Coffee runs hot and cold

April 08, 2011

The numbers of young daily coffee drinkers are growing again. How will they take to recent price hikes?

Retailers will soon learn if a recent rebound in coffee drinking among 18- to 39-year-olds will lose steam due to steep ingredient cost hikes in 2011. Optimists will cite several figures from the National Coffee Association of U.S.A.'s National Coffee Drinking Trends 2011 Survey as cause for category promise: 

  • Daily coffee drinkers now include 40% of consumers age 18 to 24, up from 31% in 2010, and even with the 2009 level.
  • Daily coffee drinkers also include 54% of consumers age 25 to 39, up from 44% in 2010 and 53% in 2009. "These figures aligned with findings that 29% of those 18-39 feel better about their financial situation than last year," NCA reported.

But will price hikes quell their craving, in particular for gourmet coffee, which NCA says is a "significant portion" of total coffee consumption? Also, at-home consumption is quite mature compared with out-of-home consumption. Some 86% of coffee consumers drank coffee at home within a day of taking the survey vs. 24% who drank coffee out of home, the survey said, noting continued category encroachment by single-cup systems. Pod penetration is up 1% a year, and 35% of respondents with pod systems bought them within the past six months.

Another segment with legs is iced coffee as a year-round beverage, suggests Dunkin' Donuts research, which shows "nearly 80% of iced coffee drinkers are drinking more iced coffee now than one year ago," and most (56%) prefer it to hot coffee even during winter. What's behind this trend? When people want energy, 64% drink iced coffee, 22% opt for energy drinks, 9% carbonated beverages and 6% juice, the survey says.

Coffee marketing is keeping the heat on. A year ago, the category grew 2.9% and surpassed the $5 billion dollar sales benchmark in U.S. food, drug and mass merchandiser stores (including Walmart), according to Nielsen data for prepackaged, UPC-coded products only.  In the latest 52-week period ended February 19, 2011, coffee sales perked up another 3.1% to $5.20 billion.  Yet this latest gain was probably due to price hikes because equivalized unit volume fell by 2.9%.

EUV was down for both brands and private label, but brands fared much better. A 1.6% EUV dip for brands, which account for 90% of category share, still led to a 4.2% dollar sales rise to $4.73 billion in the latest 52 weeks. By contrast, a 12.3% fall in private label EUV produced a 7.1% drop in dollar sales to $471.9 million, Nielsen data show. 

Ground coffee dominates the category, with dollar sales up 3.4% a year ago and 4.3% in the latest 52 weeks to $3.79 billion. Yet ground coffee experienced a 3.7% EUV decline in the most recent year. This was comprised of a 2.2% dip by brands and a 13.1% fall by private label.

Indeed, of all category segments, just one posted both dollar sales and EUV rises in the latest year. Liquid coffee dollar sales were up 3.7% to $363.7 million on 4.4% EUV growth. Brands account for 99% of dollar sales within this segment.


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