The Future of Coffee

September 2022

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© Euromonitor International
International 2021.
2022. All rights
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reserved.
 Euromonitor’s Hot Drinks research took place before the invasion of Ukraine. As such, the impact of the
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▪ Forecast closing date: October 2021
▪ Report closing date: September 2022

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Contents

Introduction

The next wave(s) of coffee

Supply chains and meeting future demand

Key global growth opportunities

The big four and the consolidated industry

Functionality and caffeine in an anxious world

Categories of the future

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 Introduction

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 INTRODUCTION 55

Scope
The coffee industry will see many changes in
Coffee 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
Specialist Coffee and Tea Third Wave gives way to the Fourth and
Retail Coffee Retail RTD Coffee possibly even Fifth waves. Emerging markets
Shop Foodservice Sales
like Brazil and China will become ever-more
USD95.4 bn USD22.4 bn
USD84.0 bn important and new categories will emerge
that challenge our notions of what “coffee”
even is.

This strategy report focuses on industry trends in beverages.

Unless otherwise noted, all values expressed in this report are retail/off-trade in US dollar
(USD) terms using a fixed exchange rate (2021). Disclaimer
Much of the information in this briefing is of a
2021 figures are based on part-year estimates. statistical nature and, while every attempt has
been made to ensure accuracy and reliability,
All forecast data is expressed in constant 2021 price terms; inflationary effects are discounted. Euromonitor International cannot be held
Conversely, all historic data is expressed in current price terms unless otherwise noted; responsible for omissions or errors.
inflationary effects are taken into account. Figures in tables and analyses are calculated
from unrounded data and may not sum. Analyses
Euromonitor Hot Drinks research publication pre-dates the war in Ukraine and therefore all found in the briefings may not totally reflect the
estimates should be understood to not include the impact of the conflict. companies’ opinions, reader discretion is advised.

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 INTRODUCTION 66

The future of coffee: Five key takeaways

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

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

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

Energy will remain the core of functional coffee in the future, but this demand will splinter into
Functional products must
many directions, from ultra-caffeination to mitigated energy. This will occur against a backdrop
reckon with an anxious
of spiking anxiety rates and sleep problems worldwide, which have curiously enough not yet
world
led to a noticeable anti-caffeine backlash.
Many of the most exciting new coffee products of the future will be hard to categorise
Category boundaries are according to traditional understandings. Close partnerships in the alcoholic and soft drinks
collapsing 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.
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 The next wave(s) of coffee

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 THE NEXT WAVE(S) OF COFFEE 88

The wave model of coffee: Advantages and limitations

The evolution of coffee has often been understood through the “wave model”. As is generally agreed,
the First Wave was the rise of at-home coffee after World War II when brands such as Nescafé and
Maxwell House rose to prominence. For the Second Wave, the key location shifted to the coffee shop,
specifically Starbucks and those like it. This was associated with mass popularisation of espresso-based
drinks, as well as the idea of the coffee shop as a social gathering place (the fictional shop Central Perk First Wave
Mass brands designed for
on the TV sitcom Friends being in many ways the idealised version of the Second Wave).
at-home consumption
The Third Wave began around the turn of the millennium and was centred around independent coffee
shops that paid a greater attention to bean quality. At this point, coffee began to be more commonly
understood as more than a mass commodity (the “speciality” descriptor began to have real importance
around this time). Baristas began to become more appreciated as skilled professionals similar to
mixologists and people began to pay attention to sourcing in a way they did not before. Interest in how a Second Wave
bean reached a cup emerged as a major trend. New drink styles from a
This model is helpful to understand the macro shifts in how coffee is consumed but it suffers from many coffee shop
limitations. For one, its explanatory power is largely limited to the English-speaking world and has only a
limited link to how coffee has been consumed in the largest developing markets or even some key
developed ones (eg Italy). A country such as China could be said to be experiencing all three waves at
once, depending on what consumer group is being looked at. For another, the trends have only become
clear in retrospect, making them interesting intellectually but weakening their value as a predictive tool. Third Wave
Finally, they have applied to increasingly small amounts of the market. While Third Wave speciality Focus on quality at a
products may attract a high degree of interest from the industry, the reality is the mass First Wave specialised coffee shop
brands remain how many consumers still understand and appreciate coffee.
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 THE NEXT WAVE(S) OF COFFEE 99

The Fourth Wave: What could it look like? Does it even exist?
Because of how common discussion about the Third Wave has become, there has been an Forces eroding the importance of place
intense hunger to proclaim the Fourth Wave. Many have already, and they have come to
wildly different conclusions. For some it is about technology, others diversity, still others an
even higher quality increase over the third. Depending on who you ask, the fourth wave may Technology:
be centred around perhaps a dozen possible guiding themes. What is clear is that we will Delivery apps, robotics, vending
only be sure what the Fourth Wave was after it has happened (assuming one ever does take advances, drones, mass smart phone
place, which by no means is guaranteed). As long as that is kept in mind however, there is usage, “Internet of Things"
nothing wrong with engaging with speculation as to what the Fourth Wave might look like.
The first three waves were about place as much as they were about coffee (First-Home,
Second-Coffee Shop, Third-Independent Coffee Shop). The Fourth Wave is then most likely Portable formats:
to be about place as well. The spatial development of coffee however is going in no one
Primarily RTD, but also single-serve
direction. The trend is towards place losing its meaning. The rise of RTD, delivery options,
pour over, cold brew packets,
online ordering, e-commerce, new-styles of vending, etc, are all leading us towards a world
speciality instant
in which good coffee can be consumed anywhere.
These trends will strengthen as technologies such as drones, vending that can match
foodservice on quality, robot baristas, augmented reality, and the metaverse further Post-pandemic trends:
destabilise what place means. The ideal the industry is moving towards is one in which
Flexible work schedules, rise in app
anyone can have any kind of coffee they want as rapidly as possible anywhere they are. In
usage, focus on grab-and-go,
reality of course there are numerous logistical issues that stand in the way of that, so it
diminishing importance of human
should be thought of as a guidepost to the further evolution of coffee rather than an end
interaction
goal.
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 THE NEXT WAVE(S) OF COFFEE 10
10

