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Coffee and Tea On Premise - US - July 2018

"The foodservice coffee market is highly competitive and many large coffee brands are starting to experience a slowdown in sales due to saturation. However, the incidence of consumers buying coffee away from home has grown, with increased consumption coming from new drink trial. The future of the foodservice market will be characterized by the continued growth of third wave coffee and innovation surrounding cold coffee drinks."

Caleb Bryant, Senior Foodservice Analyst

This report will look at the following areas:

  • Major coffee players experience a slowdown
  • Lapsed consumers unlikely to start buying more coffee

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Table of contents

  1. Overview

    • What you need to know
      • Definition
        • Coffee wave definitions
        • Executive Summary

          • The issues
            • Major coffee players experience a slowdown
              • Lapsed consumers unlikely to start buying more coffee
                • Figure 1: Reasons for buying coffee AFH less often, May 2018
              • The opportunities
                • Consumers are experimenting with new coffee drinks
                  • Figure 2: Reasons for buying coffee AFH more often, May 2018
                • Build lasting brand loyalty among iGens through cold drinks
                  • Figure 3: AFH coffee consumption: most ordered, by generation, May 2018
                • Make third wave coffee a treat for Millennial parents
                  • Figure 4: AFH coffee attitudes, by Millennial parent breaks, May 2018
                • What it means
                • The Market – What You Need to Know

                  • Consumers have a few extra dollars for coffee
                    • Coffee shops go green
                    • Market Perspective

                      • RTD coffee: friend or foe?
                        • Figure 5: RTD coffee interest, May 2018
                      • Energy drinks compete with iced coffee for afternoon occasion
                        • Figure 6: Reasons for usage of energy drinks/energy shots, March 2017
                        • Figure 7: Top five energy drinks with highest purchase intent score; T2B-five point scale
                    • Market Factors

                      • Coffee, it prevents Parkinson’s, heart attacks, and causes cancer?
                        • Starbucks puts a lid on straws; Dunkin’ shifts to paper
                          • Strong economy benefits coffee shops
                            • Figure 8: Consumer sentiment index, January 2007-May 2018
                            • Figure 9: Unemployment and underemployment, January 2007-April 2018
                          • Healthy bean harvest in Brazil and Colombia
                          • Key Players – What You Need to Know

                            • Competition causes slowdown for coffee chains
                              • The future of coffee is cold, functional, and colorful
                              • What’s Working?

                                • JAB continues to build its coffee empire
                                  • Figure 10: US coffee and foodservice companies owned by JAB
                                • Coffee shops become high tech
                                  • Starbucks Rewards 2.0?
                                    • Starbucks launches its credit card
                                        • Figure 11: Starbucks email, “Earn 2,500 Bonus Stars”, sent 2/16/2018
                                        • Figure 12: Starbucks email, “Introducing the Starbucks Rewards Visa Card”, sent 2/7/2018
                                      • Non-dairy milks gain penetration in coffee shops
                                        • Figure 13: Coffee and tea additions, non-dairy milk, by generation, March 2018
                                        • Figure 14: Change in incidence of non-dairy milk as an ingredient in coffee drinks, Q1 2015 – Q1 2018
                                        • Figure 15: Change in incidence of non-dairy milk as an ingredient in tea drinks, Q1 2015-Q1 2018
                                      • Coffee and tea gets boozy
                                        • Figure 16: coffee and tea used in alcoholic beverages, Q1 2018
                                    • What’s Struggling?

                                      • Starbucks’s US growth slows
                                        • Frappuccino falls victim to consumer health concerns
                                          • Dunkin’ focuses on its strengths
                                          • What’s Next?

                                            • Cold drinks and the afternoon become key battlegrounds
                                              • Figure 17: AFH coffee consumption by daypart, among drinkers, September 2016
                                            • Starbucks’ three prong approach to the afternoon
                                                • Figure 18: Online Ad, “Afternoon Made at Starbucks”
                                              • Dunkin’ releases nitro, focuses on flavor
                                                • Dunkin’ drops the donuts with new unit design
                                                  • Juice/coffee blends gain wider acceptance
                                                    • Drinks with shades of functionality
                                                      • No more room for independent third wave coffee?
                                                      • MMI Analysis

                                                        • Cold coffee drinks experience strong growth
                                                          • Figure 19: Change in incidence of coffee drinks on menus, Q1 2015-Q1 2018
                                                          • Figure 20: Change in incidence of coffee drinks on menus, by segment, Q1 2015-Q1 2018
                                                          • Figure 21: incidence of iced coffee/cold brew coffee on menus, by segment, Q1 2015-Q1 2018
                                                          • Figure 22: Incidence of cold brewed coffee on menus, Q1 2015-Q1 2018
                                                        • Coffee flavor trends
                                                          • Figure 23: Coffee flavors with strong directional growth, Q1 2015-Q1 2018
                                                        • Specialty tea drinks gain a presence on menus
                                                          • Figure 24: Change in incidence of top 20 tea types on menus, Q1 2015-Q1 2018
                                                          • Figure 25: Change in incidence of tea drinks on menus, by segment, Q1 2015-Q1 2018
                                                        • Tea flavor trends
                                                          • Figure 26: tea flavors with strong directional growth, Q1 2015-Q1 2018
                                                      • The Consumer – What You Need to Know

                                                        • Primary coffee drinks vary among consumers
                                                          • Capture Gen X with third wave coffee
                                                            • Consumers are experimenting with new drinks
                                                              • Bring consumers in the door with new flavors
                                                              • Restaurants Visited for Coffee: Most Visited vs Also Visit

