Assessing “premium” coffee

Image: Kim White for illycaffè

The United States is the world’s largest coffee market generating more than USD $14 billion in sales in 2018 per Euromonitor International (Brazil surpassed the US in volume but not value) but it has its challenges. According to Euromonitor, the volume growth is being affected by slow population growth (and an aging one at that), high consumption rates and a shift to pods.

The number of cups being consumed in the US has dropped. “The average American drank 332 cups of coffee in 2018, down from a peak of 350 in 2013,” reported Matthew Barry, senior beverages analyst, at Euromonitor, during a recent NCA Webinar, “US Coffee Outlook 2019.” However, he said that while Americans may be drinking less, they are drinking better coffee. Spending has increased significantly with the average consumer expending USD $130 in 2018.

In fact, Euromonitor found that spending rose in all three major segments – coffee shops, hot coffee at retail and ready-to-drink coffee at retail – with spending growth going mostly to coffeehouses and RTD formats. The London-based global market intelligence firm estimates $4.5 billion in spending growth at coffee shops in the US between 2017 and 2022.

Premiumization, says Barry, is the driving force behind coffee growth in the US. The term “third wave” is quite frequently used when discussing premium or specialty coffee — the notion that at-home brewing was the first wave with coffee evolving into a high-end, commodity (like wine) in the third wave. However, in an article in the March issue of T&CTJ, Barry says this idea is inherently limited. “The coffee industry is simply too complex to fit precisely into such a simplified model. There have been some interesting activities in coffee that reject aspects of the third wave but are too premium to fit neatly into the first or second,” he writes. “Premiumization of coffee is taking many paths, presenting opportunities for high-quality coffee beyond the third wave.”

People often ask me, “What is the best coffee to buy?” But the answer is quite subjective. What appeals to one coffee drinker may not appeal on another. For example, the flavor notes of a single origin coffee (a medium or light roast) is not likely to be desirable to the consumer who buys their bold or dark roast coffee at a grocery store, even though the bag (or can) might be labelled “100% Arabica” or “gourmet.” To that consumer, the pricier single origin might taste weak, or they may dislike tasting the individual notes of cherry, citrus, dark chocolate or caramel, and so forth.

“Some consumers want quality coffee but are not interested in bean origins or a proper pour over,” writes Barry in the upcoming T&CTJ piece, Premium Coffee Beyond the ‘Third Wave.’ He explains that there are times when consumers are also turned off by the sense of elitism that can pervade third-wave coffee. “This has created a small, but significant, number of coffee drinkers who want a quality cup of coffee but would prefer it to be simpler and convenient.” Hence, the improving quality in the retail sector, as well as the evolving definition of what is deemed high quality or premium coffee.

Upcoming trade shows and conventions such as Coffee Fest New York, the National Coffee Association (NCA) Convention, the Re:co Symposium and the Specialty Coffee Association (SCA) Expo – all of which I will be attending – will likely offer some sort of projections on trends or where the coffee industry is headed. Coffee Fest and the NCA Convention will be more US-centric, while the Re:co Symposium and SCA Expo will offer a global perspective of the coffee industry. It will be intriguing to see what the projections will be and how “premium coffee” may be redefined.

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