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Coffeehouses and Donut Shops - US - June 2010

The restaurant industry faltered in the recession as consumers opted to stay home more for meals and drinks. All segments suffered, yet QSRs in general fared somewhat better, due to customers trading down. Within that realm, coffeehouses and donut shops saw a greater impact, with many customers deciding not to spend limited discretionary dollars on pricey coffee drinks.

The economy appears to be improving and sales at leading outlets are trending up. Going forward, regaining momentum will require strict adherence to market trends and consumer demands. This report focuses on the following:

  • How best to compete against ever-encroaching competition from QSRs
  • The importance of social media and technology tools in the battle for customers
  • How health on the menu figures into the equation, and what are the key “hot buttons”
  • How market leaders are innovating to bolster traffic
  • What menu trends are most evident across the industry
  • What is top-of-mind for core demographics that will be essential to keeping them engaged in rebound efforts

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Market size and sales data
            • Consumer survey data
              • Social media data
                • Advertising Creative
                  • Abbreviations and terms
                    • Abbreviations
                      • Terms
                      • Executive Summary

                        • Consumers react to recession
                          • Sales dropped, but are rebounding
                            • Health remains a core concern
                              • Tech tools and social media have become essential
                                • Moving beyond the traditional storefront
                                  • Menu Insights: New product introductions on the rise
                                    • Younger patrons remain at the core of the industry; watch out for McCafé
                                      • Consumers admit to spending less out and on coffee drinks
                                        • Regular coffee continues to dominate; age and region dictate preferences
                                          • Interest in food wanes
                                          • Insights and Opportunities

                                            • Aligning with health
                                              • Figure 1: What coffeehouse patrons would like to see more of, March 2010
                                              • Figure 2: Changes in consumption of non-alcoholic beverages at restaurants, by type, January 2010
                                            • Twarketing? Twhat’s that?
                                              • “Location! Location! Location!” goes high tech
                                                • Expanding horizons
                                                  • Take it on the road
                                                    • Making a difference in the neighborhood and beyond
                                                    • Competitive Context

                                                      • Customers spend less and stay in
                                                        • Figure 3: Coffeehouse and donut shop coffee-spending trends, March 2010
                                                        • Figure 4: Coffeehouse and donut shop coffee-spending rationales, March 2010
                                                      • Customers are considering prices
                                                        • Figure 5: Mean purchases of drinks at coffeehouses and donut shops in past month, February 2009 and March 2010
                                                        • Figure 6: Mean purchase of food at coffeehouses and donut shops in past month, February 2009 and March 2010
                                                        • Figure 7: Coffee beverage price comparison, Q1 2010
                                                      • The McElephant in the room
                                                          • Figure 8: McCafé television ad, 2010
                                                          • Figure 9: McCafé television ad, 2010
                                                        • Other QSRs get in on the action
                                                            • Figure 10: Attitudes towards restaurant segments, November 2009
                                                          • Smoothie shops “cross the line”
                                                            • Competition as a “third place”
                                                              • Marketing muscle
                                                                • Figure 11: Spend by select restaurant advertisers, by segment, 2008 and 2009
                                                            • Inspire Insights

                                                                • Inspire trend: Rise of the Self Employed
                                                                  • The cubicle at the coffeehouse
                                                                    • Figure 12: How coffeehouses are used, by education, March 2010
                                                                  • Inspire trend: Sustainability’s Evolutionary Tree
                                                                    • Stay up with sustainability concepts and terms
                                                                      • Supporting evidence
                                                                        • Figure 13: Top beverage nutritional claims at coffeehouses and donut shops, Q4 2007-Q4 2009
                                                                    • Market Size and Forecast

                                                                      • Key points
                                                                        • Sales sluggish, but expected to increase
                                                                          • Aggressive plans of key players will elevate the combined segment
                                                                            • Figure 14: U.S. systemwide sales of top coffeehouses and donut shops, 2007 and 2009
                                                                            • Figure 15: U.S. on-premises sales through coffeehouses and donut shops, at current prices, 2005-15
                                                                            • Figure 16: U.S. on-premises sales through coffeehouses and donut shops, at inflation-adjusted prices*, 2005-15
                                                                            • Figure 17: U.S. on-premises sales through coffeehouses, at current prices, 2005-10
                                                                            • Figure 18: U.S. on-premises sales through coffeehouses, at inflation-adjusted prices*, 2005-10
                                                                            • Figure 19: U.S. on-premises sales through donut shops, at current prices, 2005-10
                                                                            • Figure 20: U.S. on-premises sales through donut shops, at inflation-adjusted prices*, 2005-10
                                                                        • Market Factors

