state of the coffee market in north america...state of the coffee market in north america a review...

STATE OF THE COFFEE MARKET IN NORTH AMERICA

A REVIEW OF THE TOP COFFEE TRENDS IN THE US, CANADA AND MEXICO

MARK STROBEL & ERIC PENICKA

© Euromonitor International

2

Euromonitor International

INTRODUCTION

http://www.euromonitor.com/



3

Global Coffee

Industry

Retail (Off-Trade) Coffee

Foodservice (On-Trade)

Coffee

Packaged RTD Coffee

Coffee Machines

A complete view of the coffee industry

INTRODUCTION

Volume v Brewed Volume

Retail/off-trade; Foodservice/on-trade

Mexico is included in North America

RTD = ready-to-drink

CAGR (Compound annual growth rate) over 2009-2014 unless stated



NORTH AMERICA: A KEY COFFEE MARKET

COUNTRY FOCUS: US, CANADA AND MEXICO

CONCLUSION

84.5 US$ BILLION 2014 RETAIL VALUE RSP

5.0% COMPOUNDED ANNUAL GROWTH SINCE 2009

18.3 US$ BILLION ABSOLUTE RETAIL VALUE GROWTH SINCE 2009


6

Coffee is among the most consumed beverages by volume globally


0

50

100

150

200

250

300

350

Bil

lio

ns

of

Lit

ers

Global Beverage Market, Total Liquid Volume, 2014

171 BILLION LITERS




7

14%

86%

World

Coffee

Other Non-Alcoholic Drinks

Coffee has a greater share of throat in North America


21%

79%

North America

Coffee

Other Non-Alcoholic Drinks

Coffee as a Percent of Total Non-Alcoholic Drinks Volume Consumption




8

Which regions spend the most on coffee?


0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

5

10

15

20

25

30

WesternEurope

NorthAmerica*

Asia Pacific LatinAmerica

EasternEurope

Middle East& Africa

Australasia

Coffee Retail Value Sales and Growth by Region

Retail Value Sales 2014 (US$bn) % CAGR 2009-2014

* Mexico is included in North America




9

A glimpse at coffee expenditure by country


Retail Value Sales

>10 bn

2-10 bn

1-2 bn

0.5-1 bn

<0.5 bn

Not represented




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Rank Country Volume (tonnes ‘000)

1 Brazil 1,001

2 USA 978

3 Germany 430

4 Italy 210

5 France 200

6 Japan 197

7 Indonesia 164

8 Spain 137

9 Philippines 136

10 South Korea 134

12 Canada 124

17 Mexico 107

Top markets globally in retail volume in 2014





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Rank Country Value (Dollars)

1 USA $12.8 bn

2 Brazil $6.4 bn

3 Germany $6.4 bn

4 Japan $4.6 bn

5 France $4.2 bn

6 Russia $3.7 bn

7 United Kingdom $2.5 bn

8 Italy $2.4 bn

9 Canada $2.1 bn

10 Mexico $1.8 bn

Top markets globally in retail value in 2014





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Rank Country Value (Dollars)

1 Austria $105.4

2 Norway $99.8

3 Finland $98.5

4 Switzerland $88.7

5 Netherlands $87.0

6 Denmark $81.3

7 Germany $78.7

8 Belgium $73.2

9 Sweden $66.5

10 France $65.1

13 Canada $59.9

19 USA $40.3

39 Mexico $15.3

Top markets globally in per capita retail value in 2014





COUNTRY FOCUS: UNITED STATES

CONCLUSIONS


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A leading non-alcoholic drink in volume terms, a value driver