Physical location will mean less with each passing year

The world of the future is one in which the smartphone is used by nearly all Consumers 15+ with ownership or regular access to a
consumers and forms the base of not only e-commerce but commerce in general. smartphone by region, 2022
This makes it possible for ordering of coffee to take place from essentially % of respondents
anywhere. Given the disruption the pandemic made to traditional working and Middle East and Africa
living patterns, the consumer increasingly could actually be essentially anywhere. Latin America
Asia Pacific
Getting the coffee to the consumer is the larger challenge. The growth of RTD has
helped this a great deal, as the cold drinks that are especially popular with younger Europe
consumers are now much more widely available. Prepared drinks are more North America
complex but here too the old spatial limitations are less important. Delivery apps 75 80 85 90 95
now work with foodservice coffee and make delivery at least in major urban areas a Source: Euromonitor Voice of the Consumer-Digital Survey
real possibility at a reasonable cost. The probability of these eventually being
automated with self-driving cars and delivery drones will further this process along. Global e-commerce sales by device 2016-2025
Retail Value RSP (USD billion)
Coffee vending is also surging. With advances in automation technology a wider
10,000
range of high-quality drinks can now be made in places a full coffee shop would be
8,000
impractical. Temporally this also expands the possibilities, as ordering can take
6,000
place at off-hours when coffee shops would not generally be open. The boundaries
4,000
between “vending” and “foodservice” will increasingly become arbitrary as the
2,000
foodservice experience is automated and branded vending increases in quality.
0
Plenty of coffee shops and cafés will firmly stick to offering a human experience in
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
the fact of automation and digitalisation but they will be the outliers in a market
that will be ever more focused with speed and customisation. Mobile Device PC

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 THE NEXT WAVE(S) OF COFFEE 11
11

What does it mean to say the Fourth Wave means good coffee anywhere?
It is important to note that physical place will not literally cease to matter in the
Brand strategy of the future Fourth Wave any more than the Third Wave means that every consumer now
devotedly looks up the origin story of their beans. What it means is that this will
be a theoretical guidepost that the industry will move towards.
The direction of progress will in the long-run bend towards making coffee
availability more seamless. Plenty of new innovations will focus on taste,
functionality, etc, but the dominant trend will be towards speed and efficiency.
Some of this is well underway already (the expansion of RTD, the uptick in digital
ordering in coffee shops), some is just starting to be (next-generation vending
At-home retail options Branded foodservice machines rolling out), and some remains largely theoretical (drone deliveries,
options metaverse integration).
In the future it will be possible to fully participate in the leading trends in coffee
without ever setting foot in a coffee shop. That is not to say that coffee shops
will not remain of paramount importance, but in an era of pick-up-only stores,
advanced branded vending machines, and flexible delivery options physically
entering an outlet will no longer be essential. Brands (in what is now a very
consolidated industry) will seek to establish a presence at all potential
Institutional (office, Delivery options consumption occasions. The idealised goal will be to be the coffee of choice
school, etc) everywhere a consumer goes. When they are not at home or in somewhere like
an office, an array of coffee shop outlets, vending machines, RTD options, and
delivery will aim to fill every possible gap.
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 THE NEXT WAVE(S) OF COFFEE 12
12

Cafés in the metaverse and the virtual third place

Arkycia Metaverse has claimed to have created the first
metaverse coffee shop. No actual coffee is served here, showing
that the metaverse has begun to detach the social and coffee
aspects of the coffee shop the Second Wave created. “Coffee
shop” could be on its way to becoming metaverse shorthand for a
relaxed place to socialise rather than somewhere one literally
obtains coffee.
For the coffee companies themselves the value of the metaverse
is murky. Starbucks has expressed interest in investigating a
“digital third space” in the metaverse and it will certainly not be
Metaverse coffee shop from the Arkycia Metaverse
the last. The reality however is that the more digital the coffee
Source: Arkycia YouTube experience becomes the less well it will be able to serve as a third
The Second and Third Wave coffee shops served a twofold purpose: space. The metaverse will be a marketing tool for the coffee
Serve coffee but also to provide a physical place to socialise. As the industry, not the next phase of coffee shop evolution.
coffee ordering aspect goes digital there is an obvious interest in seeing
if the latter function of the coffee shop can be digitalised as well. This
interest is crystallising around the metaverse. Many companies in the
food and drinks space from Wendy’s to Jose Cuervo have launched
operations in the metaverse but they are still struggling to find a
purpose. While there are some possibilities in marketing in metaverse
outlets nothing so far has begun to really re-create the third space.
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 THE NEXT WAVE(S) OF COFFEE 13
13

The human experience and the persistence of the physical third place
As much as some might long to automate the entirety of the coffee Global responses to the statement “I prefer living in the real world
shop experience, the Second and Third Waves will by no means to virtual online experiences”, 2022
simply disappear. Indeed, one of the interesting things about the % of respondents
wave model is how the waves pile on top of each other rather than
ever fully replacing the previous one. Perhaps the average Starbucks 60+
consumer in 2040 will only be interested in getting their beverage to
their exact specifications exactly when they want it, but there will
remain a large group that still values the older aspects of the coffee
45-59
shop and, above all, will still want a human experience. The world of
the next few decades will be likely an increasingly atomistic and
stressed one as more people live in ever-larger cities and live ever-
30-44
more digital lives. Yet even Generation Z reports that they in general
prefer real world experiences to digital ones. This may very well
change as the quality of digital experiences increases but it is
extremely doubtful even Generation Alpha will not have at least a 15-29
minority passionately seeking out human interaction.
The coffee shop has traditionally provided this sort of human 0 20 40 60 80 100
connection and it will never entirely stop doing so. This will Strongly agree Agree
necessarily require sacrifices on speed and will almost definitely Neither agree nor disagree Disagree
cost a great deal more but coffee shops will play an important role Strongly disagree
in providing a human space in the digital-first world of the future.
Source: Euromonitor Voice of the Consumer: Lifestyles Survey
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 THE NEXT WAVE(S) OF COFFEE 14
14

A Fifth Wave? The end of traditional supply chains

If attempting to figure out the Fourth Wave is problematic, aiming at understanding
the Fifth Wave is entering a realm of pure speculation. The Fourth Wave is most Potential features of the Fifth Wave
likely about consumption becoming detached spatially. The Fifth Wave, in turn, will
be most likely about production becoming detached spatially. The realities of
climate change, threats to the coffee plant (and arabica specifically), new
technologies, and changing global demand patterns mean that the supply chains
that have existed for centuries will be radically rethought.
The changing global climate will force the geography of production to move to some
extent even with status quo in terms of production methods. New agricultural Advanced The effects Lab-
techniques and possible genetic modification of the coffee plant however will allow agricultural of climate cultivated
cultivation to enter areas not previously possible. Perhaps more importantly, techniques change products
molecular and lab-cultivation techniques mean that coffee may not even necessarily
require farming at all in the future. Production, roasting and consumption will be
able to take place at a hyper-local level, with perhaps even all parts of the supply
chain taking place in the same location in the major consumer countries.
This process will take decades at the very least and with it will come tremendous
disruption at origin. There will not be any point at which consumers stop being Shifting of Rising Localisation
interested in premium arabica beans nor where they stop being produced, but growing prices for of supply
increasingly those will be luxury items (and priced accordingly). Regardless of areas arabica chains
whether it eventually gains the title of “The Fifth Wave”, this radical re-thinking of
supply will be a defining feature of coffee in the decades ahead.
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 Supply chains and meeting future demand

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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 16
16

Inflation is temporary but supply challenges are not

The current wave of inflation that is hitting the globe has its immediate Annual rate of inflation, 2019-2026
causes: COVID-19-related logistical back-ups, the war in Ukraine and trillions %
in government spending in pandemic relief. With central banks tightening 8
interest rates and recession likely to eventually cause a sustained fall in global
demand, this inflation wave should be largely passed within a few years. 7

