Coffee Demand in US Faces Stronger Headwinds on Slowing Economy

US coffee retail sales reached $18 billion last year
Ready-to-drink remains fastest growing segment: Euromonitor
By Marvin G. Perez

(Bloomberg) --

Coffee demand in the US, the world’s biggest consumer, has proved resilient in the face of the pandemic and soaring inflation. But now slowing economic growth is adding fresh pressure on the market.

The question is whether consumers will keep spending money on something that’s considered to be “a permissible indulgence,” Matthew Barry, food and beverage insights manager at researcher Euromonitor International Ltd., said in prepared comments for a webinar sponsored by the New York-based National Coffee Association.

In 2022 coffee spending, was “bolstered by households’ accumulated savings during the pandemic and government’s financial support that helped cushion the inflation hit,” said Euromonitor’s Lan Ha. “In 2023, however, the support of these two factors is waning.”

US coffee retail sales reached $18 billion in 2022, making it the world’s largest market, trailed by Brazil, Germany, France, Russia and Japan. Coffee drinking is compatible with all major consumer dietary trends, such as keto, Paleo and vegan-plant-based, which also helped demand stay strong, according to Barry.

On average, Americans spent $223 on coffee last year, with coffee shops taking 59% of that, at-home 24%, and ready-to-drink beverages like Starbucks Corp.’s frappuccinos about 7%, data from Euromonitor show. RTD is the fastest-growing segment, around 5% a year, followed by fresh ground coffee pods, and standard fresh ground brew.

Sales at specialty coffee and tea shops is expected to grow around 5% a year through 2026 to $50 billion from $40 billion in 2020, Euromonitor forecasts.