Coffee Growth Dynamics: The Four Market Types Shaping Global Coffee Demand

July 2019

Euromonitor International’s Industry Forecast Model allows a way to break the world down into four kinds of country based on what is driving coffee demand in each location. The four groups are distinguished by their leading growth driver: income, population, premiumisation, or soft drivers. All four are playing a major role in growing global coffee demand, but the exact nature of their demand growth shows considerable variation.

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Key Findings

Four major types of coffee market exist worldwide

There are, broadly speaking, four types of coffee market worldwide. This is based on the leading factor in their future growth potential: premiumisation, income, population, or soft drivers (generally lifestyle trends). It is rare that a market is only shaped by one, but in most cases one of these four is dominant over the others and plays a decisive role in shaping the nature of future coffee demand.

They correlate strongly but not perfectly to certain regions

Premiumisation tends to be most important in the developed world and is especially strong in East Asia and Western Europe. Developing Asia and Eastern Europe, meanwhile, are generally income-led, while population is the most important driver in Africa and Central America. In all regions however, there are outliers that resist this neat geographical correlation.

Premiumisation-led markets are the most important for value terms but have little room to go for volumes

About half of global value growth will take place in premiumisation-led markets as consumers trade up to higher-value formats of coffee. In volume terms however, they play only a minor role since these tend to be highly mature markets with slow population growth.

Income-led markets are driving global coffee shop growth

Coffee shops are growing worldwide but most global growth will come from income-led markets. For these consumers, the coffee shop is an important status symbol as much as it is about coffee.

Basic formats such as instant are performing best in population-led markets

Population-led markets are seeing prices stay relatively stable and little format switching occurring. What performs best is inexpensive products in categories already familiar to consumers. Nearly all future instant growth is taking place in these countries as well as a significant proportion of standard ground growth.

Introduction

Scope
Key findings
Major growth markets in coffee have little in common
Breaking down the drivers of global coffee growth
Mapped: the core growth drivers by country
This means that four major types of coffee market exist today
Weighing the relative importance of the drivers in key markets
Sizing the four types: where will global value growth come from?
P icture becomes quite different in volume terms
Tea consumption patterns exert influence in all four types

Premiumisation-Led Markets

Map: the premiumisation -led markets
Premiumisation is nearly the sole positive driver in a mature Italy
Growing volumes is difficult in these countries
Brazil is an outlier, but an incredibly important one
The maturity of the pod market may slow premiumisation

Income-Led Markets

Map: the income-led countries
Asia and Eastern Europe are driven by income growth
These markets drive global coffee shop growth
Rising GDP in Vietnam boosts demand for coffee
The reverse of income-reliance: Ukraine

Population-Led Markets

Map: the population-led markets
Minimal category shifting in developing markets such as Guatemala
Affordable categories do well in population-led markets
Population overshadows premiumisation in Canada

Soft-driver-Led Markets

Map: the soft driver-driven countries
The soft driver markets are disparate, but with some commonalities
Exposure to global trends raises consumption in Azerbaijan
Soft driver markets are vulnerable to external shocks

Conclusions

Most categories are strongly associated with a single market type
The future of coffee demand growth by area

Appendix

About Euromonitor International’s Industry Forecast Model
Soft drivers and the Industry Forecast Model
Growth decomposition explained
Significance and applications for growth decomposition
Key applications for the Industry Forecast Model
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