Coffeehouses - US - February 2004

SUMMARY

Coffeehouses are relatively new to the U.S. landscape. According to findings from the Specialty Coffee Association of America, only 500 specialty coffeehouses existed in 1982; it required seven years for the number of coffeehouses to double to 1,000 in 1989. Through the latter half of the 1990s, however, coffeehouses in the U.S. enjoyed rapid growth. By 2000, sales had reached $4.4 billion via an estimated 12,600 coffeehouses nationwide.

Between 2000 and 2003, sales increased by more than 50% to reach $6.9 billion, as the number of coffeehouses nationally increased by 38% to exceed 17,000 shops. Primary factors driving this growth include the increased perception that coffeehouses serve superior coffee, an interest in the wide variety of flavors, blends, and drinks provided by coffeehouses, and increases in demographic groups that favor coffeehouses. At present, there is no evidence to suggest decline among these trends.

Coffeehouses covered in this report are those that feature coffee as their primary sales item. Coffeehouses sell other items in addition to coffee, such as sweets, tea, travel mugs, coffee beans etc., but the main product is coffee and coffee-based beverages. The term coffeehouse is used interchangeably with coffee shop. Coffeehouses include freestanding stores, kiosks, and coffee carts, as well as those located in malls, office buildings, hospitals, etc. if operated independently of the facility that house them. The report excludes other types of outlets that sell coffee, such as restaurants, donut shops, truck stops, and diners (although some of these outlets are considered in the Consumer section of the report).

From the Specialty Coffee Association of America:

"For many years, meaningful research on retailing prepared specialty coffee beverages was practically non-existent. Thankfully, that changed in 2001 when Mintel released a report on the U.S. coffeehouse sector. Now, with input from the Specialty Coffee Association of America, this valuable report has been completely updated. Whether you're a small operator looking for the insight you need to grow your customer base, or a large supplier trying to make strategic decision about the future, you'll find this new report from Mintel provides information you cannot find anywhere else. The Specialty

Coffee Association of America is pleased to partner with Mintel on the 2004 coffeehouse report."

TABLE OF CONTENTS

Introduction & Abbreviations

INTRODUCTION

OTHER REPORTS OF RELEVANCE

DEFINITION

ABBREVIATIONS & TERMS

• Abbreviations
• Terms

EXECUTIVE SUMMARY

COFFEEHOUSES BREED COFFEEHOUSES

STILL A GROWING MARKET

GROWTH IN CHAINS AND INDEPENDENTS

KING STARBUCKS

PROFILE OF COFFEEHOUSE VISITORS

ATTITUDES TOWARD COFFEEHOUSES

THE FUTURE OF THE COFFEE SHOP MARKET

FORECAST

MARKET DRIVERS

COFFEE CONSUMPTION AT HOME VERSUS AT COFFEEHOUSES

• Figure 1 U.S. retail sales of coffee through FDM* and through coffeehouses, 1998-2003
• Coffeehouse Culture-Quality of Coffee
• Coffeehouse Culture-Variety of Beverages

COMPETITION FROM OTHER RETAILERS

• Figure 2 Places to get coffee, November 2003

READY-TO-DRINK COFFEE BEVERAGE CONSUMPTION

• Figure 3 Sales of RTD coffee beverages through FDM*, 1998-2003

SKIPPING BREAKFAST

DEMOGRAPHIC FACTORS IMPACTING THE MARKET

• Figure 4 Incidence of visiting coffee shops in the last 7 days by key demographics, November 2003
• Age
• Figure 5 U.S. population, by age, 1998 and 2003
• Ethnicity/Race
• Figure 6 Number of U.S. households, by race/ethnicity, 1998 and 2003
• Educational Attainment
• Geographic Shifts

MARKET SIZE & TRENDS

• Figure 7 Total U.S. retail sales at coffeehouses, at current and constant prices, 1998-2003
• Graph 1 Total U.S. retail sales at coffeehouses, at current and constant prices, 1998-2003
• Figure 8 Number of U.S. coffeehouses, 1998-2003

MARKET SEGMENTATION

• Figure 9 Number of coffeehouses, segmented by chains and independents, 2001 and 2003
• Graph 2 Percent of coffeehouses that are independents, microchains and chains in 2003

