Q&A: The State of the Coffee Market in North America

July 28th, 2015

These are the questions posed to us following our recent webinar “The State of the Coffee Market in North America.” We responded to the original questions via email; you can view our responses below. You can also watch the full webinar on-demand for complete insights.

Q: ­Is there any preference in terms of coffee exporting country for USA, Canada and Mexico? For example, do they prefer mostly coffee from Brazil, Africa, Costa Rica etc or there is no preference?­

A: As a whole, I would say the vast majority of American consumers aren’t aware of differences in coffee by origin, although they may be able to rattle off a few coffee producing nations like Costa Rica, Brazil, Colombia, Ethiopia, etc. When speaking about the sophisticated, high-end coffee consumer, there may very well be some who have a preference to origin, however I believe these consumers are oftentimes more concerned about ethically sourced coffee which may play into geographical preference.

Q: ­Who are the main players in the pod category in the US and what are their market shares?­

A: Coffee pods in the US are dominated by Keurig Green Mountain, who has licensing agreements with nearly all other coffee companies. At a more specific brand name level, Green Mountain Coffee, Private Label, and Starbucks lead, with 16%, 14% and 11%, respectively. Nespresso has only 5% share.

Q: ­What is driving the value of whole bean vs R&G?­

A: Whole beans are becoming a more premium product, particularly on the retail end of things where the consumers of whole bean coffee are oftentimes more keen on quality rather than convenience. Ground coffee, which is typically a more economical way to consume coffee, is effected more directly by coffee prices influenced by crop yields and trade conditions.

Q: Can you please talk about RTD Coffee in Mexico

A: RTD Coffee certainly presents an opportunity in Mexico. One thing that Mexico has going for it is the hotter environment relative to the US and Canada since many of these products are positioned as a refreshing and indulgent beverages. However, sales are currently still quite low, with 11.5 million liters being sold in 2014, or US$73.4 million in retail sales and these products are likely to remain niche. While the up-and-coming coffee culture could provide a boost to these products, it is important to keep in mind that they are relatively expensive and many consumers in Mexico will still prefer lower priced coffee that they prepare at home.

Q: ­Who are the main players in the instant category in Mexico besides Nestle and what are their market shares?­

A: The instant coffee category in Mexico is dominated by Nescafe, which holds over 50% of retail value share. Dolca from Nestle accounts for another 13%. Other more minor players include Café Legal, Los Portales and Diplomat, each of which account for less than 5% of the market.

Q: ­In terms of consumers lifestage, which one is growing consumption in Mexico?­

A: This is an excellent question. Unfortunately we do not have any quantitative information crossing age and coffee consumption in Mexico. However, qualitatively, young professionals are the ones most driving the growth in specialist coffee shops. These consumers often have the means to purchase high quality coffee, and increasingly use it to help fuel them through the work day.

Q: ­what is the projected growth rate for single serve over the next 3 to 5 years?­

A: We expect Fresh Ground Coffee Pods to grow, in retail volume terms, by a compound annual growth rate of 5% in the US, 10% in Canada and 8% in Mexico.

Q: ­Do you have an estimate on how many B2B Keurig machines are out in the market (US/CAN)?­

A: We do not specifically have estimates on how many B2B Keurig machines are in the US and Canadian markets. However, we estimate that in 2014 there are 12.9 million home pod machines in the US and 1.4 million in Canada.

Q: ­Can you compare consumption of coffee vs. tea­ in Mexico?

A: We estimate that in 2014, using a brewing conversion ratio, we estimate that there were 16.3 billion cups of coffee sold compared to 1.2 billion cups of tea. That comes out to be about 1 cup of tea for every 16 cups of coffee.

Q: How much focus should be placed on “fair trade” positioning? It is our understanding that this is the next big niche in North America.

A: We don’t have any quantitative information regarding “fair trade”. However, qualitatively, I do think it is a strong opportunity and consumers are certainly paying more attention to those environmentally and business friendly products. More and more consumers are willing to pay the price premium for these products. However, there is of course much competition in the space and the market is very fragmented. There are many up-and-coming providers that offer “fair trade” coffee. Also, there is the issue of fair trade products being more expensive and a great number of consumers that continue to be value driven. Overall, as I mention, I think fair trade is a strong opportunity, but will not necessarily make the product stand out on its own.

Have a question or a thought to add? Leave us a comment below.

Mark Strobel

Mark plays an integral part in Euromonitor’s research process for the beverages industry, which includes soft drinks, alcoholic drinks, hot drinks and drinks packaging, as well as for the tobacco industry. He is responsible for the investigation and analysis of key aspects of these industries, such as market sizes and trends, company and brand shares, consumer behaviors, channel distribution, and more, with a geographical focus on North and Latin America

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