As upscale coffee is seen by consumers as a relatively inexpensive luxury, sales of the item continue to thrive even as many other industries suffer from consumer cutbacks on nonessential purchases, according to new market research by New York-based Packaged Facts.

In “Coffee and Ready-to-Drink Coffee in the U.S.: The Market and Opportunities in Retail and Foodservice, 6th Edition,” Packaged Facts estimates total coffee market sales, including foodservice and retail, rose to $48 billion in 2009, with annual growth of 4 percent in 2008 and 2009.

Sales in foodservice reached $42 billion, accounting for 87 percent of the coffee market, according to the report.

“With the advent of the so-called ‘Great Recession’ in 2008, the central question facing the coffee market was whether a product that saw sales growth through upscaling could continue to progress in the face of a severe economic downturn,” said Don Montuori, publisher of Packaged Facts. “By and large, the answer is yes. Even if marketers must now scuffle for every percentage point of sales growth they get.”

While the shift to upscale and specialty coffees diverges from overall trends of the economic downturn, they interact with each other as customers circumvent cheap ground coffee, and instead make tradeoffs to stay within budget while indulging in premium beverages, Packaged Facts reported.

Regarding retailing and marketing, common coffee campaigns have revolved around the “premium” angle, while more downscale coffee venues introduce luxurious coffee beverages at comparatively thrifty prices, the report noted.

SOURCE: Convenience Store News