U.S. Roasts Fewer Coffee
Beans
By SUSAN BUCHANAN
June 20, 2007; Page B5F
Top U.S. coffee companies aren't processing as many
beans as last year when the nation's roasting pace reached a 30-year
high, but with Americans still drinking lots of java, small roasters are
thought to be picking up some of the slack, industry members say.
Beans roasted nationally as tracked by Coffee
Publications Inc. -- which doesn't reveal the companies it surveys --
are down slightly from last year. In the latest figures, 5.980 million
bags had been roasted from the start of 2007 to April 14, compared with
6.010 million in the same 2006 span. Those numbers are believed,
however, to cover only about 80% of all U.S. processing -- missing many
of the newer specialty coffee companies. Specialty or gourmet beans now
account for over 15% of U.S. java demand as increasingly sophisticated
drinkers sip their favorite lattes and cappuccinos.
Procter & Gamble Co., maker of Folgers, and
Kraft Food Inc., producer of Maxwell House, together control about
68% of the U.S. retail coffee business in supermarkets, grocery stores,
drug stores and food clubs, with Folgers' share greater than Kraft.
Segafredo Zanetti Group's Massimo Zanetti Beverage USA, owner of Chock
Full o'Nuts, Hills Brothers, MJB, and Chase & Sanborn, is another
leader. Big roasters offer traditional brands, along with newer
specialty-type products.
Lars Atorf, spokesman for Procter & Gamble, said the
decline in U.S. roastings into mid-April reflects a slight market
contraction for those companies surveyed. He said the dip may be related
to "sustained green-coffee price increases in July-December 2006 and
resulting list-price increases that we and competition had to take in
October 2006 and January 2007." Folgers raised ground prices by 10 cents
a can, or about 4%, in early January and raised prices for its
gourmet-line by 5%. Maxwell House and Chock Full o' Nuts quickly
followed with similar increases.
To explain lower national roastings, Mr. Atorf said,
"relatively high shelf prices of coffee might have played a role,"
meaning customers may have reduced purchases. "But it would be
speculation right now to view this as an ongoing trend, or something
that will continue through the year," he said. "We have to closely
observe the figures, and should have a better understanding of them
within the next 6 to 9 months."
Last year was a banner one for U.S. roasters, hurrying
to meet strong demand. Moreover, the New Orleans hub -- home to over 20
roasters -- had just rebounded from Hurricane Katrina, which struck in
August 2005. Folgers' New Orleans plant, the world's biggest roasting
facility, was shut after the storm but was fully operational again in
November 2005, Mr. Atorf noted.
Ted Lingle, executive director of the Coffee Quality
Institute, said that to get a handle on this year's roastings and
consumption, the industry has to look beyond the under-reported
roastings to U.S. imports, which are rising, and to the National Coffee
Association's drinking survey. Adults in the U.S. now consume more
coffee per day than soft drinks, as java returns to its pre-1990
dominance, according to NCA survey results released this spring. An
estimated 57% of U.S. adults drink the brew daily, while 51% consume
soft drinks, the NCA found. In early 2007, 82% of U.S. adults drank
coffee compared with 80% in 2005 and 79% in 2004.
Mr. Lingle says another aspect of the demand story is
that the U.S. imports roasted coffee from Canada. He noted Mother
Parkers Tea & Coffee Inc., which roasts beans in Toronto for shipment to
private-label and food-service customers in the U.S. The company also
operates a large roasting plant in Fort Worth, Texas.
Don Schoenholt, president of Gillies Coffee Co. in New
York, America's oldest roasting firm, said that changing consumer tastes
have allowed specialty coffee roasters to flourish. He said their
roastings are undercounted in the Coffee Publication Inc. figures.
The cost of starting a roasting business, which begins
with expensive machinery, has always been very high, but the endeavor
has become profitable, he said, attracting new entrepreneurs. Two
decades ago, the U.S. industry consolidated as giant coffee companies
gobbled up smaller ones, and while buyouts continue, hundreds of small
roasters who opened this decade have seen good returns on their
investments. That's because Americans are willing to pay up for their
favorite cup of joe now. In the 1970s, it was unheard of to spend more
than $1 a cup, except at an expensive restaurant, but today's consumers
don't mind shelling out $3 to $4 for their designer pick-me-ups.
Mr. Schoenholt said he was staggered by the May turnout
of over 10,000 attendees at the Specialty Coffee Association conference
in California, which attracted a number of new entrepreneurs. Fledgling
coffee roasters have been helped by workshops on every aspect of the
craft run by the Specialty Coffee Association and the National Coffee
Association, he noted.
In the past 15 years, Starbucks Corp. swelled
from a regional roaster to the specialty-coffee leader, while Caribou
Coffee Co. in Minneapolis jumped to the No. 2 specialty chain. Peet's
Coffee & Tea Inc. in California and Green Mountain Coffee
Roasters Inc. in Vermont grew from small specialty firms to be among
the nation's fastest-growing, publicly traded companies in recent years,
according to Fortune Small Business magazine.
U.S. specialty roasters use mostly arabica beans, but
big roasters use between 30% and 70% robusta beans in their commercial-arabica
blends. Prices of robustas, a hardy type grown mostly in Asia, reached
9-year highs in London recently. Arabicas, the milder variety cultivated
in Brazil and Central America, have eased from a 1½-year high of $1.2975
a pound touched late last year and were recently hovering near $1.15 a
pound on the New York Board of Trade.
But Mr. Atorf said "continuously strong robusta prices
have not caused any unusual blend changes for Folgers. Recent
developments in green-coffee prices haven't caused a shift" at P&G.
Folgers isn't allowed to say how much robusta coffee it uses.
Mr. Schoenholt said if robusta prices continue to rise,
roasters who normally use them in blends might begin to upgrade to
lower-end arabicas. Robustas are still cheaper than arabicas.
Robustas now account for a fourth of the beans consumed
in the U.S. -- up from about 13% in 1990, according to the International
Trade Center, a U.N. agency. U.S. roasters stepped up robusta purchases
in the 1990s as Vietnam's exports of the hardier variety swelled, making
them inexpensive. U.S. robusta usage, however, lags many other
countries, where espresso or instant coffee are often made with robustas.
In France for example, robustas account for over 45% of coffee demand.
The U.S., the world's top single-country coffee
consumer, roasted 20.6 million bags in 2006, up from 19.92 million in
2005, according to Coffee Publications Inc.
Write to Susan Buchanan at
sbuchanan@osterdowjones.com1
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