Coffee Production in the US

1. Coffee Production in the US “This industry produces coffee, typically by purchasing coffee beans and processing them into roasted or ground coffee products… …the industry excludes tea production and revenue from coffee made on premises, such as in a coffeehouse or cafe. Coffee creamer production is also excluded from the industry.” • Supply Industries • Baking Mix & Prepared Food Production • Hay & Crop Farming • Plastic Film, Sheet & Bag Manufacturing • Demand Industries • Grocery Wholesaling • Supermarkets & Grocery Stores • Convenience Stores • Food Service Contractors Source: IBIS World

2. Coffee Production in the US Source: IBIS World

3. Coffee Production in the US Source: IBIS World

4. Coffee Production in the US Source: IBIS World

5. Major Industry Players Source: IBIS World

6. Industry Performance • Key external drivers: • Demand from supermarkets, grocery wholesalers, and grocery stores • Wholesalers are the link to stores, and stores are the link to customers • Fighting for in-store advertising and shelf space • World price of coffee • Risen sharply recently  growing demand in other countries leading to supply shortages • Per capita coffee consumption • Recent studies have shown positive health effects of coffee • World price of crude oil • Transportation costs

7. Industry Performance • Current performance: coffee production industry’s revenue has performed well despite increases in commodity pricing, which has been passed on to the consumer. • Increased demand: consumers are increasingly demanding specialized, high-quality coffee, particularly in single-serving amounts. • Though economic recession curbed consumer income in 2013, consumers view coffee as an affordable luxury item. • Media attention pointing to positive health benefits from coffee has also spurred greater demand.

8. Industry Outlook • Life cycle: industry is mature, characterized by saturated domestic market and a range of well-established brands. • Premiumization and stable coffee consumption will drive the Coffee Production industry's growth over the next five years. • Weak dollar against the currencies of major trading partners will boost industry exports. • Revenue is forecast to grow at an annualized rate of 1.0% to $11.5 billion over the five years to 2018.

9. Products and Markets Key Buying Industries: • Grocery Wholesaling • Supermarkets & Grocery Stores • Convenience Stores • Food Service Contractors Key Selling Industries: • Baking Mix & Prepared Food Production • Hay & Crop Farming • Plastic Film, Sheet & Bag Manufacturing

10. Products and Markets Coffee manufacturing • Gourmet and specialty coffee segments • Ground roasted coffee • Whole bean and other coffee

11. Products and Markets Market Segmentation • By age • Brewed in home vs. purchased in store • Exports

12. Products and Markets International Trade • Imports are increasing • Exports are increasing

13. Competitive Landscape Market Share Concentration • High industry concentration • Expected market share going forward Basis of Competition • Competition is medium and increasing • Internal Competition • External Competition

14. Competitive Landscape Barriers to Entry • High and increasing • Major players have established high brand and customer loyalty • Contracts with key suppliers

15. Market Participants Major Companies Percent Market Share Kraft Starbucks Nestle J.M. Smucker Co. Green Mountain Coffee Roasters 10.9% 15.6% 16.2% 21% 22% Brands Maxwell House, General Foods, Seattle’s Best, Starbucks Nescafe, Taster’s Choice, Coffee-Mate Folgers, Dunkin, Millstone, Café Bustelo Green Mountain, Keurig, Tully’s, Diedrich

16. Operating Conditions High levels of Capital Intensity Plants require sophisticated technology Recent CapEx Expenditures for major companies Increased automation, decrease in labor hours $.38 is spent on capital per labor dollar Technology and Systems Level of technology is determined by processing method 2 Methods: Dry and Wet Change in the technology necessary to roast and grind coffee beans is low

17. Operating Conditions pt.2 Industry is defined by high levels of revenue volatility • Revenue is dependent upon cost of raw materials, energy and oil prices, weather conditions, exchange rates, and household incomes • Extremely sensitive to economic conditions • Industry revenues have been rapidly increasing in recent years Average levels of regulation • Governed by FDA • Required to label nutrition contents • Consumers are demanding more detailed information • Failure to abide by regulations can cause product recalls

18. Operating Conditions pt. 3 Environmental Regulation Industry Assistance Governed by EPA Eco-friendly operations are used as selling points to potential customers Adherence has created more efficient operations and improved quality Low amounts of tariff protection exists for manufacturers The U.S. protects coffee bean to prevent there rusting Further research is being conducted by Global Agriculture and Food Security Program International Coffee Organization is made up of coffee importing and exporting countries to facilitate trade

19. STRATEGY “Nestlé’s objectives are to be recognised as the world leader in Nutrition, Health and Wellness, trusted by all its stakeholders, and to be the reference for financial performance in its industry.” • THREE KEYS: • Competitive Advantages • Operational Pillars • Growth Drivers Source: GlobalData

21. CHARACTERISTICS • Six reportable segments: • Zone Europe • Zone Americas • Zone Asia, Oceania and Africa • Nestle Waters • Nestle Nutrition • Other Food and Beverages • Products are categorized under: • Powdered and Liquid Beverages • Milk Products and Ice cream • Prepared Dishes and Cooking Aids • Confectionery • Pet Care • Water • Pharmaceuticals • Nutrition Source: GlobalData

22. SWOTAnalysis Source: GlobalData