That does not, however, mean that the question of supply will cease to be of
6
primary importance for the coffee industry. The long-term challenge is
twofold, and neither component has been seriously affected by the pandemic
5
nor related issues in the last few years: Climate change is threatening a huge
swath of growing areas in the Coffee Belt and global demand for coffee
4
continues to increase every year. These two trends mean that regardless of
the macroeconomic situation, prices for coffee should continue to rise
3
consistently.
That is all assuming that no additional larger geopolitical or macroeconomic 2
issues arise, which the last few years have proven is hardly a safe assumption
to make. In an era of climate change and the breakdown of the post-Cold War 1
geopolitical order it should be expected that additional shocks such as COVID-
19 or the war in Ukraine will take place. These will take place on top of a 0
supply situation that is already challenged, ensuring that while this particular 2019 2020 2021 2022 2023 2024 2025 2026
wave of supply chain challenges will soon pass, they will hardly be the last.
Developed Countries Emerging and Developing Countries

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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 17
17

The steady rise in global demand raises serious questions about future sourcing
Retail plus foodservice coffee volume sales worldwide, 2007-2026
Tonnes

10,000,000 6%
8,000,000 4%
6,000,000 2%
4,000,000 0%
2,000,000 -2%
0 -4%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Retail+Foodservice Volumes Growth %

Over the span of the past decade, global coffee demand has risen fairly consistently around 2-3% each year, with the only major exception
being during the pandemic. Assuming a conservative 2% growth rate a year that means global coffee demand in 2040 will be about 50%
higher than it is today. Even with existing growing areas holding constant, meeting this demand would be a challenge, particularly given that
much of this demand is coming specifically for high-quality arabica beans as premiumisation trends strengthen worldwide. With climate
change however, there is no easy solution as to how this demand can possibly be met.
There will, indeed, be no one solution. Meeting this global demand can be done but it will require a coffee industry that looks different than
it does today. 100% arabica will become something of a luxury item, with shortages and strong demand combining to raise prices
significantly. Meanwhile, robusta, new cultivated strains, “molecular” coffee, and lab-cultivated products will all pitch in to cover demand
gaps. Everyone who wants a cup of coffee globally in 2050 will be able to have one, but where that cup comes from is going to look
significantly different in many cases than it does today.
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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 18
18

Breeding of new strains of coffee will be the first choice for the industry
Very few are eager to switch from beans from the coffee plant towards beanless or
molecular brews, so the option of first resort will clearly be to improve the
resiliency of the coffee plant itself to prepare it for climate change. The core
challenge is that the arabica bean that is the basis for essentially all speciality
coffee in the world today will find itself under immense pressure. Attempts are
underway to improve the resiliency of arabica but it has so far proven fairly difficult
to adapt to changing climatic conditions. One possibility is simply increased usage
of robusta, a more bitter but also more resilient plant. That will be fine for more
functional coffees but it is unlikely to appease aficionados used to the taste of
arabica.
One potential alternative is commercial scale use of stenophylla, a bean that fell
out of cultivation a century ago but has recently been rediscovered. In blind taste
tests stenophylla has been able to compete against arabica. More importantly, it is
better able to handle hot climates, allowing it to be cultivated in areas where
arabica may become impractical in the future. In fact, there is evidence that it is
even more resilient than robusta. Even absent the threat of climate change,
monocultures expose coffee to threats such as coffee rust. Diversifying the genetic
base of the coffee industry will be a critical portion of building future resilience.

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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 19
19

“Beanless coffee”: Plant-based without the halo

The plant-based food revolution has begun to make its presence felt in coffee, with Atomo’s
“beanless” coffee being the first but certainly not the last of a new wave of coffee analogues
using upcycled ingredients. Taking their cues from the plant-based meat category, these
brands talk up their sustainability credentials, focusing on the deforestation, water usage and
other environmental harms associated with coffee production. Like plant-based meat, they
contain no genetic trace of what they are imitating, but otherwise try to get as close as
possible in taste. That does not mean that these coffee analogues will follow the path of meat
analogues such as Impossible or Beyond.
The main challenge is the lack of the plant-based “health halo”. Consumers associate plant-
based diets with a healthier lifestyle and therefore assume (correctly in some cases,
incorrectly in others) that plant-based meats are better options than animal-based meat. In
coffee, however, the evidence is increasingly strong that regular consumption leads to
positive health outcomes. Beanless coffee is therefore deprived of plant-based meat’s key
selling point. There is also no animal rights argument to support switching from coffee to a
beanless analogue. There is instead an entirely new ethical question, namely, how
responsible it is to reduce demand at origin given how seriously reduced prices would have a
detrimental effect on coffee farmers.
This all means that there will be limited switchover to beanless coffee analogues by
consumers who have access to regular coffee. That does not mean that these products do not
have a long-term future however. What it means is that the value of these products is a part Atomo’s Oat Milk Latte RTD product, one of the first
beanless coffee analogues available to consumers
of the mix of options to make up for arabica production shortfalls. Source: Atomo
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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 20
20

Lab-cultivation will be the real key to filling future demand gaps

In the long term the real challenge for beanless coffee may not be against regular Do you look for the claim “Does not contain GMO
coffee at all but against lab-cultivation, which will offer a similar ability to produce ingredients” on food or drink labels?, 2022
more sustainable options with less sacrifice on the part of consumers. Lab- Age group
cultivated brews are genetically the same as coffee but are synthesised in a lab
rather than being taken from a coffee plant. Again, the template here is the meat
60+
industry, where lab-cultivated products are already on the market in Singapore and
are seeking approval elsewhere. In 2021, scientists in Finland claimed to have
created the first lab-cultivated cup of coffee. The first company planning to bring a
product to market, Paris-based Stem, is also based in Europe, suggesting that these
45-59
products will first appear on the European market around the middle of this
decade. Coffee is much easier to make in a lab than meat in a technical sense, so
while it starts behind lab-grown meat by several years it could establish a real
presence at retail first. Stem, for example, claims its growth media is currently 30-44
EUR10/litre and falling, compared to the hundreds that the bovine equivalent costs.
The legal challenge from the coffee industry will doubtless be intense once these
products hit the market. Consumers will be the greatest challenge however, as this
is in many ways a reversal of the Third Wave; people will need to think of coffee as a 15-29
commodity again rather than as a unique product with terroir and a bean-to-cup
story. Those able to pay for arabica beans will turn up their noses at this
0 20 40 60 80 100
“Frankencoffee” but not everyone will be able to do that. Younger generations will
be especially receptive, as they are less concerned than older ones with genetic Yes No
modification. Source: Euromonitor Voice of the Consumer: Lifestyles Survey
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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 21
21

Dairy alternatives are also very much a part of the shift towards new sourcing
As coffee seeks alternative sources of supply, so too will the dairy
products that are an integral part of coffee consumption. Dairy is
consumed alongside coffee in much of the world and is especially Wave 1: Soy-based

