Positioned as a relatively inexpensive luxury, upscale coffee sales continue to thrive

Positioned as a relatively inexpensive luxury, upscale coffee sales continue to thrive even as many other industries suffer from consumer cutbacks on nonessential purchases, according to market research publisher Packaged Facts in "Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition."

Packaged Facts estimates that total coffee market sales, including foodservice and retail, rose to $48 billion in 2009, with annual growth of 4% in 2008 and 2009. Sales in foodservice -- everything from Dunkin' Donuts' select blends to McDonald's medley 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," says 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."

As opposed as the economic downturn is to the upscaling thrust (i.e., 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. Instead of settling for cheap ground coffee, consumers and their growing "coffee connoisseurship" have been willing to make difficult tradeoffs to stay within their means while indulging in premium beverages that provide many with a source of comfort during stressful times.

Accordingly, marketers who have found success discovered ways to respond to the downturn -- not by ignoring it or reversing strategy, but by incorporating its impact on consumer behavior as a factor among others that help them drive the daily value choices consumers make. Common claims for new coffee drinks since 2009 play up the "premium" angle and relatively downscale coffee venues continue to introduce luxurious coffee beverages at comparatively thrifty prices.

"Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition" examines both the retail and foodservice sides of the U.S. coffee market, as well as the growing overlap of the two. On the retail side, the report analyzes coffee sold for future brewing -- beans and ground, and instant -- and ready-to-drink coffee drinks (à la Frappuccinos), as well as coffee enthusiasts' new brewing method of choice: single-serve (pod) coffee. Examination of the vast foodservice market for coffee includes the expansion of specialty drinks at such mass-market venues as McDonald's, Dunkin' Donuts and Burger King with its planned 2010 roll-out of Starbucks' Seattle's Best.