                                                                          • Recession-weary restaurant industry poised to rebound
                                                                              • Figure 21: Unemployment and underemployment rates, January 2007-March 2010
                                                                              • Figure 22: Real disposable personal income, January 2007-January 2010
                                                                              • Figure 23: Consumer sentiment index, by quarter, 2001-10
                                                                            • Restaurant sales a casualty of recession
                                                                              • Figure 24: Consumer Price Index for key consumer markets, August 2007-09
                                                                              • Figure 25: Coffeehouse and donut shop coffee-spending trends, February 2009 and March 2010
                                                                              • Figure 26: NRA Performance Indices, January 2009-April 2010
                                                                              • Figure 27: Adjusted foodservice and drinking place sales, January 2008-April 2010
                                                                            • Consumers leery of hidden health traps
                                                                              • Figure 28: Percentage of population who are overweight or obese, 20-74 years of age, 1988-2006
                                                                              • Figure 29: Select menu nutritional values
                                                                              • Figure 30: Attitudes towards natural sweeteners and high-fructose corn syrup, by gender, November 2009
                                                                            • The power of the Millennials
                                                                              • Figure 31: Population by age, 2005-15
                                                                          • Brands and the Advertising Landscape

                                                                              • Brand analysis: Starbucks
                                                                                • What’s on the menu
                                                                                  • Figure 32: What’s on the menu at Starbucks, Q1 2010
                                                                                • Combating the image of the stalwart of the evils of excess
                                                                                  • Perks for loyal patrons
                                                                                    • Moving beyond the Starbucks store
                                                                                      • Marketing
                                                                                        • Figure 33: Starbucks VIA television ad, 2010
                                                                                        • Figure 34: Brand analysis of Starbucks VIA, 2010
                                                                                      • Brand analysis: Caribou Coffee
                                                                                        • The brand makeover
                                                                                          • Going green(er)
                                                                                            • What’s on the menu
                                                                                                • Figure 35: What’s on the menu at Caribou Coffee, Q1 2010
                                                                                              • … and not on the menu
                                                                                                • Marketing
                                                                                                  • Figure 36: Caribou Coffee television ad, 2010
                                                                                                  • Figure 37: Brand analysis of Caribou Coffee, 2010
                                                                                                • Brand analysis: Dunkin’ Donuts
                                                                                                  • What’s on the menu
                                                                                                    • Figure 38: What’s on the menu at Dunkin’ Donuts, Q1 2010
                                                                                                  • Setting the social networking bar
                                                                                                    • Irreverent advertising
                                                                                                      • Figure 39: Dunkin’ Donuts television ad, 2010
                                                                                                      • Figure 40: Brand analysis of Dunkin’ Donuts, 2010
                                                                                                    • Brand analysis: Krispy Kreme
                                                                                                      • New store format
                                                                                                        • New menu items
                                                                                                          • The woes of an inherently unhealthy product line
                                                                                                            • Marketing
                                                                                                                • Figure 41: Krispy Kreme television ad, 2010
                                                                                                                • Figure 42: Brand analysis of Krispy Kreme, 2010
                                                                                                            • Analysis: The Independent Coffeehouse

                                                                                                                • CC’s Community Coffee House
                                                                                                                  • The Coffee Groundz
                                                                                                                  • Menu Insights Analysis