The development of dairy alternatives

important in Asia and North America, where the majority of coffee is Alternatives are relatively uncommon. The
taken with milk or a creamer. This means that for coffee brands based lactose intolerant are the key target group
in these areas, their dairy usage is likely their biggest roadblock to
carbon neutrality (a sustainability audit conducted by Starbucks
revealed exactly this in 2020). Wave 2: Diversified plant bases
The industry then will need to shift away from dairy. Non-dairy Oat, almond etc. Flexitarians enter the
alternatives are currently available and many, notably oat, are growing category; sustainability becomes important
quite strongly. The transformation of the dairy sector is in many ways
only beginning however, and coffee will be closely tied to future
developments. The next key wave will be blended plant milks such as Wave 3: Blended plant bases
Nestlé’s Wunda or Danone’s Nextmilk, aiming to follow the path of Mimicking taste of dairy is priority, specific
plant-based meat and focus on re-creating taste and texture through a plant base de-emphasised
number of plant ingredients rather than a single dominant one. These
products are already on the market and more will soon follow. In the
longer term, it will be cultivated dairy from animal proteins that will Wave 4: Animal-free
become the key growth segment. These will likely reach mainstream Dairy proteins from lab cultivation and
status even faster than lab-grown coffee because they are not only able fermentation
to leverage sustainability but also create lactose-free products and
appeal to vegetarians.
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 SUPPLY CHAINS AND MEETING FUTURE DEMAND 22
22

Conclusion: The Leopard Principle and the future of coffee supply

The classic Italian novel The Leopard contains the famous line, “If we want everything to remain the same, everything will have to change.”
This encapsulates nicely the future of the coffee industry. In order to do what it wants on the demand side (encourage premiumisation,
launch new products, find new consumption occasions, etc), the industry will have to radically revamp how it operates on the supply side to
deal with the twin challenges of climate change and rising global demand.
No single solution will be enough to solve all the industry’s supply challenges. What is instead likely is a variety of different approaches
favoured by different producers and consumers. For some, authenticity will be paramount and they will be fully prepared to pay for
increasingly scarce speciality arabica beans at whatever price they have to. For others, functionality is what they need and a robusta-heavy
mix will be perfectly fine to start their day. Others will be more adventurous and willing to integrate hybrid strains, lab-cultivated, or
molecular options. The coffee shelf in grocery stores of the future will likely have all of these together, somewhat similar to the dairy aisle
today that has milks of different animals, plants and soon lab fermentation processes co-existing.

Current sources New sources of

of supply supply
▪ Arabica Future coffee • New beans
▪ Robusta • (eg Stenophylla)
▪ Historical supplies • Upcycled
alternatives (eg beanless
Chicory) • Lab-cultivated

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 Key global growth opportunities

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 KEY GLOBAL GROWTH OPPORTUNITIES 24
24

What are the most important global opportunities?

No country in the world is more important to coffee than Brazil, the single largest producer,
consumer and source of future demand growth. The strong Brazilian preference for fresh over
Fresh in Latin America
instant makes this the key growth segment, although there is also considerable opportunity in
fresh in much of Latin America, including Mexico, Argentina and Guatemala.

The cold revolution is globally important but in no other region is it quite as important as in
North America. Cold beverages dominate coffee shops, which has combined with other trends
Cold in North America
such as rising demand for caffeine to supercharge the RTD segment and turn it into not only
the core of North American growth but a top growth opportunity globally.

Over three quarters of all new coffee shops expected to open in the next five years are
expected to open in Asia, with China alone accounting for 43% of the global total. The big
Coffee shops in Asia
global players are very interested but local chains are becoming more important and the
struggle between the two will be a key feature of the Chinese market in the coming years.

With standard ground and instant both in decline, pods represent the strong majority of growth
in the mature markets of Western Europe. Traditionally a strong performer in times of
Pods in Europe
recession because of their positioning as an affordable alternative to going out for coffee, they
should do quite well even if looming energy crisis tips Europe into a serious recession.
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 KEY GLOBAL GROWTH OPPORTUNITIES 25
25

The growth in coffee shop spending dwarfs that of retail at a global level
Growth in foodservice value sales at specialist coffee and tea shops by region, 2021-2026
Foodservice value RSP
25,000

20,000

15,000

10,000

5,000

0
Asia Pacific North America Western Europe Middle East and Africa Latin America Eastern Europe Australasia

At a global level, growth in spending at coffee and tea shops (a channel that mostly consists of coffee-focused outlets) is projected to be
over three times that of retail coffee during the forecast period. This growth however, is highly concentrated and two markets in particular
are responsible for a remarkable 72% of total global spending growth: China and the US. This general spending pattern however is not
unusual. Many of the other major global coffee markets are also seeing more spending growth go to coffee shops. The major exceptions are
in Latin America, especially Brazil, and the café-heavy countries of Western Europe (Italy, Spain).
None of the other markets however begin to approach the two heavyweights in importance for the major global chains. Western chains
including Starbucks, Costa, Tim Hortons and Lavazza have collectively committed to thousands of new outlets in China in the next few years.
The US, however, a more mature coffee shop market, is also seeing plenty of attention from the global chains. Costa, still generally
unfamiliar to Americans, is making a major push into the US market and Starbucks is increasing its store count in what is already a saturated
market in order to add more drive-through capacity.
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 KEY GLOBAL GROWTH OPPORTUNITIES 26
26

The key categories for growth in some areas are major liabilities in others
Retail value sales of coffee by category and region, 2021-2026
Retail value RSP (USD million)
4,000

3,000

2,000

1,000

-1,000
North America Middle East and Africa Latin America Asia Pacific Western Europe Eastern Europe Australasia

Fresh Ground Pods Standard Fresh Ground RTD Fresh Beans Instant

North America is the top growth region at retail overall, powered by the explosive RTD segment. Nowhere else however is RTD playing such
an important role. Indeed, a key aspect of growth in the coffee industry is that nearly every region has a different segment leading it
forwards. Only Asia Pacific has relatively balanced growth among multiple categories, a sign that Asia as a region encompasses countries at
very different levels of market maturity when it comes to coffee more than anything else.
Instant is a particularly interesting category because its role shifts tremendously depending on the region in question. In developed
countries, it is stagnant and even recent premiumisation attempts have done little to turn things around. By contrast, in the Middle East and
Africa, it is the single most important growth category, with sizeable prospects also existing in much of Asia and Latin America.
Understanding why such diversity exists among growth patterns requires first understanding what drives coffee demand growth
© Euromonitor International
 KEY GLOBAL GROWTH OPPORTUNITIES 27
27

The four types of coffee growth markets

GDP-led Premiumisation-led
Markets in which continued personal income growth is the key to These are markets in developed countries where volume growth has
coffee growth are the ones that will be most important to the future largely stalled out because of high per capita consumption and slow
of coffee. China is the most significant country in this group, but it is population growth. Instant and standard ground struggle but growth
also inclusive of other major developing markets such as India, is still possible through consumer switchover to pods, speciality
Indonesia and Russia. Consumers in these markets are eager to get products and RTDs. The US is the key market here, along with the
their share of global coffee culture, and coffee shop growth is larger Western Europe markets such as France and Germany and
especially strong here. However, they are also highly exposed to Asian markets such as Japan. These markets will be especially
macroeconomic shocks which can send consumers trading down or challenged by high inflation, as consumers trading down at a mass
switching back to tea. scale would send their markets into negative territory.

