STATE OF THECOFFEE INDUSTRY

BY NICHOLAS UPTON

Staying current on the latest coffee industry news and dataseems like an insurmountable challenge. In trying to stayon top of the latest ROI stats, gizmos and trends, shop ownersrun the risk of getting caught up in the minutiae and losingsight of the big picture.

In order to paint an accurate picture of the industry as awhole, we've introduced this column that dives deep intohigh-level data, offering a description of the global forces thatmake waves across the coffee industry.

Here, we're looking at two reports. The first is from Statista,a market research firm that's created a dossier packed withinformation on the U.S. coffee industry. The second, a NationalCoffee Drinking Trends report from the National CoffeeAssociation, details who is drinking coffee and how they'reconsuming it.

COFFEE BOUNCES BACK, FOOD SALESCROW^INC

Coffee and snack shop total revenue is set to surpass $30billion in 2014, and is forecast to rise to $32.46 billion by 2016,according to data from research company Statista.

Those record numbers are good news for the entire industry,which shows no sign of slowing down despite a major drop inwholesale coffee prices. The numbers indicate that the coffeebean is not the lynchpin for the modern coffee industry. That'sbad news for coffee farmers who may look to diversify theircrops or dial back their operations. It is, however, good newsfor coffee shops and retailers.

Wholesale roasters are in the best position, as their rawmaterials are relatively inexpensive. According to recentInternational Coffee Organization numbers. Arabica is poised

10 I January 2014 www.specialty-coffee.com

U.S. coffee and snack shops industrytotal revenue 2009-2016

35 -

30 -

25

20

15 -

10

0

SOURCE:

Revenue

24.74

2009

STATISTA

of the coffee

25.52

1

2010

and snack

26.53

2011

shops industry(in billion U.S.

27.84

2012

in the Uniteddollars)

28.84 _

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2013

States from

30.24

w

2014

2009 to

31.12

2015

2016

32.46

2016

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Specialty coffee consumption:consumers of specialty coffee (USA)

50

45

40

35

30

25

20

15

10

5

0

SoURC

46.00

Spring 2008

E: STATISTA

Number ofUnited

40.90

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Autumn 2008

consumers of specialty coffee as most preferred beverage in theStates (USA) from spring 2008 to spring 2012 (in millions)

38.33 38.65

MSpring 2009 Autumn 2009

39.26

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Autumn 2010 Spring 2011 Autumn 2011 Spring 2012

to continue hovering around $1 per pound. Robusta couldcontinue its slide as Vietnam ramps up what could be anabnormally large crop. Price drops at the store and consumerlevel remain to be seen.

Revenue was quick to bounce back and resume its steady riseafter the drop in 2009 from $26.46 billion to $24.7 billion. Thenumber showed the recovery topping pre-recession numbersin 2011 when industry revenue grew to $26.53 billion.

That quick bounce back shows how relatively recession-proof the specialty coffee industry is. While consumers wereholding off on big purchases and vacations, luxury items likeSunday mochas are still bringing money into shops.

Further evidence shows those lattes and cappuccinos havebecome routine for most coffee drinkers. Even during thedecline in shop revenue in 2009, customers still preferred theirspecialty coffee drinks over any other options. The numbersdo show, however, that some 4.54 million people found analternative to specialty coffee drinks since 2008.

For anyone searching for the former specialty coffee lovers,it's a good bet home-brewed coffee, pods, tea and energy drinkshave taken them out of the market.

All in all, the numbers of people preferring specialty coffeedrinks is pretty steady. But there was a drastic shift in the kindof specialty coffee drink they prefer.

Something happened in 2010 that sparked a whirlwind romancefor cold specialty coffee drinks. Approximately 14.5 millionrespondents said they preferred cold specialty drinks over hot in

2009, and that number rose to 15.05 million in 2010. Since then, thenumber has steadily risen to 16.23 million people as of 2012.

If nothing else, those numbers should be a push for shopowners to market those cold drinks right alongside the oldstandards to capitalize on all possible preferences.

According to the Statista data, 32.15 million people were ina coffee shop during any 30 day period in the spring of 2012.

That means 3.33 million more people than in spring 2010,when most consumers were worried about the economy. It'salso up more than 1 million people since the tail end of 2011,which shows that the number of retail coffee consumers is stillgrowing rapidly.

How customers spend is also returning to and toppingpre-recession numbers. Large ticket food items were the firstthings to drop off during the recession. But the number ofpeople buying food items has been growing exponentiallysince bottoming out in the spring of 2010.

Some 20.75 million of those coffee shop customers buying foodagain in the spring of 2012. Breakfast items were the first to return,as dauy drinkers became less worried about their spending.Customers began reaching for scones, muffins and biscuits againin the autumn of 2010 and haven't slowed down since.

Lunch and dinner at coffee shops is normalizing as well. Ofthose 32.15 million people, 13.5 million got lunch from a coffeeshop and 6.92 million got dinner. Lunch and dinner times area relatively new segment for the market, and one that is payingoff for shops that have invested in food options.

12 I January 2014 www.specialty-coffee.com

Restaurant traffic:coffee house/coffee

bar visits (USA)Number of people who visited any coffee house or

coffee bar within the last 30 days in the United States(USA) from autumn 2009 to spring 2012 (in millions)

32.15

27Autunin2009 Spring2010 Autumn2010 Sprlng2011 Autunin20tl Spring2012

SOURCE: STATISTA

The number of people getting lunch at a coffee fluctuatedmarginally from 2009 to 2011 without much growth - evendipping to just 11.45 million people visiting coffee shops forlunch in spring of 2011. Since then, the lunchtime crowd hasballooned to 13.15 million people getting lunch at a coffee shopin the last 30 days, according to Statista numbers. The growthcould be attributed to more spending cash in post-recessionAmerica, but it could also mean that those shops that investedin food or reinvented how they look at lunch.

Dinner was another segment that was volatile as theeconomy stumbled to get back on track. Studies showed thatthe number of people eating dinner at a coffee shop droppedsignificantly as the economy recovereddipping from 6.47million people to 6.07 million in spring of 2011. Factors couldinclude people returning to more mainstream and expensiverestaurants as the economy started getting traction. Coffeeshops may have also driven away customers on a budget byadopting more mainstream dinner practices and pricing.

The autumn of 2011 was, however, a great time for shops withdinner, when 6.75 million people reported going to coffee shopsfor dinner680,000 more people than in spring. Investmentsin good food and a great atmosphere grew the dinner crowd byanother 170,000 people in the spring of 2012.

You can flnd the full Statista report and additional charts atbit.ly/StatistaCoffee. SCR

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