Coffee sales up in Southeast Asia

“Build it and they will come” seems appropriate for coffee retailers in Asia. Coffee shops are usually packed with young and old professionals and are a common meeting place outside the office, or just an everyday place to chill.

Mintel’s latest report suggests the growth of the global coffee sector will be coming from Asia’s emerging markets: Indonesia, Vietnam, and the Philippines will be among the top five fastest growing coffee retail markets by volume between 2017-2021. Indonesia will grow at a compound annual growth rate (CAGR) of 11.4%, Vietnam at a rate of 9.2% and Philippines by 6.7%. The remaining two fastest growing markets include Turkey (6.8%) and Mexico (6.1%).

Currently Japan is the region’s top market, followed by Indonesia. In the global retail market by volume they rank fourth and fifth as the US leads the way accounting for (607,000 tonnes)*, Brazil (425,000 tonnes), Germany (424,000 tonnes), Japan (304,000 tonnes) and Indonesia (268,000 tonnes).

(Source: Mintel)

Jonny Forsyth, Associate Director, Mintel Food & Drink, said: “Asia has great growth potential when it comes to coffee, with consumption continuing to rise across the region. Coffee culture has surged in Asia with more and more specialty coffee houses setting up shop in countries like Japan, Singapore, and Indonesia. Big brand coffee chains are also increasing their expansion efforts in the region. Additionally, Asia’s emerging markets have led global coffee growth in years past and will continue, with Indonesia leading this charge.”

Coffee formats

When it comes to coffee formats, it seems single-serve coffee (eg pod, bags, pre-filled filters) remains lucrative in more developed markets like the US, but growth has slowed. On the flip side, growth of single-serve coffee is strong in emerging markets, especially in Asia.

Single-serve coffee trends

Asia, Latin America and Middle-East/Africa accounted for almost a quarter (23%) of total global single-serve launches, up from a 14% share in 2014, according to Mintel Global New Products Database (GNPD). In South Korea, 30% of all coffee launches in 2017 were pods, up from 20% in 2016. Meanwhile, in 2017, one in five (20%) urban Chinese coffee drinkers say they drink drip bag** coffee once a day or more, up from 3% in 2016, according to Mintel research.

“Single-serve coffee growth, though stalling globally, shows huge potential in emerging markets, with Asia being particularly promising because of a growing coffee habit among traditional tea nations like India and China, rising affluence, and rapid urbanisation. Single-serve formats, like the drip bag, are popular among Chinese coffee drinks as they have the familiarity of traditional tea bags. They are also viewed as more natural and less processed than soluble coffee. This suggests drip bags will have much more growth potential in 2018 and beyond,” continued Forsyth.

Some like it very cold

Producers are taking their cue from cold coffee drinkers, and increasing investments in chilled ready-to-drink (RTD) coffee.

According to Mintel GNPD, 19% of global new coffee launches were iced RTD in 2017; this is up from 16% in 2015 and 17% in 2016. Globally, Japan leads in RTD coffee innovation, accounting for 18% of all iced RTD coffee launches in 2017, down from 20% in 2016. The US follows, accounting for 13% of these launches in 2017, up from 10% in 2016. Mintel research shows that RTD coffee has thrived most in the US which is estimated to have posted steady growth of at least 10% annually in retail sales between 2013-2017.

The cold brew revolution is being driven by the US and gained significant retail momentum in 2017. Cold brew retail sales in the US were estimated to reach US$38 million in 2017, more than double the US$16 million the market experienced in 2016. In fact, 56% of new RTD coffee launches in the US in 2017 were cold brew, up from 38% in 2016. Furthermore, half of (51%) of US coffee drinks aged 18-34 drank cold brew whether at home or on-the-go in 2017, up from 46% in 2016.

“Global investment in chilled, RTD coffee has increased as producers target a younger coffee drinker who enjoys the format’s taste, refreshment, and indulgence. This is despite the fact that there is a current slowdown in the Japanese market which previously dominated global iced coffee innovation and sales. Cold brew is helping to premiumise the RTD category, and is proving to be better for innovation than other hot-serve formats, with manufacturers continuing to push the format’s boundaries in 2017. Cold brew is developing strongly in the US and will roll-out to more countries in the years ahead,” concluded Forsyth. - MINTEL

*Estimates

**Drip bag coffee is a hybrid of pods and instant coffee