Population-led Lifestyle-led
Markets where population growth is the key to coffee growth are Not all markets fit neatly into one of these brackets. The remaining
seeing both rising volume and value demand. These are generally markets are defined by a more amorphous set of trends, defined
found in developing countries in Asia, Africa or Latin America, above all by powerful cultural or lifestyle factors. The most
although there are also some high-immigration developed countries important market here is Brazil, whose growth fits neatly into none
such as Australia or Israel that fit into this category. There is trade- of the other three categories. The traditionally Turkish-style coffee-
up happening to higher-value categories such as pods but the larger drinking markets also generally fall here, as their integration of
trend is coming from standard ground and instant increasing in globalised coffee trends into traditional patterns creates unusual
volume thanks primarily to rising numbers of people of coffee- patterns not seen elsewhere. These markets are hard to generalise
drinking age. These are the most stable markets in terms of growth. about, as by their very nature they are dependent on local factors.
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 KEY GLOBAL GROWTH OPPORTUNITIES 28
28

Brazil’s size and category mix makes it uniquely important to global coffee
Brazil is widely known to be the largest producer and exporter of Forecast retail value growth in Brazil, 2021-2026
coffee in the world. Less appreciated is that it is also the world’s Retail value RSP (USD million)
largest consumer of coffee in volume terms, a position that it 1,000 7
wrested from the US in 2014. Unlike most of the other largest 900
coffee markets, Brazil still has a growing population and a relatively 6
low degree of market maturity. This combination of market size and 800
remaining potential makes Brazil unique.
700 5
This means essentially all of the world’s key growth trends are
happening in different segments of the Brazilian market. Particularly 600
4
interesting that it is the only developing country to be one of the 10
500

%
largest pod markets and one of only two in the top 20. Pods are
3
very expensive relative to median income in Brazil but it is a country 400
with a sizeable upper class as well as one that places great
importance on coffee as a spending priority. 300 2

Most growth however, will come from standard ground, coming 200
from both Brazil’s growing population as well trading up where 1
100
possible. This demand should stay relatively constant, as it has
continued to rise reliably in the past decades even as Brazil 0 0
navigated through numerous political and economic crises. There Standard Fresh Ground Instant Fresh Beans RTD
are few countries where coffee demand is quite so impervious to Fresh Ground Pods
external forces as Brazil. Absolute growth CAGR

© Euromonitor International
 KEY GLOBAL GROWTH OPPORTUNITIES 29
29

The US is the epicentre of the global cold revolution

While the growth of cold coffee is a global trend, it is the US where US RTD coffee retail sales by subcategory, 2011-2021
activity is the most intense. Starbucks has announced that three Retail value RSP (USD million)
quarters of its US beverage sales are now in cold and many other 6,000
chains are seeing levels nearly that high. Young Americans are now
cold-first when it comes to coffee in a way that has not been true of 5,000
other generations. This has triggered a wave of cold innovation,
particularly in the RTD field. A category once comprised mostly of
highly sugary drinks such as the Frappuccino now includes hybrid 4,000
energy drinks, cold brews, nitros and even an emergent alcoholic
“hard coffee” space. This constant reinvention has kept US RTD coffee
3,000
one of the most important growth segments globally and allowed it
to largely stave off category maturity.
The cold trends here, especially cold brew, are also filtering out 2,000
elsewhere. Many new launches in Europe and Asia are clear attempts
to create coffee shop-style beverages in an RTD form (as the US 1,000
segment has traditionally tried to do) rather than the outgrowths of
the dairy category or inexpensive sources of energy that they have
been in the past. Future RTD growth will therefore increasingly follow 0
in the wake of coffee shops turning their focus to cold beverages. This 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
will be most felt in countries where coffee cultures are less Standard Sweet Energy Hybrid Cold Brew (excl. nitro)
historically rooted such as China or the UK and receptivity to new
Nitro Hard Coffee
global coffee styles is therefore higher.
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 KEY GLOBAL GROWTH OPPORTUNITIES 30
30

The untapped potential of China makes it a focal point for the future
No country matters more to the future of coffee shops, and maybe for coffee overall, Foodservice sales at specialist coffee and tea
than China. Roughly 20,000 outlets are expected to open in the next five years, a retailers in China, 2016-2021
little short of half of the global total. The major global brands, including Starbucks, Foodservice value RSP (USD million)
Costa and Lavazza, have all made it a centrepiece of their future growth strategies. In 16,000
the short term, this has been a major problem given the scale of lockdowns in
14,000
pursuit of “Zero COVID” policies. Longer term, the real challenge is that domestic
chains have begun to counter-attack effectively against the foreign chains. Luckin,
12,000
once essentially left for dead after an accounting scandal, has come roaring back and
now claims to have more outlets than Starbucks, and is now joined by its first 10,000
serious domestic peer competitor in the form of the rapidly-expanding Manner.
Despite all of this, Chinese consumption remains extremely low by global standards. 8,000

If mainland China was to reach half of the per capita consumption of Taiwan it would
6,000
be the third largest coffee market in the world behind the US and Brazil. The scale of
this potential is found nowhere else. The key question surrounding the Chinese 4,000
market may be geopolitical. The expulsion of Russia from Western economic
systems after the invasion of Ukraine raises an obvious question as to what would 2,000
happen in the event of a war over Taiwan, which Chinese leadership has pledged to
reunite with the mainland no later than 2049. Coffee demand is likely too 0
entrenched at this point to be long-term jeopardised by the threat of conflict, but 2016 2017 2018 2019 2020 2021
there is a real chance that the Western companies who have their hopes set on Starbucks HEYTEA Luckin NAYUKI
China may eventually face at best a nationalist backlash and at worst needing to
Costa Pacific Tim Hortons Other
cease operations entirely the way they did in Russia.
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 KEY GLOBAL GROWTH OPPORTUNITIES 31
31

