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10th Annual Coffee and Tea Flavor Review
by Shea Sturdivant

The aromas of sticky buns, cinnamon apple, chocolate eclairs, vanilla almond, German chocolate cake, and oh so many other pastries fill the air - this has to be a bakery, doesn't it? Guess again, these scrumptious bouquets are coming from the coffee and tea section of all types of stores.

Flavored coffees and teas have not been a niche market for quite some time, but the availability of the products can still stagger the imagination. Brewed products are available in convenience stores, donut shops, fast food outlets, quick serve restaurants, fine dining establishments, as well as coffeehouses. Whole bean and ground-flavored coffees are stocked on the shelves of grocery stores and delicatessens as well as flavored teas, green and black. The market for flavored coffees and teas has grown in the last 10 years, surged forward, and shows no indications of shrinking.

As we have done every year for the past decade, we contacted flavor suppliers around the globe and asked them to give you our reader's insight into the trends for the next year. Here are their picks for top flavors, observations as to upcoming trends, and musings on the future of the flavored industry.

Of the total specialty coffee market, what would you estimate the dollar volume of the flavored coffee segment to be? Do you think the flavored coffee market will continue to increase its market share or just hold onto what it has?

Because the flavored coffee segment encompasses so many areas - ground, whole bean, instant, ready-to-drink, etc. - assigning a dollar value is difficult. However, several of our specialists did give us insight into the monetary/market share value of this lucrative segment.

Jeff Nichols of Danisco Cultor thinks that "to calculate a dollar total for flavored coffee or even the total specialty coffee segment would be very difficult. The diverse types/number of distributions channels (C-stores, coffee shops, supermarkets, etc - many of which are not easily tracked), coupled with flavored products that may fall outside the definition of flavored coffee or even specialty coffee, combined with the problem of relying on flawed market research data that considers only a portion of the overall segment, makes such projections guesses at best."

While Nichols considers the dollar value of flavored coffee difficult to calculate, he did offer an opinion as to the market share. He elaborates, "A number we find equally as valuable is the portion of the specialty coffee segment that flavored coffee constitutes. Our market research indicates that 25-30% of all specialty coffee sold is flavored coffee. If you couple that with the fact that 15-20% of all coffee sold in America today is specialty coffee - we can safely say that 4-6% of all coffee sold in the U.S. today is flavored coffee. Who would have thought that flavored coffee would grow to be as big if not bigger than instant coffee?

William Palmer, vice president of sales of Flavor & Fragrance Specialties, also considers flavored coffee a valuable segment of the coffee industry. "For the purposes of assigning a value, I am assuming the flavored coffee market to be sales of flavored whole bean and ground flavored coffee. At retail, our marketing staff assumes $750,000,000 in sales. Adding brewed coffee sales, or sales of coffee-based beverages, would greatly increase that number. Flavored coffee sales are growing smartly, fueled largely by supermarket programs by the largest brands. Additionally, companies like Dunkin' Donuts that have established brand loyalty with their brewed, flavored coffee have developed retail programs for their whole bean and ground versions. It is fortunate for us, the flavor vendors, that the market has continued to grow because price pressure is apparent in this mature market. We have recently passed through major price concessions on many of our flavors, as we've become confident that the price breaks our buying position has achieved are permanent."

All of our flavor suppliers think the flavored market will continue to grow. Paula Boudjouk, director of marketing and sales for Medallion Flavors, a division of Medallion International, Inc., feels "the flavored coffee market will continue to grow at a slow but steady pace. This increase will be to the young 18-29 year olds, who seem to be driving a strong consumption of gourmet beverages. Flavored coffees have the potential to gain market shares, [but] it is up to the retailers/roasters to continually come up with new products, and ways to market old favorites, to new groups of coffee drinkers, and in some cases, non-coffee drinkers."

Jeff Nichols agrees with this opinion. "In terms of market share within the specialty coffee segment, flavored coffee as a percentage should stay fairly consistent. I think however, with a high degree of confidence, the specialty category will continue to grow within the overall coffee category. This growth will result in overall market share growth of flavored coffee with relation to total coffee sales."

Harry Farber, vice president of the Flavor division of Technology Flavors & Fragrances, thinks flavored coffees will continue to grow in popularity in the U.S. Farber offers additional insights, "The success of coffee drinks is aided and abetted by the wide variety of preparations, especially the bottled coffee drinks which use highly colored labels with exciting graphics to encourage consumers to pick up a bottle and try it."

Farber also sees continued growth for tea. "Lemon, raspberry and peach are the most popular [teas], especially in the bottled tea drinks. We are also experiencing a renaissance of spiced tea drinks, namely chai teas. Green tea has become very important because of all the medical information in the press about the benefits - especially the anti-cancer claims. We will continue to see growth in the tea drink areas as more and more consumers accept the benefit story. The addition of nutraceuticals such as ginko biloba, ginseng, and grapeseed extract to tea drinks has also increased the market for flavored teas that can mask the taste of these nutraceuticals.

Bill Sieber, director Coffee & Tea Flavor division, Melchers Flavors of America, Inc., sees a "mature and established market for the flavored coffee consumer that has continued to expand with the introduction of cappuccinos, bottled coffee beverages, flavored creamers, etc. The new trend appears to be in the area of function beverages such as those containing green tea and other ingredients which carry nutritional benefits and health claims."

Continued on next page...


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