RETAIL DISTRIBUTION

COMPANIES AND BRANDS

• Figure 10 U.S. and Canadian coffeehouses, # of locations and sales, by company, 2001 & 2003
• Figure 11 Estimated number of locations and total revenues* by company, 2003
• Starbucks
• Caribou Coffee
• Diedrich Coffee, Inc.
• Coffee Beanery
• Seattle Coffee Company
• Coffee Bean & Tea Leaf (International Coffee and Tea)
• Tully's Coffee Corp.
• Peet's Coffee & Tea
• Barnie's Coffee & Tea
• CC's Coffee House (Community Coffee Company)

INDEPENDENTS

ADVERTISING & PROMOTION

INTRODUCTION

STARBUCKS

OTHER

THE CONSUMER

INTRODUCTION

PLACES COFFEE IS CONSUMED

• Figure 12 Where respondents get coffee, 2001 versus 2003
• Figure 13 Where respondents get coffee, by key demographics, November 2003

ATTITUDES TOWARD COFFEEHOUSES

• Figure 14 Attitudes toward coffeehouses, November 2003
• Figure 15 Attitudes toward coffeehouses, by gender, November 2003
• Figure 16 Attitudes toward coffeehouses, by age, November 2003
• Figure 17 Attitudes toward coffeehouses, by household income, November 2003
• Figure 18 Attitudes toward coffeehouses, by region, November 2003
• Figure 19 Attitudes toward coffeehouses, by urban status, November 2003

FREQUENCY OF VISITING COFFEEHOUSES

• Figure 20 Frequency of visits to coffeehouses, by key demographic variables, November 2003

AVERAGE WEEKLY SPEND AT COFFEEHOUSES

• Figure 21 Average weekly spend at coffeehouses, by key demographics, November 2003

WHERE COFFEEHOUSE BEVERAGES ARE CONSUMED

• Figure 22 Where coffeehouse beverages are consumed, by key demographics, November 2003

INDEPENDENTS VS. CHAINS

• Figure 23 Incidence of visiting independent versus chain coffeehouses, by key demographics, November 2003

FREQUENCY OF PURCHASING FOOD AT COFFEEHOUSES

• Figure 24 Frequency of purchasing food with coffee at coffeehouses, by key demographics, November 2003

CHOOSING BETWEEN COFFEEHOUSES

• Figure 25 Reasons for visiting one coffeehouse over another, November 2003
• Figure 26 Reasons for visiting one coffeehouse over another, by gender, November 2003
• Figure 27 Reasons for visiting one coffeehouse over another, by age, November 2003
• Figure 28 Reasons for visiting one coffeehouse over another, by household income, November 2003
• Figure 29 Reasons for visiting one coffeehouse over another, by marital status, November 2003
• Figure 30 Reasons for visiting one coffeehouse over another, by urban status, November 2003

CONCLUSIONS

FUTURE & FORECAST

FUTURE TRENDS

• Continued Expansion of Retail Sites
• Decreased Consumption of Coffee at Home
• Demographic Variables
• Figure 31 U.S. population projections, by age, 2003-2008
• Hispanic Growth
• Figure 32 Projected number of U.S. households, by race/ethnicity, 2003-2008
• Coffeehouse Nation?
• Evolution Into Fast-Casual Restaurants?

FORECAST

• Forecast-continued strong but diminished growth
• Figure 33 Forecast of total U.S. retail sales at coffeehouses, at current and constant prices, 2003-2008
• Graph 3 Forecast of total U.S. retail sales at coffeehouses, at current and constant prices, 2003-2008
• Forecast Factors

APPENDIX: Trade Associations

APPENDIX: Research Methodology

CONSUMER RESEARCH

• Sampling & Weighting
• Presentation & Definition
• Further Analysis

TRADE RESEARCH

• Informal trade research
• Formal trade research

DESK & INTERNET RESEARCH

SOURCES

DEFINITIONS

FORECASTS

APPENDIX:

WHAT IS MINTEL?

MINTEL PUBLICATIONS

MINTEL SERVICeS

• Product retrieval
• Retail audits
• Tailored research
• Global New Products Database

RESEARCH SUPPORT/CONSULTANCY/MIC

• The Mintel Information Centre (MiC)
• PR Research