The pods category continues to grow but is staring down market maturity in Europe
In Germany alone among major global coffee markets beans are now Fresh ground coffee pods retail value growth, 2021-2026
the leading growth format. This is particularly interesting because Retail value RSP (USD million)
800
they have displaced coffee pods to achieve this spot. Coffee pods is a
category that faces numerous challenges, from workers returning to
700
the office to sustainability concerns, yet in most places this has done
little to slow it down. In Western Europe as a whole pods remain by
600
far the dominant growth format and in the four largest non-German
European markets they are expected to grow by at least USD200 500
million in the years ahead.
The key difference in Germany is the level of market maturity. 400
Elsewhere in Central Europe and Scandinavia the pods category is
similarly troubled. Not coincidentally, these were the first countries in 300
the world to adopt pods on a mass scale. They may be a bellwether
for the rest of the region and, someday, the world. There is no 200
immanent danger of Europe as a whole turning against pods
(particularly as recession looms, given how well they have done in 100

past European recessions and how well private label has established
0
itself in this category). For the medium term, pods remain the key
growth format. In the longer term however more countries will look
-100
like Germany and the quality expectations that pods helped to create France Italy Switzerland United Spain Other
will lead people towards more time-intensive and/or expensive Kingdom Western
methods to prepare their coffee at home. Europe
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 KEY GLOBAL GROWTH OPPORTUNITIES 32
32

Preparing for the next “black swan” event

COVID-19 and the war in Ukraine highlighted how vulnerable the global coffee Least exposed markets to future coffee demand shocks
industry is to events outside of its control. A key challenge for the future of 5 Year Elasticity
demand is that at its heart is something fundamentally unknowable: What is Finland
the next “black swan” event that will disrupt the industry? The one certainty Sweden
there is in an uncertain world is that in the coming decades there will be
Denmark
external shocks that will have massive effects upon the coffee industry.
Norway
While it may be impossible to know what those will be, it is possible to see
which markets will be more resilient to them. Using Euromonitor’s Industry Japan
Forecasting Model, it is possible to see the historic relationships between Brazil
coffee demand as well as GDP and product prices. Analysing these elasticities
Colombia
gives a good sense as to what countries will cut back their coffee demand in
times of trouble and which ones will not. Poland

The most resilient are unsurprisingly found in Northern Europe, where per Taiwan
capita rates of consumption are extremely high and per capita incomes high Romania
enough even serious economic crisis would not force many to change their
Turkey
coffee habits. Others are places where coffee consumption is culturally
important and where macroeconomic shocks have been common in recent South Korea
years, acting as something of an inoculation against future trouble (Brazil, 0.0 0.2 0.4 0.6 0.8 1.0
Turkey). The most vulnerable countries interestingly tend to be in Western
GDP Elasticity Price Elasticity
Europe because consumers there are less used to macroeconomic shocks and
therefore tend to react more strongly when they do happen. Source: Euromonitor Hot Drinks Forecast Model. Retail volume terms
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 KEY GLOBAL GROWTH OPPORTUNITIES 33
33

Map: Exposure risk to future crisis

Exposure to
demand shocks
<1.0 (Least exposed)
1.0-1.2
1.2-1.4
1.4-1.6
>1.6 (Most exposed)
Note: Absolute value of 5-year price and GDP
elasticities from Euromonitor Hot Drinks Forecast
Model. Retail only.
© Euromonitor International
 The big four and the consolidated industry

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 THE BIG FOUR AND THE CONSOLIDATED INDUSTRY 35
35

The great consolidation wave has drawn to a close

Since JAB Holding’s decision to enter into the coffee industry in force Global retail coffee sales by company, 2021
roughly a decade ago, coffee has undergone a massive wave of
consolidation. JAB engineered the creation of what eventually became Nestlé/Starbucks

JDE Peet’s and Keurig Dr Pepper, which are now the world’s second and
ninth largest coffee companies at retail, respectively, as well as Panera JAB-affiliated

Brands, which has a major presence in foodservice coffee.

Lavazza
Faced with this growing threat, the other global coffee players embarked
on consolidation waves of their own. Nestlé struck a deal with Starbucks Other
to form the Global Coffee Alliance in addition to absorbing some smaller
brands such as Blue Bottle. Lavazza doubled in size through the
acquisition of Carte Noire, Merrild, Kicking Horse and Mars’s office coffee
business, and Coca-Cola bought Costa, making the market leader in global Global specialist coffee and tea shop sales by company, 2021
RTD a major force in chained coffee shops as well.
Starbucks/Nestlé
Now however, things have slowed significantly. The major players have
their alliances formed and their presence in a wide range of categories
Coca-Cola
and geographies established. JAB itself has shifted its focus to pet care,
while the rest busy themselves with fully taking advantage of their new
JAB-affiliated
partnerships. The consolidation wave of the 2010s was a significant but
temporary phenomenon and the coming years should see very little M&A
Others
compared to the turbulent decade before.

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 THE BIG FOUR AND THE CONSOLIDATED INDUSTRY 36
36

Four blocs have formed that are in the commanding position in global coffee

Nestlé/Starbucks JAB Holdings

Nestlé is the dominant global force in instant and pod coffee JDE Peet’s is the world’s leader in retail fresh coffee volumes
Starbucks is the leader in chained coffee shops by a wide margin Keurig Dr Pepper is dominant in pods in North America and has
footholds in other categories
Their alliance in retail roast and ground expands the reach of both
into new areas Chains such as Caribou and Espresso House have a major presence
in foodservice
Both also have major roles in RTD, although with restricted
cooperation because of obligations to other partners JDE has partnerships with Illy to distribute pods and JM Smucker to
jointly develop liquid coffee products, although neither is fully
within the JAB umbrella

The four key power blocs of

global coffee

Coca-Cola
Lavazza
The world’s leading player in RTD (mainly in Japan but increasingly
elsewhere as well) The smallest of the major blocs, but the one that has grown at the
fastest pace
Since the Costa deal, also now a leading player in foodservice
The Carte Noire, Kicking Horse and Mars deals have massively
Small but growing interests in fresh coffee in retail and institutional expanded Lavazza’s geographic reach and category presence
channels
Alliance with PepsiCo for RTD production in Europe
Hybrid products, such as Coke+Coffee, are also an interest

© Euromonitor International
 THE BIG FOUR AND THE CONSOLIDATED INDUSTRY 37
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Forces other than M&A continue to drive consolidation in the coffee industry

The growth of pods Consolidation of the coffee shop segment Blurring of category lines
Pods is the most consolidated of all major The four key blocs control over half of the The growth of RTD products and (to a much
coffee segments because of the closed global market for coffee shops. This is lesser extent) alcoholic hard coffee has
nature of systems. Nespresso, Dolce Gusto, unlikely to change, as they have plans encouraged alliances with other large drinks
Keurig or Lavazza-branded products collectively for thousands of new outlets in companies. Launching coffee products in
represent the overwhelmingly dominant the coming years. The growth of remote- this space needs a distribution network and
share of machine sales globally. While there ordering, digital-first models over striking an alliance with a major existing
has been a loosening of intellectual community-style third place locations will player is an easy way to do this. Once these
protections on the major systems, private further give the edge to those who have deals are formed it becomes harder for new
label growth has slowed after years of rapid well-developed apps and budgets for players to break in and win significant
share gain, suggesting a ceiling has been hit advanced technology. The brand names of share. RTD and hard coffee are therefore
on the number of consumers willing to coffee shops are also powerful at retail, consolidated segments with significant
switch away from brand names. Most ensuring that a growing presence at barriers to entry and their continued growth
growth accrues to branded products and foodservice will also translate into a will further benefit a relatively smaller
therefore the continued growth of pod growing presence in the at-home segment number of companies. Hybrid products also
machines will further increase the power of as well. The biggest possible disruptor to favour existing companies which have
the Big Four. Barriers to entry in the this consolidation is China, where domestic recogniseable brand names that can be
category are high and it is very unlikely any chains are starting to challenge the global leveraged to get consumers to try otherwise
major new competitor will arise in pods in players for the most important market in unfamiliar products.
the near future. terms of global coffee shop growth.

