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Coffee and Tea On Premise - US - December 2016

"The on premise coffee and tea market is characterized by the sustained growth of existing establishments and the influence of third wave coffee shops. While most consumers are satisfied with current coffee/tea options, a new generation of consumers is driving the trend to premium beverages. Restaurants face strong competition from CPG (consumer packaged goods) brands, yet the continued innovation and convenience of restaurants keeps them one step ahead of retail."

- Caleb Bryant, Foodservice Analyst

This report will cover the following areas:

  • Coffee and tea are most often sourced at home
  • A third of consumers are non-spenders
  • Most consumers visit only a few coffee/tea locations

This Report focuses on coffee drinks (ie regular hot brewed coffee, iced coffee, and specialty coffee such as espresso-based drinks) and tea drinks (ie hot brewed tea, iced tea, and specialty tea such as tea lattes) found at foodservice establishments. While special attention is paid to coffee houses, coffee and tea are found at nearly all foodservice segments, thus coffee and tea found at other locations (eg QSRs, donut shops, convenience stores) are also discussed.

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Table of contents

  1. Overview

    • What you need to know
      • Definition
      • Executive Summary

        • The issues
          • Coffee and tea are most often sourced at home
            • Figure 1: Coffee/tea drinks consumed AH vs AFH, October 2016
          • A third of consumers are non-spenders
            • Figure 2: Factors consumers would pay more for, September 2016
          • Most consumers visit only a few coffee/tea locations
            • Figure 3: Repertoire analysis – Locations visited, September 2016
          • The opportunities
            • The coffee house market is growing
              • Figure 4: Total US sales and forecast of coffee shops, at current prices, 2010-20
            • iGen/Millennials want innovation
              • Figure 5: Coffee/tea drink interest, by generation, September 2016
            • Court the third wave consumers
              • Figure 6: Factors consumers would pay more for, by HH income, September 2016
            • What it means
            • The Market – What You Need to Know

              • Coffee house segment has sales over $20 billion annually
                • Foodservice faces competition from innovative CPG products
                  • A new coffee movement on the horizon
                    • Coffee prices set to increase
                    • Market Size and Forecast

                      • Coffee house sales exceed $20 billion annually
                        • Figure 7: Total US sales and forecast of coffee shops, at current prices, 2010-20
                        • Figure 8: Total US sales and forecast of coffee shops, at current prices, 2010-20
                      • New coffee houses continue to enter the market
                        • Figure 9: Total number of coffee houses in the US, 2010-20
                    • Market Breakdown

                      • Starbucks dominates coffee house market
                        • Figure 10: Share of coffee house units, 2015
                      • Independent coffee houses lose market share
                        • Figure 11: Number of coffee house units, 2014-15
                        • Figure 12: Share of coffee house units, multiples vs independents, 2014-15
                    • Market Perspective – Mintel Defines Coffee’s “Waves”

                      • The history of coffee, defined by waves
                        • The first wave
                          • The second wave
                            • The third wave
                              • Third wave evolution – what’s next
                              • Retail Beverages

                                • RTD coffee is the fastest growing retail coffee type
                                  • Figure 13: Percent change in total US retail sales of coffee, by segment, at current prices, 2012-21
                                • RTD tea sales boost the entire tea category
                                  • Figure 14: Percent change in total US retail sales of tea, by segment, at current prices, 2012-21
                                • Energy drinks continue to experience strong growth
                                • Market Factors

                                  • Younger generation are core AFH beverage drinkers
                                    • Figure 15: Population by generation, 2011-21
                                  • Coffee price forecast to increase
                                    • Figure 16: US imports of coffee, trended 2010-14, November 2015
                                  • US tea imports on the rise
                                    • Figure 17: US imports of tea and mate, 2010 to 2014
                                  • Non-dairy creamers are on the rise
                                    • Figure 18: Non-dairy milk consumption habits, January 2016
                                • Key Players – What You Need to Know

                                  • Coffee and tea are growing on menus
                                    • Innovation abounds in coffee shops
                                      • Starbucks and Dunkin’ go premium, JAB makes moves
                                      • What’s Working?

