Coffee Market in the United

Coffee market in the United States is characterized by relatively slow growth at the retail and quick service levels. The industry is dominated by a handful of major firms, but at the low end is incredibly fragmented with thousands of small local and regional players, especially on the quick service side. The retail side is somewhat more concentrated.

There are few if any issues in the political environment. Regulations on the industry tend to be basic ones that apply to all food businesses. These regulations relate to food handling and safety, as well as basic worker rights laws including the different civil rights acts that govern the workplace, as well as worker safety legislation. For quick service coffee outlets, the legal environment is typically a patchwork of laws beyond those federal ones mentioned above, as there are local standards that need to be adhered to. For most companies in the coffee industry, food handling laws are the most important, followed by employment laws. There is also the risk of civil suits, famously for having coffee that is too hot. Companies in the industry need to be aware of this risk and take steps to mitigate it, in particular through warnings on the coffee cups that the beverage inside is indeed hot. Legal action is a far greater risk for large companies, as small companies do not offer the potential of a large judgment.

Almost all coffee in the United States is imported, since the only production is in Hawaii and not in much quantity relative to demand. There are, however, few if any trade barriers with respect to coffee. The product's universal appeal and the lack of meaningful U.S. production means that there is no reason for the country to erect trade barriers, and there would be political backlash from consumers if such barriers were to reduce the availability or drive up the price of coffee. There are not likely to be any barriers in the future either, because of these structural reasons.

In the coffee industry, intellectual property rights tend to extend only to branding. There are no rights extended to specific roasts, beans, or other inputs. Brand name protections include trademarks, slogans and other similar intellectual property. Common coffee terminology cannot be trademarked -- so for example Starbucks can trademark Frappuccino because that is not a generic term, but it cannot trademark cappuccino, because that is a generic term. In general, there are few IP disputes in the industry, though it is conceivable that branding disputes might emerge. Key technological inputs like espresso machines and coffee roasters can be patented, and usually are, allowing companies that build those machines to profit from their design efforts.

Coffee is traded on global commodities markets, and these set the base price for a standard bean. Beans are traded in green form, and are then roasted by the individual companies in the market. There are no import or export restrictions on coffee, owning to the lack of domestic production that would require or seek government protection. Imports are subject to inspection by the FDA, but routine coffee imports are unlikely to have problems. In some cases, roasters will seek out specific beans from individual farms ("single origin") or strains of the plant. These are likely to be priced at a premium to the global commodity price, both at the wholesale and retail levels.