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All you need to know about the coffee market

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In the beverage industry, the coffee market is a dynamic and globally significant sector. It is all about the cultivation of the coffee plant, processing, distribution and consumption of the coffee beans. Coffee has been cherished and loved by many people worldwide for its wide range of flavours and the stimulating properties, making it a staple in many countries. The market consists of various aspects, including coffee types, production regions and consumption trends. There are different factors that influence the coffee market like climate, economic conditions, consumer preferences, change in trends and it continues to evolve with innovations in brewing techniques and sustainability efforts.

Coffee consumption and the rise of coffee shops

At some point in life, most people experience a strong craving for coffee, to navigate through everyone’s daily routine through consistent consumption. Be it the night before a crucial exam, a pre-workout routine, or simply a morning routine to jumpstart your day, coffee always becomes an essential companion during these times. Its stimulating properties and irresistible aroma give a boost of energy making it a popular choice for various occasions. While India is known for its chai, recent years have witnessed a remarkable increase in coffee consumption, especially among the younger generation. The Indian coffee market is portraying impressive growth, with an annual rise of 10.15%. Globally, the coffee market has been steadily growing with a 2.5 – 3% rise. But as we can see India has been showing a drastic increase. This trend surpasses gender, as both men and women show equally high rates of coffee consumption. Filter coffee is particularly popular in the south of India whereas Instant coffee became popular in the north of India and these have been a traditional favourite. However, the introduction of various coffee types has created the expansion of the coffee industry across India, especially in tier 1 cities, assisting in a new era of coffee appreciation. Earlier coffee used to be only a home drink but now it has become a common outside drink where people go for coffee dates, work with their laptops at coffee shops, and so on and this trend has aided in the increase in coffee consumption rate. 

The coffee culture has been flourishing in India with various coffee shops popping up across the country. These coffee shops provide a wide range of tastes and preferences. To start off we have the traditional coffee houses that serve the traditional Indian filter coffee, which is always a beloved drink. Along with these classic filter coffee, there has also been an increase in specialty coffee shops that brew artisanal brews, bringing out the unique flavours and brewing methods. In addition to these, international coffee chains have established a good presence where they provide cappuccinos and lattes. In the past few years, there have also been independent coffee shops that provide cosiness along with an atmosphere for co-working spaces. These coffee shops not only specialise in coffee but also create a cultural and social experience attracting a diverse group of people. From traditional to contemporary, India’s coffee shop scenario constantly evolves to provide options to suit every coffee lovers’ taste.

Factors that can affect while starting a coffee shop

With coffee becoming a famous beverage, many people take this as an advantage to build a coffee shop business. But even though there are various coffee shops it is shown that around 74% of the new coffee shops either shut down or don’t flourish in 5 years. And you might wonder why such a high number! Let us take a deeper look into the factors that might affect the growth of your coffee shop.

High competition: The intense competition in the coffee industry has a great impact on the growth and dynamics of the coffee shops. As more and more coffee shops enter this busy market, coffee shops are forced to be unique compared to others and constantly improve their offerings to attract and retain their coffee loving customers. This competitive environment fosters innovation which leads to a range of unique coffee blends, speciality beverages and top notch customer experiences. Even though this is a plus point for coffee enthusiasts with a wide range of choices and better quality, it can also create challenges such as market saturation, price wars and the need for strategic location choices. As a result the growth of coffee shops struggles on their ability to navigate through this fierce competition while delivering unique coffee and experiences to their customers.

Lack of investment in development: The absence of proper investment in building a coffee brand can have a direct influence on how well the coffee shops grow. Building a strong brand identity is important for attracting and retaining customers in a highly competitive market. Without good investment in branding coffee shops may struggle to stand out among the competition and also connect with their audience effectively. This can hamper the growth potential as a recognizable and resonant brand often playing a pivotal role in attracting customers and fostering loyalty, ultimately affecting the success and growth of coffee shops.

Lack of knowledge and research in the coffee industry: The lack of knowledge and research in the coffee industry is a serious issue in the growth of a coffee brand. A deep understanding of coffee varieties, brewing techniques, consumer preference, branding strategies is essential for delivering exceptional coffee experiences. Without proper knowledge and constant research, coffee shops may struggle to keep up with the changing trends, changing marketing strategies and also provide the quality that the coffee enthusiasts demand. It is also important to research the geographical location for your coffee shop as this has a major impact on how well you reach your customers. In an industry where expertise and staying ahead of the curve are paramount, the lack of knowledge and research can be a significant barrier for the sustained growth of the coffee shops.

Packaging challenges: The first thing that anyone notices is the packaging of the coffee beans or the coffee but at the same time it is not easy to get a perfect packaging design to attract your customers. Packaging challenges pose a significant impediment to the growth of coffee shops. Coffee is often sold in various forms, from whole beans to ground coffee and sometimes single serve options and each type requires different types of packaging to preserve its quality and freshness. Most coffee brands find it hard to find vendors or agencies that provide good quality packaging and sometimes even provide custom packaging which can take away the story and essence of your coffee.

