The world coffee market, having negotiated disruption caused by the Covid pandemic, is poised to resume its 5% growth rate despite world economic woes, Nestlé said, highlighting the importance of emerging markets.
David Rennie, head of coffee brands at Nestlé, the world’s top coffee group, acknowledged the shake-up that the pandemic had caused to the sector, as lockdowns and changed working practices slashed custom at cafes and restaurants.
“In-home consumption saw a massive increase, strong double-digit growth… as out-of-home consumption particularly in offices and cafes took a major hit,” he said.
“But already in 2022” the market was witnessing a reversion in trade back to the likes of bars and workplaces.
‘People need coffee’
“Pre-pandemic the [overall coffee] category was growing at a reliable 5% compound annual growth rate every year” by value, Mr Rennie told investors.
“As we see the categories rebalance, we are confident that the outlook for this category is going to be at or around that 5% annual growth rate going forward.”
While world economic downturn is overshadowing many industries, coffee was “very, very resilient”, and a “category that can weather turbulent times,” he said.
“Frankly people love coffee, they need coffee, it’s a ritual, and it’s an affordable pleasure in most consumers’ days.
“It’s not something that they are going to give up even in tough times.”
‘The big driver’
Nestle valued the world coffee market as of 2021 at about SFr400bn ($420bn), comprising roughly SFr100bn retail, and SFr300bn out-of-home.
It reported cafes and bars as the biggest market segment, at SFr113bn, ahead of hotels and restaurants, on SFr97bn. Roast-and-ground is the largest at-home segment, at SFr28bn.
Growth would come in part from trends such as the “premiumisation” of at-home coffee, as consumers with flexible work contracts increase spending on their domestic blends.
However, Mr Rennie said that “the big driver for me as I think of the business over the next five to 10 years, is that roughly half of the world today drinks no coffee or very little coffee,” implying “roughly 3bn consumers for whom coffee is not a natural part of their daily beverage drinking”.
“China, India, large parts of Africa – all of these markets have huge potential as we introduce coffee as a category.”
The group reported average annual coffee consumption in these three areas at 32 cups per person, compared with more than 200 cups per person in established markets.
Big chilled
By market segment, cold coffee also represented a key growth area, with cold beverages already accounting for more than half the drinks told at Starbucks.
There is a “whole generation entering this [coffee] category through cold”.
For Nestle too, there was potential for increasing its share, from the current 15%, in the out-of-home sector which accounts for some 75% of industry business.
The company, which invented soluble coffee in 1938, claims a 22% share of the overall world coffee market, ahead of JDE Peet’s on 8% and Starbucks on 3%.
