Coffee and Tea Manufacturers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 750 coffee or tea manufacturers in the US produce roasted coffee, packaged tea, and related products. Coffee manufacturers roast coffee beans and produce coffee-based products, such as concentrates, extracts, flavorings, and syrups. Tea manufacturers produce tea concentrates or herbal teas or blend tea. Firms may offer related products, such as green coffee, other types of beverages, coffee filters, sugar, and creamers.

Variable Ingredient Costs

The cost of green coffee, the primary input to roasted coffee, is volatile and affects margins and profitability.

Dependence on Imports

The US imports the second largest quantity of coffee beans and the third largest quantity of tea in the world.

Industry size & Structure

The average coffee or tea manufacturer operates out of a single location, employs about 28 workers, and generates about $15-16 million annually.

    • The coffee and tea manufacturing industry consists of about 750 firms that employ 21,000 workers and generate $11.7 billion annually.
    • The industry is highly concentrated; the top 50 companies account for about 91% of industry revenue.
    • Multi-national food conglomerates, including J.M. Smuckers (Folgers) and Kraft Heinz Group (Maxwell House), roast and sell coffee beans, as do large coffee chains, such as Starbucks and Dunkin’ Donuts.
    • Large coffee manufacturers include Farmer Brothers and Coffee Holding.
    • Large tea manufacturers include Unilever, R.C. Bigelow, Hain Celestial, and Twinings. Major soft drink manufacturers, such as Coca-Cola and Pepsi, have tea brands in their product portfolios.
                                    Industry Forecast
                                    Coffee and Tea Manufacturers Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Nov 21, 2022 - Tea Producers Face Challenges
                                    • Declining tea sales and exports amid rising production costs are among the challenges identified by tea industry professionals at the 2022 Annual North American Tea Conference (NATC) in October. Key takeaways from the NATC gathering included findings that tea exports are flat. Global sales totaled $7.3 billion in 2021, down by 9.4% since 2017, when worldwide tea exports were worth $8.1 billion. Although unit prices rose this year, averaging $3 per kilo, up from $2.70 per kilo in 2021, the long-term trend is negative. Rising labor, fertilizer, and fuel cost used to produce quality tea has increased two- and three-fold, making growing tea unprofitable for some producers.
                                    • Wet weather in Brazil and Indonesia is favoring coffee growers there. The La Niña climate system is bringing rain to these two top coffee growing regions this season, reversing last season’s drought and frost, The Wall Street Journal reported in November 2022. The outlook for a good crop and ample coffee bean supply is driving down the price of coffee futures, with Arabica coffee futures down 22% since mid-October. In October, coffee futures fell for 13 consecutive trading sessions, the longest losing streak in nine years, while less expensive Robusta beans fell 15% over the same period, according to WSJ. Brazil’s wet weather is expected to persist as the US National Weather Service projects that La Niña will continue into 2023. Its latest outlook gives La Niña a 75% chance of persisting through the winter, WSJ reported.
                                    • Coffee and tea shops are considered at low risk for a pullback in consumer spending because they are relatively inexpensive – compared to other eateries – and an established part of many people’s daily routines. A market forecast from GlobalData predicts that by the end of 2022 the value of hot coffee served in food service outlets will increase by 10.5% in the United States, compared to 2021. This applies especially to food service outlets in travel (11.7%) and restaurants (10.6%). GlobalData’s 2022 consumer surveys also revealed that the number of US consumers who claimed to spend a ‘high amount’ in coffee and tea shops only decreased by 1% in Q3 compared to the first three months of 2022, while other venues where people who spend a high amount on food and drink had decreased by 7% over the same period.
                                    • The US coffee shop market has come within 96% of its pre-pandemic level, according to the annual Project Café USA 2023 report by Allegra Group’s World Coffee Portal. A $4.5 billion rebound in 2022 sales has driven the US coffee market to a value of $45.8 billion. The number of open coffee shops in 2022 has risen by 2.8% to 38,411 stores. The US coffee shop comeback has been fueled by young consumers’ demand for cold and espresso-based drinks, and wider adoption of convenience options including pre-ordering, delivery, and drive-thru. Thirst for premium coffee outside the home is expected to keep growing, pushing the US coffee shop market to a value of $55.9 billion by September 2027.
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