No proper marketing strategy: The lack of offline and online marketing strategies is yet another major reason why most coffee shops find it hard to be successful. In a competitive industry, visibility and consumer engagement is essential. Most coffee brands avoid investing in marketing which makes them miss out on opportunities to attract new customers, retain their loyal customers and also establish a unique brand presence making them also miss out on expressing their unique selling point. Be it traditional advertising, social media presence or digital campaigns, a good marketing strategy is important for attracting customers to physical shops and online platforms. Some fail to do separate marketing strategies for offline and online marketing which can again affect the coffee brand growth as your offline customers will have different preferences compared to online customers. Those coffee shops that overlook these crucial aspects may find it challenging to expand and thrive in a market where visibility and customer outreach are important components of success.

Keeping up with the trends: Failing to keep up with the evolving trends can have a great impact on the growth of a coffee shop both offline and online. In a constantly changing evolving industry, where consumer preferences and expectations constantly change, continuing with the same strategy can result in declining relevance. Customers seek originality, be it in the form of unique coffee blends, sustainable practices or innovative brewing methods. Coffee brands that don’t adapt to changes in the trends risk losing their customers to competitors who embrace innovation. To encourage growth, coffee brands must remain attuned to the constant market shifts and also evolve to meet the dynamic demands of their coffee loving audience.

What you can learn from other successful coffee brands

You might have got  inspiration from various famous coffee brands like Starbucks, Thirdwave coffee, Blue Tokai and so on. What made them a successful brand? What are they doing to stay on top of the coffee market in India?

Blue Tokai, a well known coffee brand, reemerged during the covid pandemic and this is a best example of adaptability and strategic vision. During all the challenging times, they capitalised on the opportunity to strengthen their brand by helping people reconnect through coffee. Their bold move of opening 21 outlets helped them expand their reach and also offered a new sanctuary for coffee lovers to try new coffee flavours. Above all their introduction of on-the-go coffee cans perfectly aligned with the changing coffee industry trends, catering to the growing demand for convenience and quality.

Starbucks, a well known brand all over the world had its own struggles when they reached India. But they took the opportunity to partner with well known companies to reach to the top in India. They accustomed their outlets in India according to the Indian trends but at the same time they maintained their original essence. Even though they are a famous brand they were aware of the adaptations that were necessary to grow in the Indian coffee market.

Thirdwave Coffee completely focuses on creating specialty coffee constantly trying to bring in new flavours to introduce into the coffee world. They try to keep up with the taste trends that are constantly evolving in the coffee market. Because of their unique tastes that they tried to acquire, it caught a lot of coffee lovers’ hearts and thus they opened around 70 outlets around India eventually. 

Building a coffee brand can have its own challenges depending on the type of brand you are building, the trending culture of the customers, geographical location, and so on. But with proper research and strategy, you can thrive to build your best coffee brand.

World Coffee Conference in India

With India having one of the largest coffee consumption rates, India is proud to say that the 5th World Coffee Conference is happening in Bangalore, India from September 25 to 28, 2023. People from around 80 countries have attended to witness the growth of coffee brands and industry. This is an opportunity for most coffee startups and well-known brands to establish their presence and also to grab more opportunities. The arrival of the World Coffee Conference in India shows how much the Indian coffee market is flourishing and also the rise in the competition. It is good for most coffee companies to get more exposure to the types of coffee brands that are currently emerging and different types of trends that are currently being followed in different parts of the world. Grabbing once-in-a-lifetime opportunities like these is a good way to grow your coffee brand.

Reference

Coffee Report and Outlook (CRO). (2023, April). icocoffee.org. https://icocoffee.org/documents/cy2022-23/Coffee_Report_and_Outlook_April_2023_-_ICO.pdf

D. Narayana. (1993). Coffee Trade in India: Is There a Case for Privatisation? Economic and Political Weekly, 28(36), 1853–1856. http://www.jstor.org/stable/4400108

Indian coffee market: industry analysis and its future. (n.d.). levista.in. https://levista.in/blogs/news/indian-coffee-market

Prabhakara. (2016, June). Impact of coffee Exporters on Indian Economy – A Case study. www.ijcrt.org. https://ijcrt.org/papers/IJCRT1133238.pdf

Statista. (n.d.). Coffee – India | Statista market forecast. https://www.statista.com/outlook/cmo/hot-drinks/coffee/india

United States Department of Agriculture. (2023, May). Coffee Annual – 2023. apps.fas.usda.gov/https://apps.fas.usda.gov/newgainapi/api/Report/DownloadReportByFileName?fileName=Coffee%20Annual_New%20Delhi_India_IN2023-0033

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