The migration inflow that has been experienced over recent years in Chile, with people coming from countries with a very strong coffee culture, allowed coffee to increase its household penetration, which has enabled it to sustain total volume growth in a time of crisis during COVID-19 in 2020. Although on-trade sales have fallen dramatically in this year, due to outlet closures to stop the spread of the virus, the growth in off-trade sales has completely offset this decline, as on-trade sales were already only low, and at-home consumption increased.
Having been hit since October 2019 by social unrest, Chilean on-trade channels specialising in coffee had no period for recovery before being hit by closures to try and stop the spread of the COVID-19 virus in the country in 2020. Being closed for more than five months in many cases, many coffee shops had to close permanently, with even traditional decades-long coffee shop chains going bankrupt.
Nestlé Chile has maintained its dominance in coffee in Chile in off-trade value terms in 2020, seeing strong growth in its value share, taking share from the smallest players. Consumers turned to well-known brand names such as Nescafé and Dolca during the COVID-19 crisis in this year.
Along with the better control of COVID-19 in the country, restrictions to control the spread of the virus are already easing according to the infection rates in different areas, enabling more footfall in foodservice outlets, and this is expected to continue moving into the forecast period. This will lead on-trade sales of coffee to see a strong rebound in 2021, returning to the pre-COVID-19 level in this year.
Ensuring online availability might be the ultimate challenge for some new entrants and smaller players in coffee in the forecast period. More consumers have shifted to e-commerce in 2020 due to limited opening hours and queues at store-based retailers, and the desire to avoid leaving the home due to COVID-19.
As more players enter the market in the different coffee categories, and as private label lines start to emerge as quality and affordable options, the consumption of coffee pods, ground coffee and premium instant coffee will be able to reach new socioeconomic levels, whereas regular instant coffee used to reign absolutely amongst lower-income groups. However, with the contraction of the economy and the middle-classes having to tighten their finances, new product launches will have the challenge of coping with increasing import costs, due to the dollar exchange rate, and the need to continue bringing innovative products to existing customers who have new ways of spending.
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This report originates from Passport, our Coffee research and analysis database.
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