Background on the U.S. Coffee Industry

Market Information

Recall from the home page that the U.S. Market for Coffee and RTD Coffee, according to a report by Packaged Fact, is a $34 billion market with U.S. sales of coffee approached $43.9 billion in 2007, for a five-year compound annual growth rate of 9.7%.

  • Specialty coffees represent approximately 30% of the market in both food service and retail channels
  • Restaurants and coffeehouses are the largest food service channels; supermarkets are the primary retail sales channel
  • Coffehouses have expanded from 500 in 1991 to more than 25,300 in 2007
  • Single-serve coffee systems using coffee pods or capsules are starting to take off
  • Coffee faces competition from beverages such as tea, juicers, bottled water, soft drinks, and sports and energy drinks
  • The specialty coffee industry is at the forefront of offering ethical, eco-friendly products and this trend is spreading (e.g. fair trade brands)
Year Dollar Sales in millions %Change
2007 43,896 11%
2006 39,530 11.3%
2005 35,502 8.6%
2004 32,693 7.8%
2003 30,339

Market Leader

The monopolist in the market without a doubt is Starbucks, but competitors are such as McDonald's and even local convenience stores and supermarkets are trying to steal away some market share.

  • McDonald's McCafé specialty beverages concept has caused quite a splash in the industry due to McDonald's advantage in terms of pricing.
  • Procter & Gamble sold its Folger Coffee division to J.M. Smucker. Massive changes are brewing in the U.S. coffee market, where sales surged 11% in 2007 to reach $39.5 billion.

Product Types

  • Coffee brewed and served by the cup
  • Ground Coffee
  • Whole Bean Coffee
  • Single-serve pods and capsules
  • Instant/Freeze-Dried Coffee
  • Instant Cappuccino and Specialty Coffee mixers
  • Liquid Coffee Concentrates
  • Packaged Ready-to-drink Coffee Beverages

Industry Growth

The Coffee Consumers are a difficult group to appease. Some care about social responsibility, others values, still others only care about taste, no matter how much it costs. Much of what you will find in this blog is information regarding the struggle of Starbucks to maintain its lead. Its strategy includes better PR, trying to maintain loyal consumers, and differentiating its products.

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Additional Information

Top Market Players
Market Background Information
Additional Sources of Information
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