Food service coffee segment recession-proof

by Keith Nunes
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NEW YORK — Positioned as a relatively inexpensive luxury, upscale coffee sales continue to grow even as many other industries suffer from consumer cutbacks on nonessential purchases, according to Packaged Facts in its latest report “Coffee and ready-to-drink coffee in the U.S.: The market and opportunities in retail and food service.”

The market research firm estimated that total coffee market sales, including food service and retail, rose to $48 billion in 2009, with annual growth of 4% in 2008 and 2009. Sales in food service — which encompasses everything from Dunkin’ Donuts’ select blends to McDonald’s portfolio of McCafé mochas, lattes, and cappuccinos — reached $42 billion, accounting for 87% of the coffee market.

“With the advent of the so-called ‘great recession’ in 2008, the central question facing the coffee market was whether a product that saw sales growth through upscaling could continue to progress in the face of a severe economic downturn,” said Don Montuori, publisher of Packaged Facts. “By and large, the answer is yes. Even if marketers must now scuffle for every percentage point of sales growth they get.”

The economic downturn is to the up-scaling thrust, which may include everything from shifts toward specialty coffee drinks, specialty coffee varietals, single pod coffee, and fair trade and triple certification coffee, the former doesn’t negate the latter but rather interacts with it. Consumers have been willing to make tradeoffs to stay within their means while indulging in premium beverages.

Burger King Corp., Miami, is responding to the continued growth in food service coffee sales by entering into a partnership with Starbucks Coffee Corp., Seattle, to offer Starbucks’ Seattle’s Best Coffee brand in over 7,000 Burger King restaurants. Burger King estimates that the transition will be complete by September 2010.

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