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Economy leads to more home-brewing of coffee

BY Alaric DeArment

NEW YORK Americans may keep getting their morning Joe at Starbucks and Dunkin’ Donuts, but a difficult economy will cause sales to increase faster at retailers than at coffeehouses and restaurants, according to a new Packaged Foods study.

The study, “Coffee in the U.S.: Retail, Foodservice and Consumer Trends,” found that coffee sales increased by 11 percent last year, to $43.9 billion, compared to a 9.7 percent growth rate between 2003 and 2007.

PF predicts that while sales at coffeehouses and restaurants will increase by 36 percent, sales at retailers will increase by 37 percent, to $52 billion and $7.8 billion, respectively.

PF also found that cross-branding has become a significant trend. For example, Kraft Foods distributes ground and whole-bean Starbucks and Seattle’s Best coffees to retailers, while supermarkets in the eastern United States are selling packaged coffee from Minneapolis-based Caribou Coffee.

Starbucks shares were trading on the NASDAQ at $14.56 around noon Tuesday, up by 0.47 percent.

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PBM Products introduces A-Soy milk alternative

BY Alaric DeArment

GORDONSVILLE, Va. A new soy drink whose manufacturer hopes it will provide an alternative to milk for adults who are lactose intolerant, allergic to cow’s milk or vegan is hitting the shelves.

PBM Products announced Monday that it had introduced A-Soy. The drink has no lactose, animal protein, cholesterol, trans fats or gluten, and is certified kosher. PBM chief executive officer Paul Manning said the drink is based on its successful Bright Beginnings Soy Pediatric Drink, meant for children younger than 10.

“Developing a similar soy drink for adults and people older than 10 years was the next logical step,” he said.

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Consumers will only bear so much on rising prices

BY DSN STAFF

NEW YORK —Consumer prices for finished food products have risen 5 percent to this point in 2008, compared with the same period last year, while agriculture commodities prices for the same period have risen 25 percent, according to analysts at Citi Investment Research. And while that might seem a bit out of balance, experts say there is only so much manufacturers and retailers can expect to pass on to the consumer.

“Food and energy prices have been rising well above income growth rates all throughout the world,” said Steve Wieting, managing director and senior economist of Citi U.S. Institutional Equities. “That will put some self-imposed limitations on how far these prices can go.”

To offset rising prices, some supermarket retailers have been promoting more aggressively. Deborah Weinswig, managing director of retailing/broadlines, food, drug and home improvement for Citi Investment Research, said she has seen more aggressive promotion with rebate checks. Kroger and Giant, for example, have been offering consumers a percentage above the value of their tax rebate checks if they use the money at those supermarkets. “It’s a smart, easy way to gain market share,” Weinswig said. “Retailers are more mindful of weekly promotions in this difficult market.”

Wieting said Wal-Mart has been pushing back on its vendors to help keep prices low for its consumers. “They have been very aggressive in regard to keeping their prices low and not accepting inflation for their customers,” he said. Not all retailers are shielding consumers from the increases, and consumers are feeling a pinch in the wallet.

The rise in food prices has had an impact on consumer spending in other segments of the market. “It’s pretty clear that this rise in food and energy prices is limiting demand for other products elsewhere, and is associated with a spike in inflation and weak real consumer spending,” Wieting said.

Consumers are finding other ways to stretch their food dollars. “Private label is outpacing national brand growth six-to-one at Safeway and four-to-one in other retail outlets,” Weinswig said. “We’ll see some interesting consumer behaviors, whether it’s trading down to private label or eating out less.”

Wieting said price increases at the retail levels should be reaching their peaks. “It’s not limitless,” he said of price hikes. “In food, there’s lots of room for substitution. Retailers could end up losing sales if they keep pushing prices up.”

Consumers are not likely to experience the supply shocks that affected some commodity crops this year. Wieting said there’s been a 25 million acre increase of corn, wheat and soybean crops planted. “It is a boom time for agriculture,” he said, adding that a production boom should “put this food price surge behind us.”

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