© Euromonitor International
 THE BIG FOUR AND THE CONSOLIDATED INDUSTRY 38
38

The future will be shaped by a relatively small number of companies

70 of the 99 Euromonitor-researched markets are led by either Nestlé or Number of Euromonitor-researched markets in which select
JDE at retail and most of the rest have one if not both in the top five companies have a leading market share in retail coffee, 2021
brands. This reflects what has happened in other segments of coffee as Number of markets
well - a Nestlé or Starbucks product leads in 32 of the 72 sizeable RTD 120
coffee markets and Starbucks leads 30 of 53 measured specialist coffee
shops markets. The power of previously discussed consolidating forces 100
means that the power of the Big Four will likely only continue to grow in
the coming years.
80
This means that what “good coffee” looks like globally will have a relatively
uniform nature. The trendy coffee beverage sipped in coffee shops in
London and New York in 2030 will likely be largely the same one sipped in 60
Beijing and Istanbul. When these consumers go to their local grocery
stores, a retail version of that drink with familiar branding will be available
to them all. The consolidation of the industry is not the only homogenising 40
force in global coffee (the role of social media, for example, spreads trends
globally faster than was once possible) but it is a very important one. 20
For trends of the future to hit mainstream status then at least one of the
four key power blocs will have to throw its weight behind it. The
0
mainstream acceptance of lab-cultivated coffee, for example, can only be Nestlé JDE Peet's Lavazza
said to really have taken place once at least one of these four decides to
roll a product out at scale. First Second Top five

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39

Functionality and caffeine in an anxious world

© Euromonitor International
 FUNCTIONALITY AND CAFFEINE IN AN ANXIOUS WORLD 40
40

An anxious world demands ever-larger amounts of energy

In the 2022 edition of Euromonitor’s Health and Nutrition Survey, concerns Retail value sales of reduced-caffeine beverages globally,
about stress and anxiety ranked second behind only vision issues as a top global 2016-2026
health concern. This is nothing new (it was also second in the 2019 edition) but % growth
it does seem to be intensifying worldwide. The pandemic, inflation, geopolitical 4

threats and “eco-anxiety” are all piling onto consumers one after another, 3
leading to a spike in global stress that is unlikely to dissipate anytime soon. 2
This places coffee in a difficult position long term. How can a beverage that 1
triggers anxiety and sleeplessness perform well in such a world? The answer is
0
actually quite easily thanks to what can be referred to as The Caffeine Paradox.
-1
Concern with stress, anxiety and sleeplessness may be rising but this is not
-2
corresponding to an increase in sales of decaffeinated products. Even as 42% of
consumers globally report in Euromonitor surveys that they are trying to reduce -3
or quit caffeine consumption, sales of decaffeinated coffee are forecast to see a -4
CAGR of just 0.1% over 2021-2026. This anaemic growth is not because -5
consumers are switching to other categories, as sales of reduced caffeine teas
-6
and carbonates are performing even worse. It is because consumers are looking
for ever-higher levels of caffeine despite their concerns with sleep and anxiety.
What stresses people out above all is the number of things they feel they need
to get done. Caffeine is their indispensable ally in getting those things done. This
is the paradox; the more stressed consumers become, the more they reach for Beverages overall Coffee
caffeine even knowing that it is making them more anxious. Tea Cola Carbonates

© Euromonitor International
 FUNCTIONALITY AND CAFFEINE IN AN ANXIOUS WORLD 41
41

Where is the ceiling on caffeine consumption?

The pace of modern life is unlikely to slacken anytime soon, making
it equally unlikely that demand for caffeine will soften even as Functional
anxiety and stress rates continue to rise. There are some hard limits energising coffee
however in both a biological and legislative sense to consider. Most
public health bodies around the world recommend no more than
400mg/day of caffeine consumption for a healthy adult. That is
Moderated-energy
several cups of coffee generally but even one or two modern RTD or High-energy coffee
foodservice cold options can be enough to go over. Historically,
coffee
governments only step in to regulate caffeine if minors are
endangered (South Korea banning coffee in schools being one
example). However, levels of caffeine in beverages have also never
been this high, so legislation has to be considered a real possibility Protein Cannabis
in the future. It should be expected however, that legislation
protecting minors will remain the priority.
A splintering is therefore likely to take place in the functional coffee
segment. One branch (concentrated especially in the RTD space but High caffeine L-theanine
in fresh and instant as well) will move towards increasingly higher
amounts of caffeine. Additional energising ingredients will be added
in some cases, such as protein or ginseng, but caffeine will be the
core of the offer. The other brand will push towards mitigation, with
the goal of providing a more moderate energy boost without a Energy drink mixes Adaptogens
crash.
© Euromonitor International
 FUNCTIONALITY AND CAFFEINE IN AN ANXIOUS WORLD 42
42

Nootropics: The next great coffee functionality

Related to the stress and anxiety of the pandemic era specifically Top-reported short-term future health concerns among adults 15+
and the modern era more generally, there are increasing globally, 2022
concerns about mental performance across a wide variety of % of respondents
demographics. Stress and anxiety are the top consumer 30
concerns of the moment, but when Euromonitor surveys shift 25
their time window longer memory issues sharply jump in 20
importance to become the most-cited long-term health concern
among consumers. The ageing of the Baby Boomers will make 15
this need especially acute but there is plenty of interest in 10
improved cognition for those who do not have a specific health Upper digestive Heart issues Memory issues Joint and muscle Lower digestive
issues pain issues
concern as well, from students looking for help studying to video
gamers seeking an edge.
Top-reported long-term future health concerns among adults 15+
Nootropics, or cognition-enhancing products, are as a result globally, 2022
gaining traction fast. The largest stumbling bloc they have is % of respondents
consumer concern about safety and effectiveness, given that 30
early nootropic enthusiasts have given the segment an 25
association with risky experimentation. This presents an
opportunity for coffee specifically, as caffeine is already used for 20
cognitive enhancement and thus is already the world’s largest 15
nootropic (even if it is rarely referred to as such). The idea of a 10
brain-boosting coffee is therefore less of a hard sell for Memory issues Heart issues Mobility Diabetes Incontinence
consumers compared to other possible categories. problems
© Euromonitor International
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43

Categories of the future

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 CATEGORIES OF THE FUTURE 44
44