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

0

10

20

30

40

50

60

Carbonates Bottled Water Coffee Tea Juice

Total Volume Sales (bn litres) Retail Value % Growth 2013-2014

COUNTRY FOCUS: UNITED STATES OF AMERICA




15

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Bil

lio

n U

S$

Pod Coffee Retail Value Sales

Pod coffee retail value sales over $4 billion in 2014

7.0%

0.0%

Total RetailCoffee

Excluding Pods

2009-2014 CAGR





16

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012 2013 2014

Retail Coffee Pod Share

Brewed Volume

Value

While value share has erupted, volume share is modest





17

Pod coffee is three times more expensive than coffee beans

$0.53

$0.16

$0.08

$0.07

Pods

Beans

Ground

Instant

Coffee retail price per brewed 8-oz. cup

7.4X

Instant Coffee

6.9X

Ground Coffee

3.3X

Coffee Beans


Image: Flickr user Chris RubberDragon

Image: Flickr user babbagecabbage

Image: Flickr user yoppy




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The Great Recession

Cost Quality

Consumers turned away

from foodservice

Balance of cost,

convenience, and quality

Coffee driven by necessity

Volume Growth in 2009: Foodservice 0.3%

Retail 5.2%

Brewed volume up 3.8%


Image: Flickr user bnpositive




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Specialty Coffee Shops Sales Double Over 15 Years

0

10

20

30

40

50

60

70

0

5

10

15

20

252

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

010

20

112

012

20

132

014

Do

lla

rs

pe

r p

er

so

n

Bil

lio

n D

oll

ar

s

Value Sales Per Capita


67%

33%

2008

Starbucks Others

63%

37%

2014

Starbucks Others




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1980:

Staple Caffeine

2000:

Fun Indulgence

2015:

Artisanal

Coffee innovation, a history





21

The return of filter coffee

COFFEE

The next phase of innovation

“Third-wave” coffee shops less espresso-driven, more about new methods of brewing

New ways of enjoying an old favorite



66.3 mn

$1.1 tn

29.8

* SOURCE: CONSUMER EXPENDITURE SURVEY, BLS

POPULATION OF MILLENNIAL CONSUMERS IN THE US IN 2014

COMBINED POST-TAX INCOME OF MILLENNIAL SHOPPERS IN 2013*

AVERAGE AGE OF MILLENNIALS IN 2013*

Image: Flickr user Patrik Nygren


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Pods slowing

Specialty coffee

Growth from Millennials

Key takeaways: United States

CONCLUSION




COUNTRY FOCUS: CANADA

CONCLUSIONS


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Canada is not a little USA!


≠




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0

20

40

60

80

100

120

140

160

180

US Canada

Per Capita Hot Drinks Retail Brewed Volume

(liters)

Canada has a much more developed hot drinks culture


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

US Canada

% Split in Retail Brewed Volume

Coffee Tea




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Canada is a more mature coffee market


0

10

20

30

40

50

60

70

Per Capita Coffee Retail Value Sales (US$, 2014)

US Canada

0

2

4

6

8

10

12

14

16

Per Capita Specialist Coffee Shop Transactions

(2014)

US Canada




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0%

10%

20%

30%

40%

TimHortons

McDonald's Starbucks Subway A&W

Canadian Consumer Foodservice Transaction Breakdown 2014

Ubiquitous Tim Horton’s supports strong coffee consumption


0% 10% 20% 30% 40%

Consumer Foodservice Percent of Total Transactions 2014

Tim Hortons (CA) Dunkin Donuts (US)

In Toronto

Source: Google Maps




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Starbucks

Coffee Bean &

Tea Leaf

Peet's Coffee &

Tea

Others

US

Canada is a more competitive coffee market


Starbucks

Second Cup

Van Houtte

Blenz

Timothy's

Café Depot

Others

Canada

Specialist Coffee Shop Value Sales Brand Share Breakdown




30

0

10

20

30

40

50

60

70

80

90

Retail Volume Sales (Tons)

Strong growth despite being a mature and competitive market


0

0.5

1

1.5

2

2.5

Retail Value Sales (US$ bn)




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- 100 200 300 400 500 600 700 800 900

1,000

Retail Value Sales by Coffee Type in Canada (US$ mn)

Fresh Coffee Beans Fresh Ground Coffee Pods

Standard Fresh Ground Coffee Instant Coffee

Fresh ground coffee pods add value to the Canadian coffee market





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05

101520253035404550

Per Capita Retail Value Sales of Fresh Ground Coffee Pods (US$)

