Economy

Asia’s thirst for coffee to boost industry

by Joey O'Gorman

Changing coffee trends, especially in Asia, should spell good news for the industry, said Mauricio Galindo, head of operations at the International Coffee Organization (ICO).

The ICO’s March conference on global coffee trends “showed the dynamism of emerging markets and economies,” Galindo told Colombia Reports. This will give a boost to the industry, which in Colombia has been suffering from low prices and a flooded market.

“Consumption trends in Asia: India, China, South Korea and Indonesia, are changing. They are organizing themselves and establishing structures for consumers, growers, buyers – imitating what we have here,” said the head of operations.

The average consumption growth in these regions is increasing by around 4% per year, said Galindo. Not only are these emerging economies seeing such huge growth, but demand from these countries will reach 50% of global coffee consumption by 2020, Ross Colbert from Rabobank told the conference.

Some 2.5 million bags are being added to global consumption each year, with around 80% of this growth in the emerging markets. Rising incomes and a growing middle class are the driving factors.

Coffee experts have targeted young Asian urban professionals as the key to success for the industry. China and India have seen a boom in coffee shops opening up, and Indonesia and Vietnam are also seeing a local growth in the cafe culture.

The consensus at the ICO conference was that young professionals are looking for the “coffee experience,” which gives status, yet is affordable.

“The attitudes towards coffee in these countries is changing. Drinking coffee is seen as a trendy, cool, western habit and it is very attractive to young people there,” said Galindo.

Interestingly growth in the instant coffee market is driven largely by tea-drinking countries mainly because people are reluctant to change their hot-drink ritual, but also because low income prevents them from buying specialized equipment for coffee-drinking.

This preference for instant coffee will likely not benefit Colombian coffee growers initially, as instant coffee is made mostly from lower quality robusta beans rather than the high-quality arabica beans grown in Colombia.

However the trend seems to be that the taste for coffee in these regions will also change in the future. In South Korea where the total number of coffee shops has gone from 1,600 in 2006 to 12,000 in 2011, a shift from instant to fresh-roasted has occurred as consumers begin to be concerned about coffee quality.

In Colombia, the fourth biggest producer of coffee worldwide, but where it is extremely difficult to find a good cup, Toma Cafe has been promoting a new dynamic in the coffee culture.

In a drive to increase the frequency of coffee consumption, representative Marcela Jaramillo said that Toma was attempting to promote drinking coffee as a traditional, yet sophisticated and modern social activity.

The group are endeavouring to introduce versatility to coffee-drinking such as iced coffees, cappuccinos and other different forms. Toma are “refreshing the image from dull and adult to young and hip, tackling health myths and concerns, improving preparation standards both in and out of home and increasing versatility,” Jaramillo said in her presentation.

Coffee consumption tends to grow in an “S” shape with very fast growth as seen in Asia, and then a flattening out, as currently evident in the United States.

According to the Wall Street Journal at around 23 gallons a year, Americans consume less than half the amount of coffee than they did 65 years ago. In mature markets the trend seems to be showing that younger generations are drinking less coffee, and are less likely to step into their parents multiple-cup-a-day habit.

The mature markets have also seen a shift from multi-serve to single-serve in-home consumption. Many commentators have claimed that the single-serve culture will negatively effect sales due to the reduction in waste, but no concrete evidence has been provided to back this up according to the ICO.

The single-serve denotes a shift in mature markets towards convenience according to the coffee experts, with gourmet coffee shops also losing ground to quick-service restaurants.

However as mature markets are flattening out, emerging economies are continuing to flourish. The first Asia Coffee Summit was held in March boasting 150 exhibitors from 10 countries, and also this month Singapore hosted the Tea and Coffee World Cup, a three-day exhibition with growers, traders and buyers.

“They are scaling up the game. We expect much more from there,” said Galindo.

Sources