Coffee Segment Set for Strong 2012

A Jefferies & Company report predicts sales growth of up to 10 percent this year for major coffee chain brands

The coffeehouse segment is poised for a banner year due to rising same-store sales, more stable coffee prices, and a boom in consumer packaged goods revenue led by price increases and “K-Cup” individual-brewing sales, according to a report from Jefferies & Company Inc.

Andy Barish, equity analyst for Jefferies, projected sales growth between 8 and 10 percent for the coffeehouse segment this year.

“In the currently mixed consumer sales environment, the specialty coffee sector continues to be among the ‘haves’ in terms of same-store sales growth,” Barish wrote in a research note. “We believe the habitual nature of the occasion and the affordable-luxury aspect of the experience continue to drive sales opportunities, both in retail coffeehouses as well as in the [consumer packaged goods] channel.”

Jefferies is projecting revenue growth between 15 percent and 20 percent for Starbucks and Dunkin’ Donuts, and of about 20 percent for Peet’s and Caribou Coffee.

In addition to same-store sales in coffeehouses, growth in retail CPG sales and the emerging K-Cup trend should provide a tailwind for the major coffee players, as those brands continue to grab more shelf space in grocery stores and the single-serving coffees build brand awareness.

“We believe this cycle can continue over the next several years before a shakeout amongst the winners and losers emerges,” Barish wrote.

In their most recently completed fiscal quarters, Starbucks, Dunkin’ Donuts, and Caribou Coffee tallied same-store sales growth of 10 percent, 5.6 percent and 4.1 percent, respectively.

Barish cited other data from Nielsen for grocery store sales of ground coffee, which “indicates a continuation of the trend: sales growth fueled primarily by price, with market share growth dominated by specialty names and single-serve offerings.”