                                                                • Starbucks leads the AFH coffee market
                                                                  • Figure 27: restaurants visited for coffee: most vs also visit, May 2018
                                                                  • Figure 28: restaurants visited for coffee, number of restaurants visited, May 2018
                                                                • Strong cross-visitation among the big three coffee chains
                                                                  • Figure 29: Locations also visited for coffee, among chains visited for coffee (most often), May 2018
                                                                • iGens/Millennials visit multiple locations for coffee
                                                                  • Figure 30: restaurants visited for coffee, any visitation, by generation, May 2018
                                                                  • Figure 31: restaurants visited for coffee, number of restaurants visited, three or more locations, by generation, May 2018
                                                                • Venue preferences of multicultural consumers
                                                                  • Figure 32: restaurants visited for coffee, most visited, by race/ethnicity indexed against all consumers, Top five locations, May 2018
                                                              • AFH Coffee Consumption: Most Ordered vs Also Order

                                                                • Cold coffee drinks are an “also” beverage
                                                                  • Figure 33: AFH coffee consumption: most vs also order, May 2018
                                                                  • Figure 34: AFH coffee consumption, number of different drinks ordered, May 2018
                                                                • iGens enter the coffee market through flavored cold drinks
                                                                    • Figure 35: AFH coffee consumption: most ordered, by generation, May 2018
                                                                    • Figure 36: AFH coffee consumption, number of different drinks ordered, four or more drink types, by generation, May 2018
                                                                  • Starbucks consumers love specialty drinks
                                                                    • Figure 37: AFH coffee consumption: most ordered, by chain visitors (most visited), May 2018
                                                                  • Flavored cold drinks appeal to Hispanic consumers
                                                                    • Figure 38: AFH coffee consumption: most ordered, by race and ethnicity, May 2018
                                                                • Changes in AFH Coffee Consumption

                                                                    • Consumers drinking coffee AFH more often
                                                                      • Figure 39: Changes in AFH coffee consumption, May 2018
                                                                      • Figure 40: Changes in AFH coffee consumption, by select demographics, May 2018
                                                                  • Reasons for Drinking Coffee AFH More

                                                                    • Innovative cold drinks drive increased consumption
                                                                      • Figure 41: Reasons for buying coffee AFH more often, May 2018
                                                                    • Increased cold coffee consumption among Gen X
                                                                      • Figure 42: Reasons for buying coffee AFH more often, by age, May 2018
                                                                  • Reasons for Drinking Coffee AFH Less

                                                                    • Coffee shops will have difficulty reengaging lapsed consumers
                                                                      • Figure 43: Reasons for buying coffee AFH less often, May 2018
                                                                  • Coffee and Tea Tracker

                                                                      • Strong growth in AFH iced tea consumption
                                                                        • Figure 44: Change in coffee/tea drinks consumed AFH, April 2017-March 2018
                                                                        • Figure 45: Change in coffee/tea drinks consumed AFH, by generation, April 2017-March 2018
                                                                    • AFH Coffee Attitudes

                                                                      • There’s a diverse set of coffee drinkers
                                                                        • Figure 46: AFH coffee attitudes, May 2018
                                                                      • Third wave coffee can’t ignore Gen X
                                                                        • Figure 47: AFH coffee attitudes, by generation, May 2018
                                                                      • Make coffee a treat for parents
                                                                        • Figure 48: AFH coffee attitudes, by Millennial parent breaks, May 2018
                                                                      • Dunkin’ can keep the flavors rolling
                                                                        • Figure 49: AFH coffee attitudes, by chain visitors (most visited), May 2018
                                                                    • Premium Coffee Perception

                                                                      • Third wave coffee will continue to grow
                                                                        • Figure 50: AFH premium coffee perception, May 2018
                                                                        • Figure 51: Premium coffee definition, May 2018
                                                                      • Target Millennial and Gen X coffee lovers
                                                                        • Figure 52: AFH premium coffee perception, by generation, May 2018
                                                                      • Convince older consumers premium coffee is worth the price
                                                                        • Figure 53: AFH premium coffee perception, by food and drink shopper segmentation, May 2018
                                                                    • Coffee Shop Visitation Motivators

                                                                      • Opportunity for increased flavor innovation
                                                                        • Figure 54: Coffee shop visitation motivators, May 2018
                                                                      • Improvements may not attract lapsed consumers
                                                                        • Figure 55: Coffee shop visitation motivators, by changes in AFH coffee consumption, May 2018
                                                                      • Function and color appeal to iGens
                                                                        • Figure 56: Coffee shop visitation motivators, by generation, May 2018
                                                                        • Figure 57: CHAID analysis – Coffee shop visitation motivators
                                                                      • Third wave fits with Starbucks
                                                                        • Figure 58: Coffee shop visitation motivators, by chain visitors (most visited), May 2018
                                                                    • Appendix – Data Sources and Abbreviations

                                                                      • Data sources
                                                                        • Consumer survey data
                                                                          • Mintel Menu Insights
                                                                            • Purchase Intelligence
                                                                              • Mintel Food and Drink Shopper Segmentation
                                                                                • Abbreviations and terms
                                                                                  • Abbreviations
                                                                                    • Terms
                                                                                    • Appendix – The Consumer

                                                                                        • Figure 59: TURF analysis – Coffee shop visitation motivators

                                                                                    Coffee and Tea On Premise - US - July 2018

                                                                                    US $4,395.00 (Excl.Tax)