“Coffee” will become a harder category to define

The dominant trend in new products in the future will be that they New and emergent coffee categories
are harder to slot into traditional understandings of the coffee
category. In part, this will be because many of them literally will not
Cold
be coffee, given beanless, lab-cultivated and various other
sustainability-minded products such as cascaras (whether they can
▪ Cold brew, nitro, “hard coffee”, coffee liqueurs
be legally referred to as “coffee” will be a matter of intense interest
for the industry). The other major reason this will be the case is
because there will be increasing amounts of genre-blurring. This will Hybrid
be especially true of alcoholic and soft drinks but may also take
place to some extent with food, consumer health, or even beauty ▪ Coffee-based energy drinks, caffeinated water,
products. Growing understanding of coffee’s naturally healthy carbonates+coffee
attributes opens up a wide range of doors for where coffee can slot
in. Coffee can be a base to which other ingredients are added or it
Single-serve
can be an ingredient in itself added to something else.
Occasions will also evolve and necessitate new products to meet ▪ Compostable pods, bagged coffee, single-serve
them. Single-serve especially will evolve as pod maturity leads to a pour overs, frozen capsules
new wave of competition for these occasions. There will also be
increasing numbers of beverages whose demand will come from the
Upcycled and pseudo-coffee
effects of social media, especially TikTok. These “fashion beverages”
will rise and fall quickly but those who are able to time these
▪ Beanless, lab-cultivated, cascara
transitory beverages well will be rewarded.
© Euromonitor International
 CATEGORIES OF THE FUTURE 45
45

“+Coffee” will strain traditional category lines but be a major growth segment
As a way of illustrating the collapse of traditional boundaries, consider
Coca-Cola with Coffee, a carbonated soft drink with added coffee to both
modify the flavour as well as add caffeine. It is neither a carbonate in the
traditional sense nor an RTD coffee, yet it expands coffee drinking into
new occasions. This sort of occasion-expansion will be a key target of
what could be called the “+Coffee” category. What were once purely
carbonates occasions are now (to some extent) coffee occasions instead.
And increasing understanding of coffee as a naturally healthy energy
source as well as the growing acceptance of cold coffee means new
possibilities in the soft drinks space. Energy drinks have long had these
sort of hybrid products (Java Monster being the most significant) and now
they are creeping into carbonates, waters, juices and elsewhere. There
will likely be no category of soft drinks that will remain untouched
without at least an attempt at a hybrid coffee product, although the long-
term prospects in a category such as sports drinks are questionable.
Rather, what should be expected is the greatest success in the categories
that have been successful without adding coffee: waters and energy
drinks. Coffee as a source of clean energy is a natural value-add as both
look to boost their caffeine content in healthy ways.
Coca-Cola with Coffee
Source: The Coca-Cola Company
© Euromonitor International
 CATEGORIES OF THE FUTURE 46
46

Coffee and alcohol: A potent mix?

Like soft drinks, the alcoholic drinks industry is increasingly looking for
healthier, more natural ingredients to use in its products. This has led the
industry into, among many other places, an increased interest in alcoholic
coffee. One aspect of this has been the revival of the espresso martini
and other coffee cocktails in bar settings. It has also led to more coffee
liqueurs and pre-mixed “hard coffees” that pair RTD coffee with a malt
base.
The move towards healthier alcoholic products is an important long-term
process. It is not one though where coffee will take a leading role. One
problem the caffeine question. Most of the alcoholic coffee space is
decaffeinated but with decaf sales struggling in general this is likely to be
a turnoff with some consumers. Going full-caffeine however, limits the
number of people that will drink these products in evening social
occasions and invites regulatory scrutiny.
Even if caffeine is not an issue, there remains the larger issue of
sessionability. RTD coffee tends to be an on-the-go, functional beverage.
It also tends to be drunk only one at a time. This is not how alcohol tends
to be consumed so the buy-in for hard coffee will be much more complex La Colombe Hard Cold Brew, a joint product from Molson Coors and
than it was for similar emergent categories such as hard seltzers. It is a La Colombe
Source: La Colombe
short jump from sipping a non-alcoholic seltzer to an alcoholic one but a
rather long one from RTD to hard coffee.
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 CATEGORIES OF THE FUTURE 47
47

The maturity of the pod category will lead to a more diverse single-serve experience
The existence of instant coffee means that there has always been a
convenient single-serve option suitable for at-home consumption. The
emergence of pods has not changed that. What it has changed is the
expectation for high quality, coffee shop-style beverages available at
home. This expectation is not something that by any means needs to
stay limited to the pods category itself.
Various attempts to offer more sustainable alternatives to pods
through single-serve have been tried. These include coffee grounds in
tea bags, single-serve pour overs, and speciality-grade instant coffees.
Many of these have found market niches but none has truly disrupted
the pods category in a meaningful way. Much of the growth now is in
cold single-serve, such as cold brew packets or frozen capsules. None of
these looks likely to pull ahead, meaning the future of single-serve is
most likely a fragmented one. Pods will remain dominant but as
maturity sets in people will start to look increasingly for other options
tailored to specific needs. Someone who prefers cold might prefer a
Cometeer Frozen Coffee Capsules
frozen coffee puck, whereas someone who has more time in the Source: Cometeer
morning might opt for a single-serve pour over. What will be most
important is that “single-serve” and “pods” will no longer be used as
interchangeably as they are today. In the future, single-serve will be a
more diverse category, albeit one still dominated by pods.
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 CATEGORIES OF THE FUTURE 48
48

“Fashion” coffee will go in and out of style in ever-shrinking cycles

Some coffee drinks are purchased not primarily for their taste or their Google search interest in “Dalgona Coffee” 2019-2021
functional benefits but simply because they are trendy and the drinker wants
to look cool drinking them. This has existed in some form for years but the rise
of social media made this into a core segment of the industry. Many in
foodservice now design drinks that are designed to be short-term launches
where aesthetics come first. The important thing is for the drink to look as
good as possible for the one time most people are likely to drink it. The
Starbucks menu now usually features at least one of these drinks (eg The
Unicorn Frappuccino) and they are hardly alone.
Because these drinks can be understood as “fashion” drinks, it is important to Source: Google Trends
look at what is happening in the fashion industry. The key story of modern
fashion is the collapse of the trend cycle into increasingly small “micro-trends”
as TikTok takes over from the major designers and fashion houses as the driver
of trends. This has created a chaotic and fast-moving modern fashion scene.
Coffee too has seen this begin to take place. Dalgona coffee, for example, rose
out of nowhere to prominence for a brief period in 2020 before almost
immediately disappearing again as social media trends moved on. There will
be more Dalgonas in the future, some consciously created by brands and
some spontaneously arising from the internet. “Fashion coffee” will be an
amorphous, always-changing category, but it will be one of significance
nonetheless. The Starbucks Unicorn Frappuccino, a limited-time drink.
Source: Starbucks Stories
© Euromonitor International
THE FUTURE OF COFFEE

For Further Insight please contact

Matthew Barry
Insights Manager - Food and Beverages
matthew.barry@euromonitor.com
• https://www.linkedin.com/in/mbarry47/

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