A homemade cup of coffeehouse-quality brew was the caffeine addict's drink of choice, as the National Coffee Association trade group's 2010 National Coffee Drinking Trends Study showed a jittery 86% of Americans preparing their coffee at home -- percolating 4% from last year. Of the 56% of Americans who drink coffee, the study found that 16% changed their drinking habits as a result of the economy. With 40% of all coffee consumed considered to be "gourmet," that meant a shift from the counter to the coffee aisle.
In the case of Minneapolis-based Caribou Coffee, while sales at coffeehouses increased 3.4% last year and comparable store sales dove 2.3%, commercial sales including K-cups jumped 42.4% in the same period. Commercial sales also leapt 4% as a percentage of total sales, a trend that continues as Caribou's commercial sales growth (51%) far outpaced that of its coffeehouses (4.4%) last quarter.
The same holds true for San Francisco-based Peet's Coffee (PEET), which lost to Green Mountain in a bidding war over single-cup coffee company Diedrich. The company has only 192 retail locations -- only eight east of the Mississippi River -- and gets nearly 35% of its net revenue from grocery and delivery sales. While the company's coffeehouse sales grew 7% last year, grocery and delivery sales of Peets Coffee by the pound nearly doubled that growth rate. Growth was even more disparate last quarter, when a 4% retail gain was minimized by a 22% hike in grocery and foodservice revenue.
Nearly a year after its brief stumble, Starbucks has received the message. The launch of its VIA single-serving instant product in stores and supermarkets helped Starbucks push third-quarter revenues up 6%, to $2.6 billion, increase same-store sales in the U.S. by 9% and improve its operating margin to 15.6% from 10.8%. Revenues have improved 7% year-to-date, while comparable store sales growth spun 180 degrees, from down 7% last year to up 7% this year.For now, Green Mountain and its home-brew ilk have seized the spotlight, though their reign may be short-lived. Coffee prices hit a 13-year high last week, trading at nearly $1.99 a pound, forcing J.M. Smucker (SJM - Get Report) to boost prices 9% on its Folgers, Millstone and Dunkin' Donuts coffees. Green Mountain followed suit, announcing plans to raise prices on its K-Cup offerings 10% to 15% next month. With Starbucks saying it will absorb the cost increase for the time being, it's possible the company may end up winning the same coffee war its instability started. --Written by Jason Notte in Boston.
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