Specialty coffee: when you're hot, you're hot!

According to a report recently published by the Specialty Coffee Association of America, titled, "Avenues for Growth: A 20-year Review of the U.S. Specialty Coffee Market," the forecast for sales of specialty coffee is "bullish." The trade organization projects that approximately $3 billion worth of specialty coffee will be sold for home consumption by 1999. Combined with the anticipated $1.5 billion in retail foodservice sales of specialty coffee beverages, the industry will approach a $5 billion retail business at the turn of the century. SCAA's projections indicate that the overall U.S. coffee market will show slight gains by the year 1999, with total coffee roastings reaching more than 19 million bags of coffee. Specialty coffee is expected to reach more household consumption and approximately 8% of foodservice consumption.

SCAA president Phyllis Jordan notes, "Specialty coffee is rapidly becoming an integral part of the American lifestyle with coffee cares, espresso carts, and retail stores specializing in whole bean coffees opening throughout the country. At the same time, specialty food stores and supermarkets are expanding their inventories of fine Arabica coffees to meet the demands of today's savvy coffee drinkers."

In the report's epilogue, "Forecast for the Ninety's," SCAA forecasts that supermarkets will continue to be the leading distribution channel for specialty coffees, selling 1.2 million bags, approximately one-third of all specialty coffee sales. However, the distribution channel experiencing the fastest growth rate will be the category of "coffee cares" which includes espresso bars and espresso carts. According to Mrs. Jordan, "Increasing consumer demand for fine quality Arabica coffees is responsible for the rapid growth of specialty coffee. Today's coffee drinker demands quality and the industry is responding by providing better accessibility and variety."

Growth in Distribution Channels

SCAA projects that by 1999 there will be more than 10,000 retail locations in operation across the. country, including 3,000 espresso bars, 4,500 espresso carts, and 2,500 coffee cares. By the end of the century, there will be over 30,000 retail stores offering specialty coffee, including approximately 2,500 bean stores, 5,000 specialty food stores, 5,000 gift/housewares stores, 9,000 other stores, and 10,000 coffee cares. Because of the high gross profit margin, vendors will focus their attention on selling coffee beverages by the cup.

Although consumers will enjoy better quality and variety at the aforementioned types of establishments, the SCAA predicts that the foodservice community will be slow in upgrading its product quality to the level of specialty coffees. The growth potential in this segment has yet to be realized.

Quality will continue to be the primary consideration among members of the specialty trade. As the industry approaches the next century, real estate will also become a key factor in the success of the specialty coffee business. With the increasing number of outlets, finding good retail locations may become more difficult. Chain-operated stores, having the necessary capital and staff may have a competitive edge. No matter how large or small the operation, "location, location, location," will be increasingly more important consideration.

The SCAA report reveals; "The most fundamental change in the coffee industry will be in the continued growth of the 'micro-roasteries."' In 1969, there were approximately 20 firms roasting between 250 bags and 500 bags per year in 12-kilo roasters, employing fewer than five people. By 1979, the number doubled. During the 1980's, the number exploded to more than 385 micro-roasteries in operation around the country. The growth rate is expected to continue at a rate of approximately 100 new operations per year, reaching an estimated 1,450 micro-roasteries in operation by the end of this century. Small roasting companies, including the micro-roasteries, will number more than 1,600 firms by 1999, roasting more than one million bags of coffee annually.

Product Trends

Product categories will continue to solidify their niches. As the consumer's thirst for top-quality coffee increases, so does his or her demand for knowledge visa vis the origin of the coffee. Hence, unblended or "straight" coffees will bear the exact geographic location of their origin albeit a regional name or a specific estate or even a special selection from a given farm. In keeping with the growing interest in a coffee's origin, it will also become increasingly more common to see a coffee identified as being "wet," "dry," "semi wet," "semi dry" or "natural dry" processed. Blends will continue to be popular, often reflecting local and regional taste preferences. Dark roast coffees will be in great demand and, at the same time, the roasting community will begin to develop a standardized method of matching coffees to specific roast degrees ranging from light to dark. (To that end, SCAA's technical standards committee is developing a set of color tiles with Agtron, Inc. to establish universal terminology for roast colors.) Decaffeinated coffee drinkers will enjoy broader product selection and improved product quality. Flavored coffees will continue to increase in total market share and sales of organically grown coffees will increase to a significant size propelled by their success in the health food market.

Coffee Knowledge: Key to Success

Finally, one of the most important trends in the specialty coffee market today is the quest for information. With today's demanding consumer, education is the key to understanding and selling specialty coffee. SCAA's Fifth Annual Conference & Exhibition, May 8 11, 1993 has been designed to be the most comprehensive learning and networking forum in the history of the specialty coffee trade. More than 1,500 members of the specialty coffee industry convene in Boston to share product knowledge, analyze the market trends, and prepare to meet the challenges presented by the Twenty-First Century's sophisticated coffee consumer. For more information about SCAA's "Avenues for Growth" report or Fifth Annual Conference and Exhibition, contact Melissa Pugash at SCAA, (310) 9838090.