The Future of Coffee

September 2022

The coffee industry will see many changes in the coming decades. Demand will continue to grow worldwide, especially for high-quality beans, even as the effects of climate change seriously threaten traditional supply routes. Physical place will lose its meaning as the Third Wave gives way to the Fourth and possibly even Fifth waves. Emerging markets like Brazil and China will become ever-more important and new categories will emerge that challenge our notions of what “coffee” even is.

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Key findings

The Third Wave will give way to the Fourth as physical space loses its meaning

Emerging technologies and the changing world post-pandemic are pushing global coffee towards an era in which physical place matters less with each passing year. Good coffee can now increasingly be ordered and consumed anywhere, a re-thinking of occasions so important it could well prove to be the Fourth Wave of coffee.

Climate change and future demand will necessitate a radical rethinking of supply

The serious threat to the Coffee Belt from climate change combined with steadily rising global demand is going to put immense pressures on global supplies in the years to come. The solution will have to be a multi-pronged adaptation from multiple sources to plug the gaps.

Four major blocs now exert a dominant influence on the global coffee industry

A decade of intense consolidation has created four powerful blocs on the top of global coffee. The consolidation wave itself should be much slower in the coming years but the power of these four should only grow, exerting disproportionate influence on the industry.

Functional products must reckon with an anxious world

Energy will remain the core of functional coffee in the future, but this demand will splinter into many directions, from ultra-caffeination to mitigated energy. This will occur against a backdrop of spiking anxiety rates and sleep problems worldwide, which have curiously enough not yet led to a noticeable anti-caffeine backlash.

Category boundaries are collapsing

Many of the most exciting new coffee products of the future will be hard to categorise according to traditional understandings. Close partnerships in the alcoholic and soft drinks spaces will be one major source. Another will be targeting by occasion rather than category, which will see categories such as “premium single serve” develop as recognisable entities.

Introduction

Scope
The future of coffee: Five key takeaways

The next wave(s) of coffee

The wave model of coffee: Advantages and limitations
The Fourth Wave: What could it look like? Does it even exist?
Physical location will mean less with each passing year
What does it mean to say the Fourth Wave means good coffee anywhere?
Cafés in the metaverse and the virtual third place
The human experience and the persistence of the physical third place
A Fifth Wave? The end of traditional supply chains

Supply chains and meeting future demand

Inflation is temporary but supply challenges are not
The steady rise in global demand raises serious questions about future sourcing
Breeding of new strains of coffee will be the first choice for the industry
“ Beanless coffee”: Plant-based without the halo
Lab-cultivation will be the real key to filling future demand gaps
Dairy alternatives are also very much a part of the shift towards new sourcing
Conclusion: The Leopard Principle and the future of coffee supply

Key global growth opportunities

What are the most important global opportunities?
The growth in coffee shop spending dwarfs that of retail at a global level
The key categories for growth in some areas are major liabilities in others
The four types of coffee growth markets
Brazil’s size and category mix makes it uniquely important to global coffee
The US is the epicentre of the global cold revolution
The untapped potential of China makes it a focal point for the future
The pods category continues to grow but is staring down market maturity in Europe
Preparing for the next “black swan” event
Map: Exposure risk to future crisis

The big four and the consolidated industry

The great consolidation wave has drawn to a close
Four blocs have formed that are in the commanding position in global coffee
Forces other than M&A continue to drive consolidation in the coffee industry
The future will be shaped by a relatively small number of companies

Functionality and caffeine in an anxious world

An anxious world demands ever-larger amounts of energy
Where is the ceiling on caffeine consumption?
Nootropics: The next great coffee functionality

Categories of the future

“Coffee” will become a harder category to define
“+Coffee” will strain traditional category lines but be a major growth segment
Coffee and alcohol: A potent mix?
The maturity of the pod category will lead to a more diverse single-serve experience
“Fashion” coffee will go in and out of style in ever-shrinking cycles

Hot Drinks

This is the aggregation of Coffee, Tea, and Other Hot Drinks.

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