Coffee in 2016: From Premium to Luxury

Strategy Briefing

About This Report

Aug 2016

The global coffee industry is at a crossroads, enjoying unprecedented growth, yet facing a complex competitive environment. Developed markets offer competition, commodification and demand for more premium offerings. In emerging markets, coffee culture expands apace, yet meeting demand among lower-income consumers remains challenging. At the centre of it all is the coffee shop, the axis around which the entire industry turns, and an emerging presence in the global luxury market.

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Coffee in 2016: From Premium to Luxury

Coffee’s stature continues to grow        

Coffee as a category has steadily gained share of total consumer spending on beverages over the last 10 years, both globally and in every region.

Foodservice growth is driving long-term evolution          

A large and growing percentage of coffee occasions and sales now take place through foodservice channels. This creates demand for better-quality, higher-priced options through retail, while also driving increased competition, as out-of-home brands increasingly look to establish themselves in the retail space.

Pods and instant coffee to lead long-term consumption expansion         

Instant coffee serves as the first rung on the ladder for new coffee consumers in Asia Pacific and the Middle East, while pods reflect growing demand among consumers looking for convenient, decent-quality coffee at home and in the workplace.

Instant coffee in tea-drinking markets is the next battleground                

Asia Pacific and the Middle East and Africa lead growth, both regions where tea is overwhelmingly the most popular caffeinated hot beverage. This favours instant coffee, offering an affordable, branded alternative to tea which requires no additional machine.

Coffee shops are becoming new product discovery labs               

More than almost any other foodservice channel, coffee shops have the credibility to create whole new categories of soft drinks, benefiting from daily consumer attachment and strong artisanal appeal.

The future of coffee is the story of brands          

The future of coffee is a story of brands - building out modern brands in emerging markets, while also creating the high-end brands of tomorrow amidst growing fragmentation in high-income developed markets.

Introduction

Scope
Key findings

Global Context - The World of Coffee

Coffee’s share of throat, wallet and attention continues to grow
Steady expansion for global coffee in 2015
Foodservice growth, competition with retail drive long-term evolution
Weaker performance in 2015
Pods and instant coffee to lead long-term share expansion
Strong price growth across most major categories
Pods/instant to account for 75% of global value expansion to 2020
What is driving growth in the top markets?
Instant coffee in tea-drinking markets the next battleground
Instant coffee potentially drives future pod demand in Turkey
Conclusions

Channel Summary - Understanding How We Buy

Distribution consolidates, with foodservice and internet surging
Powerful brands to drive surging internet coffee sales
Strong coffee culture drives strong foodservice performance in ANZ
Coffee shops riding the third wave
The next step: Coffee as global luxury industry
Coffee shops are becoming new product discovery labs
Millennial demand for clean labels offers potential for coffee
“Coffee-focused foodservice” continues to expand
“Good coffee everywhere” an opportunity and an obligation
The internet-foodservice-retail nexus

Competitive Landscape - Where Will the Brands Come From?

Heavy regional focus for most major players
Nestlé’s three major brands continue to drive global expansion
Maturing US pods to hit key brands hard
Few truly global players for now
Understanding the JAB portfolio
Nestlé vs JDE
What’s next for JAB?
Nestlé’s strategy centred on defined tiers, organic growth
Private label, “Nespresso-compatible” brands target the high end
Away-from-home brands, private label surge in US
Consolidation - Two approaches

Conclusion - What Can Coffee Be?

Four questions for every player

appendix

Euromonitor International Forecasting Methodology

APPENDIX

Growth decomposition explained

Appendix: Competitor Analytics

Competitor Analytics tool
Overview
Competitors
Market Overlap
Treemap
Overlap Matrices

Appendix: Industry Forecast Model

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 Industry Forecast Models