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The coffee shop industry is one of the rapidly evolving sectors of the millennium owing to the shift in consumer behaviour & preferences around the globe. Speciality coffee has gained massive momentum in the past decade as opposed to coffee shop chains. In today’s world, speciality coffee shops are brewing a completely new phenomena backed by scientific reasoning and advancement in knowledge of the consumer.The coffee shop industry is one of the rapidly evolving sectors of the millennium Click To Tweet
Considered as Crème de la crème, speciality coffee is considered as one of the finest brews in the world of coffee. The distinctive characteristics and unique flavour can only be infused in a highly controlled environment, handled specifically by artisans and specialists of the industry. According to research, the global specialty coffee shops market is expected to accelerate at a CAGR of over 10% between 2017 – 2021 as the market is projected to reach USD 121.02 billion by 2021.
What is speciality coffee?
Speciality coffee was initially recognized in the 1970’s when by Erna Knutsen in an issue of Tea & Coffee Trade Journal where she used the term to describe the best taste in coffee prepared under special microclimates. The method with which these coffee beans are roasted and extracted is the distinct characteristic of this special brew hence, it can only be managed by experts who spend their lives dedicated to brewing the best quality cup of coffee. Speciality coffee is rated above 80-100 in the according to the Speciality Coffee Association of America, which is a notch above gourmet and premium coffees.
However, one of the leading influencers in the growth of the speciality coffee industry is the increasing awareness among the millennials of today. This generation has been the reason for economic boom in many ways and the need for business to thrive among this population is to keep themselves on top of innovation and thus, specialising has become a common fad across various sectors and specifically, in the world of coffee.
What is the state of the global coffee market?
US is the largest consumer of coffee with a record volume of 607,000 tonnes of coffee brewed in a year, followed by Brazil at 425,000 tonnes and Germany at 424,000 tonnes as of 2017. According to Allegra, the coffee market globally is seeing positive growth with CAGR growth of 2.8% each year till 2023. Furthermore, it is stated that 60% of the entire US population has visited a branded coffee shop at least once a month in 2018 with the top three brands being Starbucks, Dunkin’ Donuts and Tim Horton’s. Together, these three chains make up 68.1% of the entire coffee market in the US. Starbucks takes the lead with a 40.1% hold on the total branded coffee shop market, making it the largest player in the category.
However, this growth is not restricted to traditional coffee choices. The changing consumer landscape is forcing industry giants to evolve with innovation in order to keep visitors coming back. The main reason for repeated customers is the quality of coffee. The fight in retaining customers has never been this difficult since people have become woke about their choices & the way they spend their money. Being spoilt for choices and a competitive landscape of branded players is another reason keeping coffee shops on their toes.
Coffee consumption is not only a western phenomenon. Asia is another big player in the industry that is immensely growing since a few years. A research from Mintel highlights that Indonesia and Japan are among the top five coffee retail markets globally. Indonesia, Vietnam, and the Philippines are estimated to be among the top five fastest growing coffee retail markets by volume between 2017-2021, speculated to see a compound annual growth of 8-10 percent on an average.
Why is coffee so popular?
Did you know that coffee is the most sought after beverage in the world and the primary source of caffeine for adults and teenagers alike? According to Business Insider, the coffee industry around the world is worth USD 100 billion, securing second place in the most desired beverages in the modern world.
With over 500 billion cups of coffee consumed on earth every day, this reality transcends the boundaries of being a mere habit and trespasses into being a delightful luxury. So what factors are driving this industry?
- Awareness in millennials
The growing population of woke millennials is brewing the coffee industry around the globe. For this generation, coffee is not just a cup of refreshment, it is rather a statement of pride, intellect and social acceptance. From the total demand of coffee in America, 44% of the population is millennial. From 2006-2018, a study indicated that the daily consumption of coffee between the ages of 18-24 year olds increased to 48% from 34% while young adults consumed 9% more coffee than years before.
- Europe maintains market leadership
While Asia is the fastest growing market in coffee consumption, the largest market continues to be Europe followed by North America; owing to better standards of living and per capita income in comparison to Asian countries. However, this region has to meet the increasing demands of coffee consumption mainly through imports since the harsh weather conditions in the region are unfavourable for coffee cultivation.
Right after Europe, the highest expectation of coffee consumption lies with the Middle Eastern countries owing to high per capita income as well growing millennial population.
Is coffee a popular staple in the Middle East?
The Middle Eastern region trumps consumption of hot beverages amongst other countries in the world and thus, same is the case with coffee consumption in the market. The coffee industry in the Middle East is expected to see a growth of USD 4.4 billion by 2021 which is proof of fact that the consumption is only going to climb in the future. Starbucks, Dunkin’ Donuts and Coca-Cola owned Costa Coffee are the three biggest coffee players in the Middle East with the region boasting over 9,000 coffee shops in 2018.