US Canada

Similar to the US, but pods have a much stronger impact in Canada


Source: The Coffee Association of Canada

US - Price Per Cup: ~0.75 CA - Price Per Cup: ~0.83 Image from cw-usa.com

Brewing Method Breakdown

US Canada

Drip 58% 53%

Single-Cup 20% 25%

Espresso 9% 8%

Instant 10% 15%




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As pods approach maturity, differentiation is key


0%

100%

200%

300%

400%

500%

600%

% Year-on-Year Growth in Retail Value Sales of Fresh Ground

Coffee Pods in Canada

Image from vendingtimes.com




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Differentiation is key across all coffee categories


0

50

100

150

200

250

2009 2010 2011 2012 2013 2014

Retail Value Sales of Organic Coffee (US$ mn) in Canada

Buzzwords in Consumables

Natural

Organic

Fair Trade

Non-GMO

Gluten Free

Image provided by Keurig Canada Public Relations




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0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2009 2014

RSP Share of Specialist Coffee Shops

Starbucks Second Cup

As well as in consumer foodservice


Images from secondcup.com/press-room




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RTD Coffee 2014

Total Volume (mn litres)

Total Value RSP (US$)

US 401.1 2,189

Mexico 11.5 73.4

Canada 2.2 21.8

Opportunity in RTD coffee and functional products


Convenient/

On-the-go Refreshing

Indulgent Functional

Image from Real Beanz Facebook page




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Canada is NOT the 51st

State

Growth persists

Opportunities exist

Key takeaways: Canada

CONCLUSION




COUNTRY FOCUS: MEXICO

CONCLUSIONS


39

0 20 40 60

Mexico

Colombia

Brazil

USA

Costa Rica

Canada

Per Capita Coffee Retail Value Sales

(US$)

0

2

4

6

8

10

12

14

16

18

20

00

20

01

20

02

20

03

20

04

20

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07

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08

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09

20

10

20

11

20

12

20

13

20

14

Mexico: Per Capita Coffee Retail Value Sales (US$)

Mexico’s emerging coffee culture presents an opportunity





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Low to middle

class consumers

Middle-upper to

upper class

consumers

The economy is polarizing consumers


US$41.0

US$28.8

US$8.3

Per Capita Disposable Income (‘000)




41

Specialist coffee shops are on the rise in Mexico


0

500

1,000

1,500

2,000

2,500

Specialist Coffee Shops - Outlets

0

100

200

300

400

500

600

700

800

Specialist Coffee Shops - Foodservice RSP (US$ mn)




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The Starbucks Factor


0%

10%

20%

30%

40%

50%

200420052006200720082009 2010 2011 2012 2013 2014

Starbucks Share of Specialist Coffee Shops RSP

Source: Euromonitor In-Country Analyst




43

Starbucks extends its Reserve concept to Mexico in 2015


• Artisanal coffee • Exotic and rare coffee beans • Modern and luxurious design

Images provided by Starbucks media relations




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25%

75%

Breakdown of Retail and Foodservice Coffee Volume

Sales

Foodservice Retail

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

USA Canada Mexico

Breakdown of Fresh and Instant Coffee Volume Sales

Fresh Coffee Instant Coffee

Retail sales continue to dominate the Mexican coffee market





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Instant coffee is an integral part of lifestyles


Value

Convenient

Custom

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Pods Beans Ground Instant

Average Retail Cost Per Cup by Format in Mexico (US$)




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Premium Retail Coffee

Affordable Specialist Coffee Shops

Lower income looking for a

reasonably priced gourmet experience

Middle income seeking a less

expensive luxury

Opportunity in the middle ground


Images from nescafe.com.mx and italiancoffee.com




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Growth Opportunity

Specialist coffee shops on the rise

Value is still key Finding the

middle ground

Key takeaways: Mexico

CONCLUSION




COUNTRY FOCUS: US, CANADA AND MEXICO

CONCLUSIONS


49

Key takeaways

CONCLUSION

North America is a highly important coffee market

Each country has a unique coffee culture in a different

stage of development

The US, Canada and Mexico all have distinct opportunities that

can be leveraged



THANK YOU FOR LISTENING Mark Strobel: [email protected]

Eric Penicka: [email protected]

Connect with Euromonitor at:

@euromonitor

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state of the coffee market in north america...state of the coffee market in north america a review...

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