More cafes, varieties boost U.S. coffee roastings

Dec 5, 2006

By Susan Buchanan

Of Dow Jones NewsWire

NEW YORK (MarketWatch) -- U.S. coffee companies are roasting beans at the strongest pace in over 30 years, reversing an earlier downtrend, as consumers lap up gourmet java and try new products and origins, according to industry members.

American adults now drink almost as much coffee as soft drinks, for the first time since 1990, the National Coffee Association says.

Roastings nationally reached 19.535 million, 60-kilogram bags in 2005, according to Coffee Publications Inc. in New York, and should exceed that level in 2006 - possibly by 5%. Those widely watched numbers cover most, but not all American roastings.

Hernando de la Roche, managing director of Hencorp Coffee in Miami, says a buoyant U.S. cafe culture - with shops owned by Starbucks and other chains popping up on nearly every city corner - has spurred young adults to drink java, while new offerings on supermarket shelves have also lifted demand.

"The coffee-shop phenomenon has exposed a broader base of consumers" to the brew, said Lars Atorf, spokesman for Procter & Gamble (PG), maker of Folgers. "Coffee's become more popular among younger adults - a group that in the last 10 to 20 years was trending towards sodas and other beverages."

Research supporting java's health benefits has altered consumers' views from "I love coffee, but it might be bad for my health (to a) belief it's good for my health," he said.

P&G, Kraft (KFT), Starbucks Coffee (SBUX) and other U.S. roasters and retailers raised their prices in September and early October as the cost of robusta coffee, a hardy bean grown mostly in Asia and used in U.S. blends, swelled. Since then, prices of arabicas - the milder variety cultivated in Brazil and Central America - sped to a 10-month high of $1.2835 a pound on the New York Board of Trade this week, as inventories dwindled and Brazil's harvest next September could be 25% to 30% smaller.

Most American consumers don't mind paying up for the brew they love, however, coffee analysts said.

Meanwhile, roasters have developed new products as consumer tastes become more sophisticated, Atorf said. New items at P&G include various flavors of Folgers and Millstone coffees, stomach-friendly Folgers Simply Smooth, Folgers Gourmet Selections and a single-cup brewing system called Home Cafe. Folgers recently introduced AromaSeal plastic canisters, he noted.

Ted Lingle, senior adviser to the Specialty Coffee Association of America, said growing enthusiasm for specialty or gourmet beans, which account for 15% of U.S. java demand, explains part of the recent growth in roastings. But, he said, the Coffee Publications numbers that the industry uses may only cover 80% of all roastings, missing some of the specialty companies. Coverage is nonetheless improving, especially as bigger firms buy smaller roasters.

"Coffee is on the minds and lips of American consumers like never before -56% drink it every day, and market penetration is back on par with soft drinks after 16 years," said Robert F. Nelson, president of the National Coffee Association. "With more varieties than ever, consumers are not only drinking more coffee, but mixing and matching options to satisfy expanding tastes." Mixing and matching, he explained, means drinking traditional and gourmet beverages and trying new products.

According to the National Coffee Association's drinking survey, released in March, recent growth in demand was driven by the 25-39 year-age group, with daily use in that crowd reaching 47% in 2006 from 38% in 2004. Demand among those 18-24 years of age rose to 31% in 2006 from 22% in 2004.

Some 73% of U.S. seniors, traditionally big coffee drinkers, imbibed in 2006 versus 67% in 2004.

The U.S. is the top consumer, drinking nearly 21 million bags of coffee annually. The European Union swills almost 39 million bags a year, with per-capita consumption particularly high in northern Europe.