According to a new report from Jefferies & Company Inc., the coffeehouse segment is poised for a banner year due to rising same-store sales, more stable coffee prices and a boom in consumer packaged goods revenue led by price increases and “K‑Cup” individual-brewing sales. Equity analyst for Jefferies, Andy Barish, projects a sales growth between 8% and 10% for the coffeehouse segment in 2012.
“In the currently mixed consumer sales environment, the specialty coffee sector continues to be among the ‘haves’ in terms of same-store sales growth,” Barish wrote in a research note. “We believe the habitual nature of the occasion and the affordable-luxury aspect of the experience continue to drive sales opportunities, both in retail coffeehouses as well as in the [consumer packaged goods] channel.”
In addition to same-store sales in coffeehouses, growth in retail CPG sales and the emerging K‑Cup trend should provide a tailwind for the major coffee players, as those brands continue to grab more shelf space in grocery stores and the single-serving coffees build brand awareness.
In grocery stores nationwide, where sales of ground coffee increased 23% year-over-year, Caribou Coffee showed the most growth, increasing its market share 1.9% in December and 3.6% for all of 2011, Barish wrote.
Starbucks grew its market share 1.5% in December, but lost 12.5% for 2011. Dunkin’ Donuts increased its share 0.5% in December and lost 4% for the year. Peet’s market share for ground coffee sold in grocery stores was flat for December and the full year.
Barish also noted that demand for Green Mountain Coffee Roasters’ K‑Cups grew robustly last year, as sales rose 163% in December and 156%t for the full year. Starbucks, the relative newcomer to single-serving coffee sales among the big four coffeehouse brands, rang up $6.5 million in K‑Cup sales in December, or about 12% of all K‑Cups sold.
Coffeehouses also should benefit from stabilization in coffee prices, which Barish expected to hover around the $2.20 to $2.40 range. He added that most major coffeehouse chains have locked in the majority of their purchasing needs for 2012.
“Looking across the category, we expect most companies to take similar pricing action to 2011, with CPG up 8% to 10% and up in the low single digits in retail, where coffee makes up less than 10% to 15% of cost of goods sold,” Barish said. “Margin pressure should alleviate in the back half of 2012, but there is some risk to visibility in 2013, given the South American coffee crop concerns.”[Source: Research conducted by Jefferies & Company Inc.; Brandau, Mark. Nation's Restaurant News. 6 Jan. 2012. Web. 20 Jan. 2012.]