Increased sales of specialty beverages have increased overall revenue for coffee retailers.
Most convenience store retailers appreciate the value that hot dispensed beverages provide. Retailers also recognize the importance of offering a quality product at a competitive price that is merchandised in an effective way that improves speed of service.
Beyond those elements there are the operational imperatives of consistently executing every day in a clean store and with a friendly smile. These are just some of the variables that go into building a successful hot dispensed beverage program in convenience stores today.
As a result of following these best practices, more individuals made coffee their caffeinated beverage of choice over the past five years, the Retail Market for Coffee exhibited slight growth. Fewer consumers are now drinking plain coffee, but retailers have experienced robust demand for espresso-based beverages. According to IBISWorld Industry Analyst Sarah Turk, “Many retailers have included high-quality, Arabica bean-based coffee in their product portfolios, and coffee houses and other coffee retailers that offer coffee for on-site consumption have benefited from greater purchases of specialty coffees.”
According to the National Coffee Association, per capita coffee consumption is expected to rise at an annualized rate of 1.1% over the five years to 2015, driven by the 61.0% of adults who drink coffee on a daily basis. The organization’s National Coffee Drinking Trends survey found that 29% of respondents use single-cup coffee brewers.
“Retailers such as grocery stores have experienced sales growth due to strong demand for coffee in K-cup packaging,” says Turk. “Furthermore, many time-strapped consumers have shifted toward gourmet instant coffee over the period, creating an alternative revenue stream for retailers, as evidenced by the popularity of Starbucks’ VIA ready-brew coffee.”
Despite these favorable consumer trends, revenue is projected to contract in 2015 because the price of coffee beans spiked in 2014 and is expected to remain high through this year.
As a result of volatile input commodity costs, coffee retailers have struggled to accurately reflect purchase costs in their prices. Still, profit has risen since 2010 because coffee retailers were able to mark up prices for specialized coffee, such as coffee in K-cup packaging. Over the five years to 2020, retail coffee revenue is forecast to grow at a faster pace.
Coffee bean prices are expected to exhibit less volatility, enabling coffee retailers to price their products to reflect purchase costs.
Bottom Line
Despite a slight dip in revenue in 2009, the recession’s affect on this industry was minor and the market experienced overall growth in the five years to 2015. This growth will continue in the next five years due to increased convenience to market products and more product options overall, such as bottled coffee, single-cup brewers and instant coffee.
