Please complete a CAGE analysis of the coffee and tea industry in the US.

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Please complete a CAGE analysis of the coffee and tea industry in the US.

Hello, and thanks for asking for a CAGE analysis of the United States coffee and tea industry. The short answer is that culturally, specialty and prepared coffee and tea are increasingly popular. From an administrative perspective, consumers using SNAP ("food stamps") are restricted in their tea and coffee purchase choices. Geographically, tea and coffee are import products, driving their commodity status, but their consumption varies by region. Economically, national increases in disposable income drive coffee and tea consumption outside the home, and high-income consumers comprise the plurality of coffee and tea industry revenue.
Below you will find a deep dive of my findings.

METHODOLOGY
We surveyed corporate websites and industry reports in order to provide you with the most detailed information possible on Cultural, Administrative, Geographic and Economic differences driving the tea and coffee markets in the United States. Statista, a portal for industry statistics, was particularly useful for gathering this information. We also found useful information in public reports from industry associations, such as the Tea Association of the U.S.A.

CULTURAL: SPECIALTY, HEALTH, AND PREPARED COFFEE AND TEA

In 2015 half of the coffee consumed in the US was specialty, meaning "higher-quality Arabica beans, lighter roasts, nuanced flavor profiles and greater attention to source and supply chain traceability." This is three times the amount of specialty coffee consumed in the year 2000. Tea consumers are also increasingly interested in origin, quality, and a broader profile of tea flavors. This is part of growing cultural trends which value farm-to-table food, variety, sustainability, and storytelling.

Consumers are also increasingly interested in the health benefits of tea, and green tea in particular is gaining prominence as a "superfood," increasing consumption by 40% since the year 2000. This has increased interest in kombucha and matcha teas in American culture. This trend is particularly targeted towards women.

Prepared coffee and tea beverages take up an increasing share of the market for on-the-go American consumers. 18 to 34 year olds are particularly likely to choose this option. Coffee and tea shops continue to be a growth industry.

ADMINISTRATIVE: US SOCIAL PROGRAMS

Social programs by the US federal government limit coffee and tea purchasing options for lower-income consumers. For 41 million consumers (as of March 2017) using the United States' Supplemental Nutritional Assistance Program ("food stamps"), purchases of cold prepared coffee and tea and dry tea and coffee are covered in grocery and convenience stores, but purchases of hot beverages are not, thus limiting these consumers' usage of coffee shops.

GEOGRAPHIC: IMPORT STATISTICS AND REGIONAL DIFFERENCES

The United States imports most of its coffee from South America, particularly Brazil and Colombia. This means travel time is extensive (4.5 hours flight time from Colombia and 8 from Brazil) and the industry has to deal with import and export restrictions and tariffs. Brazil produces 40% of the world's coffee, but recent drought and political instability in that nation lead to broad fluctuations in coffee pricing. In the past three years, coffee has been the second-most-volatile commodity (next to natural gas).

Leading direct import countries for tea include China, India, Indonesia, and Argentina. The United States also imports tea from secondary processing locations, including Canada and Germany. Because sources for tea are more diverse, issues with individual countries are less of an issue. However, the fact that almost all non-herbal teas must be imported means the industry is dependent on international trade relationships, similar to the coffee industry.
Within the United States, tea manufacturing facilities are regionally concentrated on the West Coast, because this places them closest to tea producers in East Asia and on the West Coast of South America. California alone houses 12.9% of tea manufacturing and packaging facilities in the United States.


ECONOMIC: INCOME DIFFERENTIATION AND RECESSION RECOVERY

Disposable income is increasing as the United States recovers from the 2008 recession, increasing consumer purchases of specialty coffee and tea products and consumer interest in trying new flavors and varieties. However, high income consumers continue to drive most tea and coffee industry profits, as they are more likely to go to coffee and tea shops and to purchase more expensive luxury products. This segment of the population drives 37.8% of annual revenue for coffee and tea shops.

CONCLUSION

To wrap up, a CAGE analysis of the coffee and tea industry in the US reveals factors specific to the national situation that would certainly impact international business strategies. I hope my brief outline of the factors involved in this industry is useful, and if Wonder can help you in any other way, feel free to let us know!

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