Is America Getting Over Its Coffee Addiction?

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You wouldn't know it from the crowd at your local Starbucks (SBUX), but coffee consumption in this country has been declining. According to a survey by the National Coffee Association, 59 percent of respondents drank at least one daily cup of java last year, down from 61 percent in 2014's study and 63 percent in 2013.

Meanwhile, the average number of cups consumed a day fell to 1.85, an 8 percent drop from the 2014 level and the lowest figure since 2010.

Coffee isn't only part of our business and social culture, it's considered a big part of the day-to-day routine for many Americans. Why, then, are those numbers falling?

Not Your Father's Cup o' Joe

Consumption of the powerful dark liquid has changed radically over the years. In the old days, drip coffee was usually the only variety available at home, in restaurants, and at various kinds of takeout establishments. It was a bulk product, brewed into pots and sold at low prices.

The market changed when espresso-based beverages began their ascendancy in the 1990s, headed by the likes of Starbucks and other slingers of European-style drinks. These "designer" versions of good old java commanded higher prices, thanks in no small part to the labor involved in making them. Coffee became more of a treat, a specialty product as opposed to a commodity.

The prevalence of designer coffee is an established trend that's becoming even more entrenched. According to the NCA, thirty-four percent of those surveyed said that they're drinking what's characterized as "gourmet coffee" every day, a notable increase over 2013's 31 percent. "Gourmet," in this case, means a product that's either espresso-based or made from premium beans, according to the NCA.

If we narrow the parameters strictly to espresso-based beverages, those figures show even higher take-up -- 18 percent for 2014, compared to only 13 percent the previous year.

The shift toward designer coffee results in a move toward pricier offerings. After all, lattes, cappucinos and their ilk are significantly more expensive than traditional varieties. These days a Starbucks Grande Latte, for example, will set a customer back around $4.40 in California.

By comparison, a 48-ounce jug of J.M. Smucker's (SJM) famous Folgers instant coffee brand can be bought for something like $18.76. On a per-cup basis, that works out to around 5 cents.

In the times when the big pot of drip coffee was the standard, it cost very little to continually refuel your cup. At a price nearing or exceeding $5 a serving these days, few people have the means or the inclination to throw down more than a couple of Starbucks drinks every day.

Tea for Me

Some of the volume lost by coffee has been gained by its traditional rival, tea. According to the The Tea Association of the USA, the American market for the beverage increased by roughly 10 percent from 2012 to 2014, landing at over $10 billion in the latter year.

Like the culture of coffee, that for tea in America has shifted over the years. But the difference is, it's become broader rather than narrower, with a range of previously obscure varieties going mainstream -- witness the prevalence of green tea, for example or the ascendancy of the spice-laden chai variation.

Meanwhile, big companies have successfully devoted big resources to selling the cold variety of the beverage. In Coca-Cola's (KO) list of its top 20 products, three are teas while only one is a coffee drink. Those three -- Fuze, Gold Peak and Ayataka -- achieved this status only recently, beginning in 2012.

In what has to be seen as an acknowledgement of tea's rising popularity, Starbucks acquired specialty retailer Teavana in 2013. In its last full fiscal year before being swallowed by its present owner, Teavana's revenue grew by a brisk 35 percent on a year-over-year basis.

Designed for Popularity

Americans have always loved their coffee, but the shape of this affection has changed. No longer is it the drink kept close at hand, quaffed at regular intervals to get us through the day; instead it's enjoyed more intermittently and in fancier forms.

Not to mention much heftier prices, to the benefit of the latte and cappuccino purveyors now seemingly on every street corner.

Motley Fool contributor Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. Check out our free report on one great stock to buy for 2015 and beyond.
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