                                                                                                                      • Key points
                                                                                                                        • An active year for new production introduction
                                                                                                                          • Figure 43: New menu introductions, Q1 2009-Q1 2010
                                                                                                                        • Beverages on the menu
                                                                                                                          • Figure 44: Drinks on the menu, Q4 2007-Q4 2009
                                                                                                                          • Figure 45: New beverages on the menu at coffeehouses and donut shop, Q1 2007-Q1 2010
                                                                                                                          • Figure 46: Top 15 beverage types on the menu, by quarter, Q1 2007-Q1 2010
                                                                                                                          • Figure 47: Beverage preparation offerings on the menu, by quarter, Q1 2007-Q1 2010
                                                                                                                        • Caramel leading beverage flavor
                                                                                                                            • Figure 48: Top beverage flavors on the menu at coffeehouses and donut shops, Q4 2007-Q4 2009
                                                                                                                            • Figure 49: Top beverage nutritional claims on the menu at coffeehouses and donut shops, Q4 2007-Q4 2009
                                                                                                                            • Figure 50: Nutritional claims on coffeehouse menus, by company, Q1 2010
                                                                                                                          • Food on the menu
                                                                                                                              • Figure 51: New food items on the menu, Q1 2007-Q1 2010
                                                                                                                            • Reduced-fat and natural dominate nutritional claims
                                                                                                                                • Figure 52: Top food nutritional claims on the menu at coffeehouses and donut shops, Q4 2007-Q4 2009
                                                                                                                                • Figure 53: Nutritional claims on menu, by company, Q1 2010
                                                                                                                            • Social Media Trends in Coffeehouses and Donut Shops

                                                                                                                                • Key points
                                                                                                                                  • Starbucks and Dunkin’ Donuts dominate discussion of coffeehouses and donut shops
                                                                                                                                    • Figure 54: Total social media mentions for select coffeehouses and donut shops, May 2009-May 2010
                                                                                                                                    • Figure 55: Total social media mentions for select coffeehouses and donut shops, minus Starbucks, May 2009-May 2010
                                                                                                                                  • Major feature discussions
                                                                                                                                    • Summary of feature discussions
                                                                                                                                        • Figure 56: Discussion around coffeehouses and donut shops, by primary topic, May 2009-May 2010
                                                                                                                                        • Figure 57: Discussion of primary topics, donut shops vs coffee shops vs McDonald’s and Burger King, May 2009-May 2010
                                                                                                                                      • Trends in major feature discussions
                                                                                                                                          • Figure 57: Trended coffeehouse and donut shop discussion, by feature, Jan. 2009-May 2010
                                                                                                                                        • Trends in discussion of trademark beverages
                                                                                                                                            • Figure 58: Trended coffeehouse, donut shop and QSR beverages, by beverage name, Jan. 2009-May 2010
                                                                                                                                        • Coffee and Coffee Drinks Usage

                                                                                                                                          • Key points
                                                                                                                                            • Being a coffee drinker does not a customer make
                                                                                                                                              • Figure 59: Coffee and coffee drink usage, by selected demographics, March 2010
                                                                                                                                          • Coffeehouse and Donut Shop Usage

                                                                                                                                            • Key points
                                                                                                                                              • Purchased drinks
                                                                                                                                                • Figure 60: Purchased drinks at coffeehouses and donut shops in past month, by store, by age, March 2010
                                                                                                                                                • Figure 61: Mean number of purchased drinks at coffeehouses and donut shops in past month, by store, by age, March 2010
                                                                                                                                                • Figure 62: Purchased drinks at coffeehouses and donut shops in past month, by store, by household income, March 2010
                                                                                                                                                • Figure 63: Mean number of purchased drinks at coffeehouses and donut shops in past month, by store, by household income, March 2010
                                                                                                                                              • Purchased food items
                                                                                                                                                • Figure 64: Purchased drinks at coffeehouses and donut shops in past month, by store, by age, March 2010
                                                                                                                                                • Figure 65: Mean number of purchased drinks at coffeehouses and donut shops in past month, by store, by age, March 2010
                                                                                                                                                • Figure 66: Purchased drinks at coffeehouses and donut shops in past month, by household income, March 2010
                                                                                                                                                • Figure 67: Mean number of purchased drinks at coffeehouses and donut shops in past month, by store, by household income, March 2010
                                                                                                                                            • Coffee and Coffee Drink Spending Trends and Rationales

                                                                                                                                              • Key points
                                                                                                                                                • Coffeehouses and donut shops feel the economic pinch
                                                                                                                                                  • Figure 68: Coffeehouse and donut shop coffee-spending trends, February 2009 and March 2010
                                                                                                                                                  • Figure 69: Coffeehouse and donut shop coffee-spending trends, by age, March 2010
                                                                                                                                                  • Figure 70: Coffeehouse and donut shop coffee-spending trends, by household income, March 2010
                                                                                                                                                • Customers trading down, and not “hanging out”
                                                                                                                                                  • Figure 71: Coffeehouse and donut shop coffee-spending rationales, 2010 and 2009
                                                                                                                                                  • Figure 72: Coffeehouse and donut shop coffee-spending rationales, by household income, March 2010
                                                                                                                                              • Coffeehouse and Donut Shop Drinks Drunk Most Often

