A recent report from BofA Securities underscores a significant trend in the restaurant industry: the burgeoning demand for specialty coffee, primarily driven by Generation Z. Despite a slight decline in overall coffee consumption among U.S. adults, the preference for specialty coffee is on the rise. The report highlights that specialty coffee demand has grown at an impressive 8% compound annual growth rate (CAGR) over the past decade, outpacing the broader limited-service restaurant segment. Gen Z, in particular, shows a strong inclination towards specialty coffee, with 89% of coffee drinkers aged 18-24 opting for these premium brews. This demographic is just entering its peak coffee-consuming years, suggesting a sustained demand for specialty coffee over the next two decades. In response to this trend, BofA has raised its price targets for Starbucks and Dutch Bros, signaling a positive outlook for these companies. The shift towards specialty coffee, despite economic pressures, indicates a robust market opportunity for industry leaders.
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