Coffee: Devil’s Drink, Devil’s Market

            Coffee has been called a ‘devil’s drink’. It has a unique appeal deeply rooted in modern society and shows the sophistication of its clienteles. In addition, coffee is such an informative and societal drink that it can work as an indicator to manifest the level of overall economic, political and cultural development of a country in an integrated global setting. In turn, each individual societal environment conditions the potentials of that particular coffee market, which renders coffee to have a different market path in comparison to the consumer goods such as soda and hamburger.

            Because of its halo image, coffee tends to radiate unusual fascination and encourages many ventures. However, coffee can also be cold as devil to business if it doesn’t realize particularities of coffee as a consumer product and doesn’t take its societal influence seriously, especially in emerging markets.

            Although the static chart shows the potentials of the coffee market, it can not shed much light on market behaviors of a particular market and how likely it may evolve in the near future.

Country by Country on Marco Factors

1.       Mature Coffee Market: Germany and the U.S.

            The U.S. and Germany are exemplary among established coffee market. Traditional coffee market (including all traditional coffee countries) is dynamic in segments and categories, and over 70% of world coffee is consumed in these countries. One of the key features in these countries is that 80% of their coffee would be drunk in the morning, which is a critical consumer drinking habit to keep their coffee market stable.

            In grass-roots coffee movement, coffee popularization is in parallel with economic and political evolution, which is in contrast to Asian countries’ top-to-down coffee popularization. In grass-roots scenarios, the per capita coffee consumption can peak well before economic and political factors become fully ripe. It is the case of England near 400 years ago, America half century ago, and so are the cases of East European countries now. (See more details below)

2.       Top-to-down Coffee Evolvement: Japan and Korea

            Economic stagnation in Japan since 1991 didn’t stop the continuous growth in its coffee market. As a matter of fact, it is a long overdue for coffee market to grow in Japan since it passed its economic and political threshold near half century ago.

Korea’s coffee consumption growth is in parallel with its political liberalization after its economic development crossed certain threshold in the late 1970s. The older generation is always harder to pick up the new drink. It is ominously important to start the grass root coffee evolution as early as possible.

            Instant coffee and bottled coffee dominate both markets, which is a common phenomenon for most of emerging coffee markets. For that, instant coffee is less likely to develop a morning coffee drinking habit. Both coffee markets have been slowing down significantly in the past five years, which still have large room for coffee consumption growth. New categories and segments of their markets are keys for growth. In both countries, pricing is more important than its western counter-parts.

3.       Culture factors: Czech, Poland & Japan

            All three countries have similar per capita consumption although it took Japan near a century to reach the number when took Poland twenty years. One may argue that coffee itself is a western culture, which is very rightfully pointing out that the culture has strong impact on coffee market. It is a contrast between hamburger (such as McDonald’s) and coffee, when Japan has 3500 McDonald’s, Poland has 250, and Czech has around 80. (China has 850 of McDonald’s and will add another 1000 or more in the coming three years.)

            Japan leads on per capita GDP and have similar political environment as other two, which manifestos even if culture impact render slow growth, coffee eventually will fortify its due position in any society. Its final glory will always arrive which has not been changed for the last 500 years.

4.       Political Factors: Hungary, Romania & Bulgaria

The chart above shows how political factors impact on the coffee market. Before and after the collapse of the Berlin Wall, it shows a sharp contrast in coffee consumption. However, the long term forecast about coffee market is also tied with economy.

Hungary is an interesting country, which show coffee can be such a prophet about a society. The first time when I prepared Hungary’s consumption chart shown above, I could deduce that Hungary was one of the more liberal and wealthier states among East European countries during the cold war. Then, history just reaffirms what coffee have already told us. “From the 1960s through the late 1980s, Hungary was often satirically referred to as "the happiest barrack" within the Eastern bloc.”[1] However, after the collapse of one party system, the overall economic condition is still in struggle, which renders coffee consumption stagnant.

Another interesting factor is that it is a bottleneck when per capita consumption reaches 3.5 kilo. It still has a lot to do with political and economic factors. More socialist North-western European countries are all reaching 6 kilos.

5.       The Interesting Countries: China, India and Egypt

Number does not lie. Gross coffee consumption for all countries listed in this article shows how influential of all three factors have impact on a country.