                                                                                                                                                • Key points
                                                                                                                                                  • Regular coffee prevails as leading beverage
                                                                                                                                                    • Figure 73: Coffeehouse and donut shops drinks drunk most often, by age, March 2010
                                                                                                                                                    • Figure 74: Coffeehouse and donut shops drinks drunk most often, by region, March 2010
                                                                                                                                                • How Coffeehouses Are Used

                                                                                                                                                  • Key points
                                                                                                                                                    • Make mine to-go
                                                                                                                                                      • Figure 75: How coffeehouses are used, by age, March 2010
                                                                                                                                                      • Figure 76: How coffeehouses are used, by education, March 2010
                                                                                                                                                  • What Coffeehouse Patrons Would Like to See More Of

                                                                                                                                                    • Key points
                                                                                                                                                      • Less interest in lunch sandwiches and salads, but health is top of mind
                                                                                                                                                        • Figure 77: What coffeehouse patrons would like to see more of, March 2010
                                                                                                                                                        • Figure 78: What coffeehouse patrons would like to see more of, by gender, March 2010
                                                                                                                                                        • Figure 79: What coffeehouse patrons would like to see more of, by age, March 2010
                                                                                                                                                        • Figure 80: What coffeehouse patrons would like to see more of, by household income, March 2010
                                                                                                                                                        • Figure 81: What coffeehouse patrons would like to see more of, by education level, March 2010
                                                                                                                                                    • Custom Consumer Groups: The Superfan

                                                                                                                                                        • Figure 82: Factors of importance at leading outlets, by favorite outlet, March 2010
                                                                                                                                                      • Starbucks
                                                                                                                                                          • Figure 83: Starbucks usage, by age and household income, April 2008-June 2009
                                                                                                                                                          • Figure 84: Factors of importance at Starbucks, by those who favor Starbucks, by gender, March 2010
                                                                                                                                                        • McDonalds McCafé
                                                                                                                                                            • Figure 85: Factors of importance at McDonald’s McCafé, by those who favor McDonald’s McCafé, by gender, March 2010
                                                                                                                                                          • Dunkin’ Donuts
                                                                                                                                                              • Figure 86: Dunkin’ Donuts usage, by age and region, April 2008-June 2009
                                                                                                                                                              • Figure 87: Factors of importance at Dunkin’ Donuts, by those who favor Dunkin’ Donuts, by gender, March 2010
                                                                                                                                                            • Krispy Kreme
                                                                                                                                                                • Figure 88: Factors of importance at Krispy Kreme, by those who favor Krispy Kreme, March 2010
                                                                                                                                                            • Cluster Analysis

                                                                                                                                                                • Breakfasters
                                                                                                                                                                  • Demographics
                                                                                                                                                                    • Characteristics
                                                                                                                                                                      • Opportunity
                                                                                                                                                                        • Dwellers
                                                                                                                                                                          • Demographics
                                                                                                                                                                            • Characteristics
                                                                                                                                                                              • Opportunity
                                                                                                                                                                                • Minimalists
                                                                                                                                                                                  • Demographics
                                                                                                                                                                                    • Characteristics
                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                        • Cluster characteristics
                                                                                                                                                                                          • Figure 89: Coffeehouse clusters, March 2010
                                                                                                                                                                                          • Figure 90: Lifestyle characteristics, by coffeehouse clusters, March 2010
                                                                                                                                                                                          • Figure 91: Menu preferences, by coffeehouse clusters, March 2010
                                                                                                                                                                                          • Figure 92: Motivations, by coffeehouse clusters, March 2010
                                                                                                                                                                                        • Cluster demographics
                                                                                                                                                                                          • Figure 93: Coffeehouse clusters, by gender, March 2010
                                                                                                                                                                                          • Figure 94: Coffeehouse clusters, by age group, March 2010
                                                                                                                                                                                          • Figure 95: Coffeehouse clusters, by household income group, March 2010
                                                                                                                                                                                          • Figure 96: Coffeehouse clusters, by race, March 2010
                                                                                                                                                                                          • Figure 97: Coffeehouse clusters, by Hispanic origin, March 2010
                                                                                                                                                                                        • Cluster methodology
                                                                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                                                                          Coffeehouses and Donut Shops - US - June 2010

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