More than 2.25 billion cups of coffee are consumed in the world daily and over 90 percent of coffee production takes place in developing countries mainly South America while consumption happens primarily in industrialized economies. The global market for coffee is characterised by volatile prices and production levels which impacts directly on the incomes and survival of producers. Referable to the shock of the COVID-19 pandemic on the coffee markets, some of these tendencies may have changed in the short to medium-term.
Coffee manufacturing companies overhauling their strategies in terms of service as well as emerging contemporary brands in order to enhance customer satisfaction and in turn gain loyalty are other factors improving the global coffee market all around the world.
Increasing organic type demand due to rising awareness of the health benefits associated with the use of coffee is further expected to boost the coffee demand in the near future.
Coffee is one drink that has been a basic part of food fare all over the world. It is one of the most profitable products in the food industry. According to clinical studies, to some extent coffee is beneficial for healthy adults. A survey by the National Coffee Association in the US, more or less 70% of the people prefer homemade coffee preparation. Research findings has indicate that worldwide coffee market is expected to be valued $ 24.2 Billion by 2020. While current projections would negatively impact prices this year, the covid-19 pandemic remains an unprecedented and swiftly evolving situation.
In a global context, coffee plays an important role in the lifestyle of people modern world. As per a report published by nestle Nespresso SA, in Germany, growing sense of coffee connoisseur ship was most noticeable among younger generations. About 24.1% of 18-29-year-olds want to try different types of coffees, coffee recipes, and want diversity in the coffee industry.
Determinants such as increasing out of home coffee consuming population, rapid urbanization, rising e-commerce retail sales, accelerating disposable income, increasing instant coffee preference, growing demand for specialty coffee and increasing green coffee consumption in emerging economies are expected to drive the market. Shifting work culture specifically in corporate industry along with enhancing living standards is further expected to boost the demand in the global market. There is an increase in the number of cafeterias in society to cater to the rise in demand. Launch of various tastes such as Barista, CCD, and Starbucks has given enriched customer experience scenario.
The market is expected to grow worldwide, with a CAGR of nearly 2.52% and reach US$ 28.8 Billion by 2027, according to Renub Research. However, growth of the industry would be challenged by weather uncertainties, retail consolidations and stringent regulations. A few notable trends include growing penetration of premium coffee shops, high demand for cold brew over iced coffee, inclining desire for functional coffee and increasing gourmet coffee sale in America.
The supply-side of the world coffee market is fragmented with millions of small-scale producers the market power lies with coffee roasting companies who buy raw coffee beans and process them into coffee-based products. When buyers have power over the market price, this is monopsony, and this purchasing power over coffee growers can force down the price that farmers receive for their products creating poverty and damaging the chances of sustainable development for regions dependent on coffee production. There have been no price controls in the global coffee trade since 1989, when the buffer-stock system run by the International Coffee Agreement broke down. Since then prices have been determined by the market supply and demand. Over the last ten years coffee prices have been volatile.
The global coffee market is segmented into two types of coffee beans: Arabica and Robusta. Arabica is more preferred by consumers for its sweet taste and more complex flavor. It is widely used in black coffee. On the other hand, Robusta is much cheaper and stronger because of its high caffeine contain then Arabica. It’s mostly used in espresso. Brazil is the biggest coffee producer for both Arabica and Robusta beans. There are various options available for coffee lovers depending upon coffee beans and type say Latte, Cappuccino, Americano, Espresso, Doppio etc.
Tens of millions of small producers in developing countries make their living growing coffee. The market is driven by multiple factors, a few being increasing demand for certified coffee products, acceptance of single-serve coffee brew systems by the consumers, and constant innovation lead by top players in the coffee market. In developed economies, some consumers are expected to switch from instant coffee to more premium options for reasons of quality and flavor. Instant coffee was once considered a high-end product but began to lose its base of younger consumers, which is changing the market dynamics.
Depending on coffee production, countries, like Brazil and Vietnam accounts for the highest production of coffee, in terms of volume, owing to suitable coffee growing conditions. With the production of 3.6 billion metric ton of green coffee, Brazil is the largest producer globally, followed by Vietnam, Colombia, Indonesia, and Ethiopia.
Coffee shops in European cities lead the way in introducing sophisticated, high-value varieties to consumers. The growing demand for speciality coffee follows the growing consumer interest in how coffee is brewed, as well as where, how and by whom the coffee was grown. It has therefore become essential for speciality coffee producers to tell the story behind their coffee, its origin and the other environmental and social aspects around it.
Meanwhile, Europe and American are the large coffee market. Sustainability remains a top priority for industry stakeholders. Buyers and retailers often use certification to promote their sustainability efforts. Certified coffee is an assurance to the consumer about the reliability of the product, as coffee is becoming an increasingly common target for food counterfeiters. UTZ Certification – It is the largest certification program in coffee and cocoa. UTZ aims to make the sustainable farming a norm, by encouraging farmers to implement eco-friendly agricultural practices and manage their farms profitably with respect to coffee consumers and nature. A number of coffee certification organizations are engaged in keeping a check upon the production procedures and supply chain of coffee. Some of them are as follows:Fair Trade Certification, Rainforest Alliance Certification, UTZ Certification.
The growing consumer demand for traceability and transparency in the value chain has influenced the growth in direct trade between producers and European roasters. At the same time, increasing integration of multinational companies in mainstream coffee trading and roasting further consolidates the market, putting pressure on prices along the entire chain.