                                        • Starbucks continues to drive innovation
                                          • Starbucks: Food
                                            • Starbucks: Drinks
                                              • Starbucks: Other changes
                                                • Dunkin’ goes premium
                                                  • Changes by other companies
                                                  • Emerging Third Wave Beverages

                                                      • Coffee drinks
                                                        • Coffee and tonic
                                                          • Flash brewed coffee
                                                            • Specialty coffee on tap
                                                              • Coffee meets booze
                                                                • Waste not want not
                                                                  • Tea drinks
                                                                    • Matcha mania continues
                                                                      • Mellow kava, man
                                                                        • 3.5 wave processing
                                                                          • Fermented coffee
                                                                            • Smoked coffee
                                                                              • Aged and barrel-aged
                                                                              • Third Wave Coffee and Social Media

                                                                                • Rival IQ methodology
                                                                                  • In the land of social media, Instagram is king
                                                                                    • Figure 19: Total audience on social media by platform, November 11th 2016
                                                                                    • Figure 20: Total activity on social media by platform in the last 90 days, November 11th 2016
                                                                                    • Figure 21: Total social engagement on social media by platform in the last 90 days, November 11th 2016
                                                                                    • Figure 22: Average engagement per social media post in the last 90 days, November 11th 2016
                                                                                • MMI Analysis

                                                                                  • Coffee beverages
                                                                                    • Coffee continues to grow on menus
                                                                                      • Figure 23: Growth in incidence of the top 10 coffee beverages on menus, Q3 2015-Q3 2016
                                                                                      • Figure 24: Percent of restaurants with any coffee beverage on the menu, by segment, Q3 2016
                                                                                    • Sweet and “spicy” flavors are trending; overall flavors are down
                                                                                      • Figure 25: Top 10 coffee beverage flavors, growth in incidence on menus, Q3 2015-Q3 2016
                                                                                    • Tea beverages
                                                                                      • Trendy teas
                                                                                        • Figure 26: Percent of restaurants with any tea beverage on the menu, by segment, Q3 2016
                                                                                        • Figure 27: Growth in incidence of the top 10 tea beverages on menus, Q3 2015-Q3 2016
                                                                                        • Figure 28: Top 10 tea beverage flavors, growth in incidence on menus, Q3 2015-Q3 2016
                                                                                    • What’s Next?

                                                                                      • Aussie and Asian shops shape the market
                                                                                        • JAB ties it all together
                                                                                          • Starbucks goes third wave
                                                                                            • Golden wellbeing
                                                                                            • The Consumer – What You Need to Know

                                                                                              • AFH coffee/tea consumption varies by demos
                                                                                                • Opportunity for unique processing
                                                                                                  • Young consumers want functional drinks
                                                                                                    • Keep it convenient
                                                                                                    • Chain/Segment Visitation

                                                                                                      • Starbucks, McDonald’s, and Dunkin’ are the Big Three
                                                                                                        • Figure 29: Chain/segment visitation for coffee/tea, September 2016
                                                                                                      • Men are an important coffee-drinking segment
                                                                                                        • Figure 30: Chain/segment visitation for coffee/tea, by gender, September 2016
                                                                                                      • Millennials primary consumers for coffee houses and tea shops
                                                                                                        • Figure 31: Chain/segment visitation for coffee/tea, by generation, September 2016
                                                                                                      • Hispanics are frequent location visitors
                                                                                                        • Figure 32: Chain/segment visitation for coffee/tea, by ethnicity and race, September 2016
                                                                                                      • Coffee/tea visitation scales with income
                                                                                                        • Figure 33: Chain/segment visitation for coffee/tea, by income, September 2016
                                                                                                      • Coffee culture varies by geography
                                                                                                        • Figure 34: Chain/segment visitation for coffee/tea, by census region, September 2016
                                                                                                        • Figure 35: Chain/segment visitation for coffee/tea, by area, September 2016
                                                                                                    • Repertoire Analysis

