Coffee Industry Threatened By Energy And Sports Drinks: US Coffee Drinking Trends

 @natrudy on March 22 2014 7:31 PM
Starbucks coffee packets
Packets of Starbucks coffee in a supermarket in Santa Monica, Calif., on Jan. 27, 2011 Reuters/Lucy Nicholson

The strength of the coffee market among young adults is threatened by the increasing market share of sports and energy drinks among that group, the latest National Coffee Association (NCA) annual consumer survey said on Saturday.

Coffee consumption currently skews toward older consumers and is less popular among those under 24. Among the 18 to 39 age group, about 20 percent indicated they consumed at least one sports drink or energy shot within the past day, according to the survey, which sampled 2,741 adults in February 2014.

“Sports drinks, energy drinks, energy shots … This is clearly appealing to the younger consumers,” said Allen Whitehouse, of Kraft Foods Group Inc. (NASDAQ:KRFT), when he presented the survey to coffee industry players at an NCA convention in New Orleans. 

“This is important because these drinks largely address some of the same consumer needs that our beverages address among this age group,” Whitehouse said. Understanding the popularity of energy drinks is key to ensuring that they don’t “steal coffee-drinking occasions,” he said.

However, not all of the news was gloomy for the industry. Gourmet coffee has trended well among younger drinkers, even as the dominance of traditional coffee declines. Thirty-four percent of those surveyed in 2014 said they drank gourmet coffee, which is defined by the industry as any drink that's made all or in part from espresso or premium coffee beans. That number marks a 10 percent gain compared to 2010. Standard coffee drinking declined almost 5 percent from last year.

The coffee industry is uncertain about if some generations drink more or less coffee than others. Coffee tends to be more popular among those over 60, as baby boomers and age groups drink significantly more coffee than Generation X, Generation Y, or millennial consume.

“Do people who are older now, drink more coffee, or do people drink more coffee as they age?” Whitehouse said, adding that Kraft Food Groups Inc. NASDAQ:Kraft has internally wrestled with this question. “Data shows it’s a little bit of both … But for coffee to remain relevant to younger consumers, we need to think about how to bring them in at a younger age.”

Consumers seemed otherwise upbeat on coffee, according to the survey results. The beverage remained more popular than soft drinks and even tap water in the U.S., the world’s largest market for coffee. More than 90 percent of respondents preferred their coffee hot, while eight in 10 coffee drinkers added another ingredient  (e.g., sweeteners, milk or other ingredients) -- to their joe.  

Coffee still beats tea among U.S. adults, according to the coffee industry trade group. Forty-four percent of those surveyed said they drank tea recently, compared to 61 percent of the U.S. adults polled who said they drank coffee recently. More complete survey results will be published in several weeks.

Sales of single-serve home coffee brewing machines, such as the Keurig K-Cup machine from Green Mountain Inc. (NASDAQ:GMCR) or Nestle’s Nespresso maker (VTX:NESN), tend to be higher among certain demographics. Owners of home systems tend to be males under 39 with incomes of more than $50,000, and many of them have children. 

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