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Asia leads coffee growth, while global market leans toward premiumization

By Rachel Arthur+

02-Mar-2017
Last updated on 02-Mar-2017 at 14:25 GMT2017-03-02T14:25:43Z

Indonesia leads growth with 19.6% CAGR; yet Finland declines 3.7%. Pic:iStock/brebca
Indonesia leads growth with 19.6% CAGR; yet Finland declines 3.7%. Pic:iStock/brebca

Asia’s coffee market is booming as traditional tea consumers are converted ‘slowly but surely’ to coffee. But category growth in more established markets is slowing, according to research released by Mintel today. 

The overall global coffee market continues to grow at a steady pace, with retail volume growth in 2016 expected to be 2.7%, following on from a 2.5% rise in 2015.

Three of the five fastest growing retail markets are is Asia: Indonesia, India and Vietnam.

The further growth potential in Asia comes from the large number of traditionally tea drinking consumers who are being converted into coffee consumers. Asia leads new product development in the coffee category: the number of new products launched in Asia rose 95% between 2011 and 2016. Meanwhile, the growth in tea product launches was comparatively low at 55%.

“There have also been an increasing number of coffee launches which blurred the boundaries between coffee and tea,” said Jonny Forsyth, global drinks analyst, Mintel. “A tea-drinking culture is the biggest barrier to coffee in Asia, and tea-coffee hybrids can be used to tempt consumers.”

Coffee: growth and declines

Indonesia: CAGR of 19.6% over 5 years, making it the fastest growing packaged retail coffee market.

India: 15.1% CAGR

Vietnam: 14.9% CAGR

Belgium: 0.5% CAGR

The Netherlands: 0.5% CAGR

Poland: 0.1% CAGR

Australia: 0% CAGR

Finland: -3.7% CAGR

Coffee innovation worldwide

Globally, coffee pods have taken the market by storm, accounting for 26% of global coffee retail innovation in 2016. In Asia Pacific, the coffee pod market is still in its early stages (accounting for 13% of coffee launches) but Mintel believes it shows ‘strong signs of growth’: 4% of launches in 2011 were coffee pods, rising to 13% in 2016.

However, instant coffee continues to dominate the retail market in Asia, with two in five launches in Asia Pacific being soluble coffee granule products. In comparison, only one in five European launches were instant coffee, while just 6% of launches in North America were in this category.

Asia Pacific also leads the way in launches in the RTD cold coffee category: in 2016, 29% of coffee launches in Asia Pacific were RTD coffees (In Europe this figure was 10%).

Coffee mixes are also a big part of the Asian market – products like ‘2-in-1’ mixes accounted for 16% of all retail coffee launches.

Premiumization

While instant coffee remains an important segment, especially in Asia, consumers are also trading up: promoting the increases in other coffee categories.

“As emerging market consumers develop their taste for coffee, innovation is stepping up a notch as drinkers trade up from instant to fresher-tasting coffee,” said Forsyth.

The ‘third wave’ coffee movement – which puts a strong focus on where beans are sourced and how they are roasted – has been growing in the US but is also gathering momentum around the globe.

The US takes the largest chunk of total third wave launches, accounting for 27% of global launches.

Yet such an interest in premiumization is also seen in Asia, with 15% of coffee products launched in this region carrying a premium claim in 2016. In Indonesia, 67% of metro consumers believe that the quality of coffee is more important than the ease of preparation.

 “Most emerging coffee markets remain in the 'first wave' of coffee; however, some are starting to enter the 'second wave' as foodservice outlets and coffee shops aggressively push Western coffee lifestyles and local coffee shops pick up the baton,” said Forsyth.

“Many Asian countries are now making the progression from ‘first wave’ to ‘second wave’, while some nations such as South Korea, Japan, Singapore and Indonesia, are moving towards a ‘third wave’ lifecycle development.”

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