Coffee brews up success in Asia: Indonesia, India and Vietnam among the fastest growing coffee markets globally

The global coffee market continues to brew up a storm and Asia is playing a key role in its growth. New research from Mintel reveals that three out of the five fastest growing retail coffee markets are in Asia. Indonesia is currently the fastest growing packaged retail coffee market with a CAGR of 19.6% over the past five years, while India has had a CAGR of 15.1% and Vietnam 14.9%. Overall, the global coffee market continues to grow steadily, with expected retail volume growth of 2.7% in 2016, following a 2.5% rise in 2015.

While Asian markets currently make up the majority of the world’s fastest growing coffee markets, European markets, as well as Australia, are among the slowest. Mintel research indicates that Finland’s mature coffee industry declined the most between 2011 and 2016 with a CAGR of -3.7%, followed by Australia (0%), Poland (0.1%), the Netherlands (0.5%) and Belgium (0.5%).

The boom in Asia’s coffee market has been driven by a surge in innovation of coffee products. According to Mintel’s Global New Products Database (GNPD), between 2011 and 2016 the number of new coffee products launched in Asia has risen by 95%. In comparison, the number of tea products launched has risen by a comparatively low 55% in the same time period.

Jonny Forsyth, Global Drinks Analyst at Mintel, said:

“The global coffee industry continues to experience healthy growth, driven by Asian markets in particular. Asia has far more growth potential as traditionally tea drinking consumers are converted slowly but surely into coffee drinkers. In 2016, there was also an increasing number of coffee launches which blurred the boundaries between coffee and tea. A tea-drinking culture is the biggest barrier to coffee in Asia, and tea-coffee hybrids can be used to tempt consumers.”

Innovation within the coffee space

In terms of local tastes, currently Asia Pacific leads the way in launches of ready-to-drink cold coffee. In 2016, 29% of all coffee launches in Asia Pacific were ready-to-drink cold coffee products, compared to just 10% in Europe. Additionally, coffee mixes are a huge part of the retail coffee landscape. In the same year, ‘x-in-1’, (i.e. 2-in-1, 3-in-1 or 4-in-1 mixes) accounted for 16% of all retail coffee launches in Asia, up from 12% in 2014.

However, instant coffee still dominates the retail market in Asia. Two in five (42%) coffee launches in Asia Pacific were soluble coffee granule products, compared to just one in five (20%) launches in Europe and a mere 6% of launches in North America in 2016.

Globally, it is coffee pods which are causing the biggest stir. Pods accounted for over one quarter (26%) of all global coffee retail innovation in 2016, up from 11% of launches in 2011. Although still in its early stages in Asia Pacific, pod innovation is still showing strong signs of growth in this region. Around one in eight (13%) coffee products launched in 2016 was a coffee pod, up from 4% of launches in this region in 2011.

“As emerging market consumers develop their taste for coffee, innovation is stepping up a notch as drinkers trade up from instant to fresher-tasting coffee. However, despite increased premiumisation in the global coffee market, the most commodified form of coffee – soluble coffee granules – remains a hugely important segment, especially in Asia. As consumers trade up from instant coffee, pod and capsule sales will increase,” Jonny adds.

Riding the third coffee wave

Moving forward, the humble coffee bean is likely to be receiving a premium makeover. While growth has already been seen in this market, with 15% of coffee products launched in Asia in 2016 carrying a premium claim up from 11% in 2013, the ‘third wave’ coffee movement is likely to propel this further. As defined by Mintel, the ‘third wave’ coffee movement is taking coffee appreciation a step further, focusing intensely on where beans are sourced and how they are roasted, with a renewed focus on brewing methods.

Currently, America is leading this movement, accounting for over one quarter (27%) of all global ‘third wave’ coffee retail launches*. While 16% of US consumers describe themselves as ‘coffee snobs’, consumers across Asia are also now showing a developing love for quality coffee. Mintel research reveals that 67% of Indonesian metro consumers** believe that the quality of coffee is more important than how easy it is to make, while 22% believe they are knowledgeable about coffee and over half (53%) say it is important for them to learn more about coffee.

“Most emerging coffee markets remain in the ‘first wave’ of coffee; however, some are starting to enter the ‘second wave’ as foodservice outlets and coffee shops aggressively push Western coffee lifestyles and local coffee shops pick up the baton. Many Asian countries are now making the progression from ‘first wave’ to ‘second wave’, while some nations such as South Korea, Japan, Singapore and Indonesia, are moving towards a ‘third wave’ lifecycle development. Some of the specialty coffee shops in Indonesia, for example, focus exclusively on Indonesian beans to showcase the richness of local coffee. Increasingly, these shops are also serving imported Arabica coffees sourced from around the world, thus enriching the ‘third wave’ coffee scene in the country.” Jonny concludes.

*defined as ground or bean or pods/capsules which use the product descriptions, “small batch” or “single origin” or artisanal or craft
**1,755 Indonesian adults based in Jakarta, Bandung, Surabaya, Yogyakarta, and Semarang