The UAE is the heart of coffee consumption in the Middle East and Dubai is the core of coffee innovation in the region. The cultural diversity and the energetic young workforce in the country are only a few reasons why coffee is a preferred beverage for the people of Dubai.
Since the mid-2000’s, UAE has seen a splurge of local & international coffee shop chains across the region. From the likes of Coffee Planet and B2B roaster, Orbit Coffee to Melbourne-inspired Tom and Serg, the region boasts a magnificent range of over a 1,000 branded coffee shops. Some of the big players in the region are,
- Caffe Nero
- Cafe Bateel
- Caribou Coffee
- Costa Coffee
- Dunkin Donuts
- Gloria Jean’s Coffee
- Krispy Kreme
- Blends and Brews
- Tim Hortons
Not far behind is Saudi Arabia in the Middle East with a total population of 34 million. According to industry experts, chances are that the coffee shop sector may outperform national GDP with respect to like-for-like for sales in the next 12 months. A report states that Saudi Arabia has the strongest growth ratio in the Middle East during 2017-2018 at an astounding 9.6% per annum. The top three countries in the region to experience robust growth in the next five years are Saudi Arabia, Kuwait and UAE. .
Popularity of ‘hipster’ speciality coffee shops over branded coffee chains
The expanding urban population is promoting a business culture of diversified specialities which cater to the evolving needs of the new consumer. As millennials and Gen Z gain market leadership in consumption around the world, their progressing desires for unique propositions, ‘organic’ food and beverages and aesthetically appealing concepts is paving way for creativity & exclusivity across all retail collaterals.
The trend of carefully handcrafted food & beverage concepts is on the rise globally, mirroring a similar effect on the coffee shops sector as well. The most influential driving forces behind the paradigm shift in modern consumer needs are millennials and Gen Z consumers. Their ever-evolving lifestyles have been a key motivator in increasing global speciality coffee consumption and thus, influencing large numbers on boutique and hipster-style speciality coffee houses.
How is the change in behaviour giving rise to acceptance of boutique coffee shops over branded chains? Let’s have a look at the two broad phenomena’s scaling the industry:
1- Consumer demands experiences over tactical offerings or products
In today’s day and age, the best of products or services may nosedive if they lack an experience for the modern consumer. This experience can range from a multi-sensorial point of view or it may arm this Gen Z consumer with bragging rights on social media; all factors which tickle the millennial fancy are key to the success of any sector.
With minimalism on the rise, speciality coffee shops are paving numerous paths to become exotic, unique and rather eccentric for their customers. Alchemy Dubai is a great example of turning around a household villa into a cosy coffee place with a small swimming pool and a lush green indoor garden for nature enthusiasts. While the finest quality and taste of speciality coffee is essential, the ambiance created around the cup of coffee drives millennials to the yard.
From the highly passionate baristas who will bring a smile on your face with their delightful feats to the honest exuberance of love in every ingredient used, speciality coffee houses have become an epitome of concept-based places for the hipster soul. Enthusiasts of food & coffee will often be found at Mad Tailors in Dubai, sipping their speciality coffees among unconventional artworks on the walls, an artsy interior design, flipping away a contemporary menu from around the world; enjoying an experience of a lifetime.
2- Customers look for more on the menu; beyond speciality coffees for their appetite
Many speciality coffee shops have diversified menus which cater to the needs of customers driven by unique experiences and preferences. Some shops offer signature drinks & have crafted fusions for their coffee which tickle the fancy of many millennials. ‘Homemade’ ingredients, cooked carefully by hand add a touch of soulful goodness and elegance to the products offered by these speciality coffee shops. One such example is of Vibe, Dubai where speciality coffee meets a picture-perfect Instagrammable atmosphere along with healthy, tropical drinks on the menu for the health conscious ones.
Alongside coffee preferences which gained mass popularity, many menu items initially brewed from artisan coffee houses became an immediate favourite among the hippies of this generation. Poached eggs, banana breads and homemade granola are only a few food solutions that have become a staple at leading food franchises in the region.
Last few words:
One of the biggest phenomena’s fuelling the hipster coffee culture in Instagram. Millennials and Gen Z customers want everything to be aesthetically beautiful so they can ‘Instagram It’ and look ‘cool’ in their social circles. And this is exactly what speciality coffee shops offer. From the ambiance to the handpicked ingredients and the uniqueness in their brew, speciality shops give more than just coffee; they sell experience.
The experience created around a single cup of coffee is giving industry giants a run for their money. As more and more exclusive boutique solutions open up, branded coffee chain will have to evolve the way they attract the new population. And how the entire coffee culture shapes up in the future, is definitely something to keep a keen eye out for.