                                                                                                      • Majority of consumers visit only a few locations
                                                                                                        • Figure 36: Repertoire analysis – Locations visited, September 2016
                                                                                                        • Figure 37: Chain visitation breakdown of single location customers, September 2016
                                                                                                      • Number of locations visited by select demographics
                                                                                                        • Figure 38: Repertoire analysis – Locations visited, by gender and by age, September 2016
                                                                                                        • Figure 39: Repertoire analysis – Locations visited, by Hispanic origin, income, and parental status, September 2016
                                                                                                        • Figure 40: Repertoire analysis – Locations visited, by census region and by area, September 2016
                                                                                                    • Coffee/Tea Tracker

                                                                                                      • Methodology
                                                                                                        • AH vs AFH coffee and tea consumption
                                                                                                          • Figure 41: Coffee/tea drinks consumed AH vs AFH, October 2016
                                                                                                          • Figure 42: Coffee/tea drinks consumed AFH, October 2016
                                                                                                        • AFH coffee and tea consumption by select demos
                                                                                                          • Figure 43: Coffee/tea drinks consumed AFH, by gender and by generation October 2016
                                                                                                          • Figure 44: Coffee/tea drinks consumed AFH, October 2016
                                                                                                          • Figure 45: Coffee/tea drinks consumed AFH, October 2016
                                                                                                          • Figure 46: Coffee/tea drinks consumed AFH, October 2016
                                                                                                      • Satisfaction Drivers by Big Three Chains

                                                                                                        • Methodology
                                                                                                          • Understanding satisfaction drivers of the Big Three
                                                                                                            • Figure 47: Key drivers of satisfaction with coffee houses, September 2016
                                                                                                          • KDA: Starbucks
                                                                                                            • Figure 48: Key drivers of satisfaction with Starbucks, September 2016
                                                                                                          • KDA: McDonald’s
                                                                                                            • Figure 49: Key drivers of satisfaction with McDonald’s, September 2016
                                                                                                          • KDA: Dunkin’ Donuts
                                                                                                            • Figure 50: Key drivers of satisfaction with Dunkin’ Donuts, September 2016
                                                                                                        • Emerging Drink Interest

                                                                                                          • The tap is where it’s at
                                                                                                              • Figure 51: Coffee/tea drink interest, September 2016
                                                                                                            • Drink interest falls into gender lines
                                                                                                              • Figure 52: Coffee/tea drink interest, by gender, September 2016
                                                                                                            • Adventurous Millennials and the “45 cliff”
                                                                                                              • Figure 53: Coffee/tea drink interest, by generation, September 2016
                                                                                                              • Figure 54: Pour-over and nitro interest, by age, September 2016
                                                                                                            • The affluent are third wave customers
                                                                                                              • Figure 55: Coffee/tea drink interest, by HH income, September 2016
                                                                                                              • Figure 56: Organic tea interest, by age and HH income, September 2016
                                                                                                            • Appeal to the “super spenders”
                                                                                                                • Figure 57: Coffee/tea drink interest, by spender types, September 2016
                                                                                                            • Factors Consumers Would Pay More for

                                                                                                              • Many consumers aren’t willing to spend more for unique drinks
                                                                                                                  • Figure 58: Factors consumers would pay more for, September 2016
                                                                                                                • Understanding spender types
                                                                                                                  • Figure 59: Spender type breakdown, September 2016
                                                                                                                  • Figure 60: Spender type index against those who have purchased a coffee/tea beverage from a foodservice establishment in the past three months, September 2016
                                                                                                                • Men will pay more for a unique drink
                                                                                                                    • Figure 61: Factors consumers would pay more for, by gender, September 2016
                                                                                                                  • Half of Boomers wouldn’t pay more for any special beverage
                                                                                                                      • Figure 62: Factors consumers would pay more for, by generation, September 2016
                                                                                                                      • Figure 63: Desired coffee functionality, June 2016
                                                                                                                    • Attract Hispanics with non-dairy milk
                                                                                                                      • Figure 64: Factors consumers would pay more for, by Hispanic origin, September 2016
                                                                                                                    • Appealing to the most affluent consumers
                                                                                                                      • Figure 65: Factors consumers would pay more for, by HH income, September 2016
                                                                                                                      • Figure 66: Factors consumers would pay more for, by HH income >$75K, September 2016
                                                                                                                  • Coffee and Tea Daypart Consumption

