FOODSERVICE COFFEE AND TEA AN $18.7 BILLION INDUSTRY.

nina | April 13th, 2012 - 9:00 am

Coffee and tea remains a key foodservice industry growth driver, buoyed by aggressive menu innovation and a strong foothold in the breakfast daypart, according to Coffee and Tea Foodservice Trends in the U.S.

Sales of coffee and tea at restaurant and drinking places are projected to reach $18.7 billion in 2012. Sales spiked 11% in 2011, driven by the return of consumers to the restaurant industry, aggressive coffee and tea menu innovation, increased penetration of coffee and tea among restaurant units, and menu price increases.

Some 173.5 million consumers drink tea and 183 million consumers drink coffee.  These are eye-popping numbers that also imply limited usage growth potential. The challenge for foodservice operators involves expanding varieties and occasions for use while converting home and office coffee and tea users into foodservice users.

“The Big Four” in this market — Dunkin Donuts, Green Mountain Coffee Roasters, McDonald’s, and Starbucks — each generate coffee and tea revenue in excess of $1 billion. Led by these Big Four, coffee and tea players continue to outperform restaurant industry growth, with restaurant brands across the foodservice spectrum pursuing incremental profits through improvements in coffee and tea quality and variety.

Data provided in Coffee and Tea Foodservice Trends in the U.S. show that most leading coffeehouse/donut shop brands have grown same-store sales since 2005.

While the percentage of restaurants that offer coffee rose across the board in the 2007-2011 period, especially notable is the increased presence of specialty coffee drinks such as cappuccinos, lattes, Americanos, and Macchiatos. Macchiato penetration has risen by over 50% since 2007.

Correspondingly, the average price for coffee on the restaurant menu has risen 25% since 2007, with the highest increase at quick-service restaurants. However, this price trend reflects operators passing on coffee commodity cost increases to consumers, as has also been the case at retail.

The rise in coffee prices has created significant challenges for industry players. Naturally, coffee commodity prices significantly affect coffeehouse expenditures, as well as those of restaurant operators with a significant coffee stake on the menu. But after rising to record levels in early 2011, coffee prices have begun to trend downward. Tea pricing stability may provide operators with higher margins than they receive for coffee, and, if history proves a barometer for the future, leave them less vulnerable to pricing volatility.

In addition, all regional and national coffeehouse chains now complement their beverages with food, and food platforms continue to expand. Against a competitive backdrop that includes quick-service restaurants offering quality food and beverages, coffeehouses need to supplement their beverages with a quality food selection or risk losing sales to players providing both.

Source:  Packed Facts; 2.13.12

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