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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
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Euromonitor International
INTRODUCTION
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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
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Coffee is among the most consumed beverages by volume globally
NORTH AMERICA: A KEY COFFEE MARKET
0
50
100
150
200
250
300
350
Bil
lio
ns
of
Lit
ers
Global Beverage Market, Total Liquid Volume, 2014
171 BILLION LITERS
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14%
86%
World
Coffee
Other Non-Alcoholic Drinks
Coffee has a greater share of throat in North America
NORTH AMERICA: A KEY COFFEE MARKET
21%
79%
North America
Coffee
Other Non-Alcoholic Drinks
Coffee as a Percent of Total Non-Alcoholic Drinks Volume Consumption
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Which regions spend the most on coffee?
NORTH AMERICA: A KEY COFFEE MARKET
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
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A glimpse at coffee expenditure by country
NORTH AMERICA: A KEY COFFEE MARKET
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
NORTH AMERICA: A KEY COFFEE MARKET
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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
NORTH AMERICA: A KEY COFFEE MARKET
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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 $15.3
Top markets globally in per capita retail value in 2014
NORTH AMERICA: A KEY COFFEE MARKET
NORTH AMERICA: A KEY COFFEE MARKET
COUNTRY FOCUS: UNITED STATES
CONCLUSIONS
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A leading non-alcoholic drink in volume terms, a value driver
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
0
10
20
30
40
50
60
Carbonates Bottled Water Coffee Tea Juice
Total Volume Sales (bn litres) Retail Value % Growth 2013-2014
COUNTRY FOCUS: UNITED STATES OF AMERICA
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0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
20
05
20
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20
07
20
08
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Bil
lio
n U
S$
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
COUNTRY FOCUS: UNITED STATES OF AMERICA
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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
COUNTRY FOCUS: UNITED STATES OF AMERICA
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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
COUNTRY FOCUS: UNITED STATES OF AMERICA
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%
COUNTRY FOCUS: UNITED STATES OF AMERICA
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
COUNTRY FOCUS: UNITED STATES OF AMERICA
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
COUNTRY FOCUS: UNITED STATES OF AMERICA
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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
$1.1 tn
29.8
* SOURCE: CONSUMER EXPENDITURE SURVEY, BLS
POPULATION OF MILLENNIAL CONSUMERS IN THE US IN 2014
COMBINED POST-TAX INCOME OF MILLENNIAL SHOPPERS IN 2013*
AVERAGE AGE OF MILLENNIALS IN 2013*
Image: Flickr user Patrik Nygren
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Pods slowing
Specialty coffee
Growth from Millennials
Key takeaways: United States
CONCLUSION
NORTH AMERICA: A KEY COFFEE MARKET
COUNTRY FOCUS: CANADA
CONCLUSIONS
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Canada is not a little USA!
COUNTRY FOCUS: CANADA
≠
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0
20
40
60
80
100
120
140
160
180
US Canada
Per Capita Hot Drinks Retail Brewed Volume
(liters)
Canada has a much more developed hot drinks culture
COUNTRY FOCUS: CANADA
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
US Canada
% Split in Retail Brewed Volume
Coffee Tea
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Canada is a more mature coffee market
COUNTRY FOCUS: CANADA
0
10
20
30
40
50
60
70
Per Capita Coffee Retail Value Sales (US$, 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
COUNTRY FOCUS: CANADA
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
COUNTRY FOCUS: CANADA
Starbucks
Second Cup
Van Houtte
Blenz
Timothy's
Café Depot
Others
Canada
Specialist Coffee Shop Value Sales Brand Share Breakdown
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0
10
20
30
40
50
60
70
80
90
Retail Volume Sales (Tons)
Strong growth despite being a mature and competitive market
COUNTRY FOCUS: CANADA
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
COUNTRY FOCUS: CANADA
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05
101520253035404550
Per Capita Retail Value Sales of Fresh Ground Coffee Pods (US$)
US Canada
Similar to the US, but pods have a much stronger impact in Canada
COUNTRY FOCUS: CANADA
Source: The Coffee Association of Canada
US - Price Per Cup: ~0.75 CA - Price Per Cup: ~0.83 Image from cw-usa.com
Brewing Method Breakdown
US Canada
Drip 58% 53%
Single-Cup 20% 25%
Espresso 9% 8%
Instant 10% 15%
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As pods approach maturity, differentiation is key
COUNTRY FOCUS: CANADA
0%
100%
200%
300%
400%
500%
600%
% Year-on-Year Growth in Retail Value Sales of Fresh Ground
Coffee Pods in Canada
Image from vendingtimes.com
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Differentiation is key across all coffee categories
COUNTRY FOCUS: CANADA
0
50
100
150
200
250
2009 2010 2011 2012 2013 2014
Retail Value Sales of Organic Coffee (US$ 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
COUNTRY FOCUS: CANADA
Images from secondcup.com/press-room
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RTD Coffee 2014
Total Volume (mn litres)
Total Value RSP (US$)
US 401.1 2,189
Mexico 11.5 73.4
Canada 2.2 21.8
Opportunity in RTD coffee and functional products
COUNTRY FOCUS: CANADA
Convenient/
On-the-go Refreshing
Indulgent Functional
Image from Real Beanz Facebook page
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Canada is NOT the 51st
State
Growth persists
Opportunities exist
Key takeaways: Canada
CONCLUSION
NORTH AMERICA: A KEY COFFEE MARKET
COUNTRY FOCUS: MEXICO
CONCLUSIONS
© Euromonitor International
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0 20 40 60
Mexico
Colombia
Brazil
USA
Costa Rica
Canada
Per Capita Coffee Retail Value Sales
(US$)
0
2
4
6
8
10
12
14
16
18
20
00
20
01
20
02
20
03
20
04
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08
20
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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
COUNTRY FOCUS: MEXICO
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Low to middle
class consumers
Middle-upper to
upper class
consumers
The economy is polarizing consumers
COUNTRY FOCUS: MEXICO
US$41.0
US$28.8
US$8.3
Per Capita Disposable Income (‘000)
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Specialist coffee shops are on the rise in Mexico
COUNTRY FOCUS: MEXICO
0
500
1,000
1,500
2,000
2,500
Specialist Coffee Shops - Outlets
0
100
200
300
400
500
600
700
800
Specialist Coffee Shops - Foodservice RSP (US$ mn)
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The Starbucks Factor
COUNTRY FOCUS: MEXICO
0%
10%
20%
30%
40%
50%
200420052006200720082009 2010 2011 2012 2013 2014
Starbucks Share of Specialist Coffee Shops RSP
Source: Euromonitor In-Country Analyst
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Starbucks extends its Reserve concept to Mexico in 2015
COUNTRY FOCUS: MEXICO
• 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
COUNTRY FOCUS: MEXICO
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Instant coffee is an integral part of lifestyles
COUNTRY FOCUS: MEXICO
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
COUNTRY FOCUS: MEXICO
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
NORTH AMERICA: A KEY COFFEE MARKET
COUNTRY FOCUS: US, CANADA AND MEXICO
CONCLUSIONS
© Euromonitor International
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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:
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