At the beginning of the month we heard that Coca-Cola was buying the UK based Costa Coffee chain for $5Bn. While the demand for sugary soft drinks is on the decline globally, the acquisition of Costa Coffee gives Coca-Cola an immediate foothold into the growing popularity of coffee worldwide.
While Coca-Cola has not had a hot beverage till now; coffee, in the form of “Ready–to-Drink” coffee products have been crossing the aisles from the grocery section to the general beverage section in big retail stores for some time now.
This merger is just one of many between some of the world’s biggest beverage brands.
With all the heavyweights getting into coffee, how do things look for the smaller operators?
We take a fairly positive view of the situation.
First, the demand for commercial grade coffees in all markets is on the decline while the demand for specialty coffee is on the rise. In the US, Specialty coffee now makes up 55% of the market and is growing. This means, customers are better informed about their coffee and are demanding a better quality coffee experience. (The more exotic and niche, the better.)
Next, in the US and in Europe, the trend toward traceability and sustainability is becoming more entrenched in the consumer’s decision-making process. People want to know where their coffee came from and what the social and environmental impact was along its journey to their cup.
At The Coffee Collaborative we have always put ethical sourcing first because we believe the sustainability and well being of smallholder farmers is critical to our industry. Not just to meet the growing demands for good quality coffee, but also to address the pressing socio-economic conditions of farmers. We believe farmers will only be incentivised to grow great coffees at scale if they receive a fair price for their efforts.
The trends in first world coffee markets therefore seem to point to this: smaller coffee operators should focus their efforts on quality while staying on top of the issues around sustainability and transparency. Increased consumer awareness around ethical sourcing and transparent supply chains seem to be the leading indicators of where consumer sentiment is going.
The information shared in this blog is from sources believed to be reliable and is intended for information purposes only. There is no warranty, expressed or implied, as to the accuracy of information or of the views given. The information provided is not for investment or speculative use.