Coffee is the second most traded product around the globe and the second most consumed beverage worldwide with daily global consumption estimated at 2.25 billion cups! The National Coffee Association indicate that the average daily intake by American coffee drinkers is approximately 3 cups.
The coffee trade association also reports that 63% of American adults drink coffee daily. The share of gourmet coffee consumed past-day has increased from 51% in 2018 to 61% in 2020.
“September 29th is the National Coffee Day in America and the best day; anyone can enjoy a Frappuccino freebie or subsidized specialty coffee blends in most restaurants and coffee bars.”
Brazil is the global leader in coffee production, a position it has held since 1840. With more than 10,000 miles of coffee plantations, the country churns out approximately 30% of the total coffee produced in the world.
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Key Growth Factors
The key channel of distribution in this industry is “company-operated stores located in high-traffic, high visibility centers,” Starbucks is growth driver for company with 12,000 to 30,000 stores in 10 years. Dunkin Donuts had its growth 4,400 to 15,000 stores in the same period.
Starbucks gets benefits of partnering with powerhouse brands like Pepsi, Barnes and Noble, Nordstrom. Most recently, Coca-Cola, to directly compete with Starbucks ready-to-drink iced coffees. These alliances allow for innovation, channel extension and even geographic extension.
Challenges
There are two sources of coffee i.e., Arabica and Robusta. Since, Arabica coffee is the first ever cultivated coffee species and hence it is dominant in the market over Robusta coffee. However, Weather Uncertainties, Retail Consolidations, Stringent Regulation.
A few notable trends include growing penetration of premium coffee shops, high demand for cold brew over iced coffee, increasing gourmet coffee sale in America, increasing potential for Agri-tourism in the coffee industry and rising popularity of coffee as a subscription
Impact of COVID –19
In 2020, the outbreak of COVID-19 pandemic has created a unfavorable impact on the global market as the production, exports and imports of coffee & related products have decreased significantly.
Starbucks brand is likely to weaken in the future due to its high growth and efficiency focused strategy of coffee brewing. This strategy has commoditized its high price point product and drive consumers to other competitors such as Dunkin’ Donuts with consumer price-value ratio.
Opportunities for the New Entrants
Some of the major players in the global coffee market include J.M. Smucker, Eight O’ Clock, AMT, Dulce Cafe, Lavazza, and Keurig Green Mountain. Other key players dominating the global coffee market are Tchibo, Kraft Heinz, Trung Nguyen, and Starbucks.
- Growing Penetration of Premium Coffee Shops
- High Demand for Cold Brew over Iced Coffee
- Inclining Desire for Functional Coffee
- Increasing Potential for Agri-tourism in the Coffee Industry
Conclusion
The Coffee Industry is benefiting, in terms of increasing sales from product differentiation, improved quality, price premiums of sustainable coffees. Providing education and information will be critical factors in expanding these market niches. Standardized terminology and consumer-friendly certification can help prevent confusion and erosion of support for this market segment.
