daily coffee drinkers, by race/Hispanic origin, July 2008
Figure 92: General coffee consumption behaviors, July 2008
Figure 93: General coffee consumption behaviors, by household income, July 2008
Figure 94: Where consumers buy coffee for home consumption, by gender, July 2008
Figure 95: Use of whole bean/ground coffee brands, by age, February 2007-March 2008
Figure 96: Use of instant coffee brands, by age, February 2007-March 2008
Figure 97: What type of coffee consumers buy for home consumption, by gender, July 2008
Figure 98: Use of instant coffee brands, by age, February 2007-March 2008
Figure 99: General attitudes about coffee, by household income, July 2008
Figure 100: General health beliefs about coffee, by household income, July 2008
Figure 101: Price beliefs about coffee, by household income, July 2008
Figure 102: Brand loyalty and coffee consumers, by household income, July 2008
Figure 103: Brand loyalty and coffee consumers, by region, July 2008
Figure 104: When coffee is consumed among teens, July 2008
Figure 105: Location of coffee consumption among teens, July 2008
Figure 106: Teens’ preferences related to coffee, July 2008
Figure 107: Population, by age, 2003-13
APPENDIX: TRADE ASSOCIATIONS

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