                                                                                                                    • Hot drinks in the morning, cold in the afternoon
                                                                                                                      • Figure 67: AFH coffee consumption by daypart, among drinkers, September 2016
                                                                                                                    • Opportunity for night time herbal teas
                                                                                                                      • Figure 68: AFH tea consumption by daypart, among drinkers, September 2016
                                                                                                                  • Reasons for Visiting Coffee/Tea Establishments

                                                                                                                    • Convenience drives a majority of coffee/tea purchases
                                                                                                                      • Figure 69: Reasons for visiting last location for a coffee/tea drink, September 2016
                                                                                                                    • Men driven by quality and experimentation
                                                                                                                      • Figure 70: Reasons for visiting last location for a coffee/tea drink, by gender, September 2016
                                                                                                                    • iGens seek deals, are creatures of habit
                                                                                                                      • Figure 71: Reasons for visiting last location for a coffee/tea drink, by generation, September 2016
                                                                                                                    • Loyalty programs appeal to the affluent
                                                                                                                      • Figure 72: Reasons for visiting last location for a coffee/tea drink, by HH income, September 2016
                                                                                                                    • Parents want variety
                                                                                                                      • Figure 73: Reasons for visiting last location for a coffee/tea drink, by parental status, September 2016
                                                                                                                  • Appendix – Data Sources and Abbreviations

                                                                                                                    • Data sources
                                                                                                                      • Sales data: Mintel Market Sizes
                                                                                                                        • Consumer survey data
                                                                                                                          • Consumer qualitative research
                                                                                                                            • Mintel Menu Insights
                                                                                                                              • Abbreviations and terms
                                                                                                                                • Abbreviations
                                                                                                                                  • Terms
                                                                                                                                  • Appendix – Key Driver Analysis

                                                                                                                                      • Interpretation of results
                                                                                                                                        • Figure 74: Level of satisfaction with Starbucks, McDonald’s, and Dunkin’ Donuts—Key driver output, September 2016
                                                                                                                                        • Figure 75: Level of satisfaction with Starbucks—Key driver output, September 2016
                                                                                                                                        • Figure 76: Level of satisfaction with McDonald’s—Key driver output, September 2016
                                                                                                                                        • Figure 77: Level of satisfaction with Dunkin’ Donuts—Key driver output, September 2016
                                                                                                                                    • Appendix – Coffee/Tea Tracker

                                                                                                                                        • Figure 78: Coffee/Tea Additions, October 2016
                                                                                                                                    • Appendix – Social Media

                                                                                                                                        • Figure 79: Total audience on social media by platform, Nov. 11, 2016
                                                                                                                                        • Figure 80: Total activity on social media by platform in the last 90 days, Nov. 11, 2016
                                                                                                                                        • Figure 81: Total social engagement on social media by platform in the last 90 days, Nov.11, 2016
                                                                                                                                    • Appendix – Market

                                                                                                                                        • Figure 82: Total number of coffee houses in the US, 2010-20
                                                                                                                                        • Figure 83: Share of coffee house units, multiples vs independents, 2014-15
                                                                                                                                    • Appendix – Consumer

                                                                                                                                        • Figure 84: Population by race and Hispanic origin, 2012-22
                                                                                                                                        • Figure 85: Median household income, by race and Hispanic origin of householder, 2015
                                                                                                                                        • Figure 86: Household income distribution, 2015

                                                                                                                                    Coffee and Tea On Premise - US - December 2016

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