Market Report: Italy – Traditions blend with innovations in the Italian coffee market
Image: Starbucks Reserve Roastery Milan
Preserving hundred-year-old traditions of coffee consumption, Italy is also actively embracing new market trends swinging towards specialty coffee, single-serve coffees and blockchain. By Vladislav Vorotnikov
Coffee is a fundamental part of Italian culture. There are about 162,000 coffee bars in Italy on average serving 175 cups of simply espresso every day, the Italian Federation of Public Exercises estimated. As many as 97 per cent of Italians drink coffee several times during the day.
An average Italian spends EUR €260 a year on coffee, which includes consumption at home, at the coffee bars, and in the office, according to Coffee Monitor Nomisma. Some researchers even suggest that Italians drink so much coffee because of having a gene that influences the daily need for caffeine. In other words, Italians may have a passion for coffee written in their DNA.
This makes Italy the third-largest coffee-consuming country in Europe. The Italian coffee market was valued at USD $3.16 billion in 2020, research conducted by Mordor Intelligence showed.
“Espresso is an icon of Italian consumption habits. Its rituality is codified and is hardly affected by major changes or fashions,” commented Nicolas Peyresblanques, CEO of Segafredo Zanetti Italia.
When it comes to consumption preferences Italian espresso has its own distinctive features, mostly linked to geographical areas, as in southern Italy the most consistent and strongest blends are preferred, whereas in northern Italy the roundness of flavour and the softness of extraction are favoured, Peyresblanques said.
The Italian market has always been considered rather conservative. There are certain rules of coffee consumption: a cappuccino with breakfast, a caffè macchiato – or two – as an afternoon pick-me-up, and espresso after dinner.
As explained, by Peyresblanques the charm of the traditional moka pot is handed down from generation to generation, so much so that coffee prepared with moka pots still accounts for 70 per cent of the consumption at home.
However, the demand for premium products has been increasing across the board. For example, the turnover in the 100 per cent Arabica coffee segment increased by 8 per cent in 2021 to €224.4 million compared to the previous year, research conducted by Nielsen showed. The single-origin coffee sales soared by 35 per cent to €12 million. Organic and capsule coffee products also enjoy rising demand.
“A new value system embracing all aspects of Italian people’s lives is taking hold making their future technological, green, healthy, and ethical,” Peyresblanques said.
Sting of the Pandemic
Wreaking havoc on the traditional coffee bars and locking people at home for an extended period of time, the Covid-19 pandemic has seemingly made a major shift in consumer preferences.
“The pandemic had a very strong impact on the hospitality sector, as bars and coffee shops were very affected but, at the same time, [retail] sales increased a lot,” commented Giacomo Vannelli, co-owner of Vannelli Coffee.
Vannelli explained that Covid-19 “let people re-discover the beauty to find the right time to make a coffee at home. Drinking a coffee in Italy has always been a fast ritual at the bar counter but finally, we can see that the trend is changing, and some people prefer making a coffee at home, maybe using different extraction methods despite the ‘classic ones’ such as the moka pot or espresso.”
The most recent statistical data shows that nearly 7,000 coffee bars were closed in Italy during the Covid-19 pandemic. The worst affected was Lazio, where the number of bars dropped by 10 per cent or 1,860 units. In Marche and Friuli Venezia Giulia, the number of bars dropped by 6 per cent, while in Tuscany, Veneto, Lombardy, and Trentino Alto Adige by 5 per cent.
The Covid outbreak had a strong impact on the out-of-home segment, leading to losses that have reached 37 per cent compared to last year, the Italian statistical service Istat estimated. The sales are yet to return to the pre-crisis level.
“In such a challenging scenario, Segafredo Zanetti has tried to support its customers and agents at its best, both financially and emotionally, as we are convinced that the human factor is the engine of relaunching in crisis periods,” Peyresblanques said.
In 2021, the market recorded a slight drop in turnover by 1.5 per cent compared to the previous year. In light of this, the single-serve segment continued its path, already begun in the previous years, settling on higher turnover levels than in 2019, reaching 44 per cent of the market value, Peyresblanques said, citing the Nielsen research.
Rise of Specialty Coffee
The pandemic also pushed some consumers to try specialty coffee, opening a new chapter in the history of this segment in the Italian market.
“Choosing to have some time for themselves, people chose also to get better quality products and so many approached the specialty coffee world,” Vannelli said. “The young generation is, in our opinion, the main driver of the specialty coffee market. Young people are looking for high-quality products, caring about values of sustainability, traceability and human rights.”
“The traditional coffee offer has been increasingly enriched by specialty coffee recipes in bar and restaurant menu cards to satisfy the expectations of those demanding consumers who aim at experiencing a totally fulfilling coffee ritual,” Peyresblanques said.
Alberto Polojac, owner of Bloom Coffee School and the national coordinator of the Specialty Coffee Association (SCA) Italy, commented that while the specialty coffee market in Italy has huge potential, the market as a whole is still yet to recover.
“The positive sign is that big companies and brands are going into the specialty coffee segment. For example, Lavazza has recently launched its own brand in 1865, which is the foundation year of the company, and there is a lot of buzz about the specialty coffee in food magazines, and newspapers”, Polojac said.
“The market is very traditional, and it’s definitely growing,” Polojac commented, adding that SCA Italy spends a lot of effort to improve customer awareness about specialty coffee, including attracting influencers, with a famous Italian model Chiara Ferragni is the most recent example.
“I see a huge potential of this segment in combination with traditional pastry, which is growing here in Italy. We see good examples in France, where pastry shops and the boulangerie are matched with specialty coffee shops. This is not happening yet in Italy, but we anticipate a boom in this segment in the next few years,” Polojac said. On the other hand, the current price fluctuations in the coffee beans market don’t help the coffee consumption, including in the specialty coffee segment, Vannelli said.
“People mustn’t lose purchasing power: we hope for no more restrictions, which could hinder the sale of a primary good, turning it into a luxury good,” Vannelli said, adding that despite everything, the company maintains a positive future perspective where the demand for specialty coffee will grow along with a conscientious and aware consumption.
Era of Blockchain
In the meantime, Italian coffee companies have also started employing new digital technologies both to improve traceability and to offer new payment methods.
For instance, Segafredo decided to launch a single-origin 100 per cent Arabica Rainforest Alliance-certified organic coffee, with an entirely transparent and traceable origin thanks to the blockchain technology that tells the full story behind each cup, enabling consumers to enter the farmers’ world and making them aware of the long journey it took and how much effort and passion it required, always respecting the people, the communities and the countries involved.
In a 2020 IBM survey, 44 per cent of all Europeans said it would be very valuable to have more information on the farmers who grow their food. A staggering 92 per cent of Italian consumers agreed that having food traceable on the blockchain would be valuable.
Segafredo is not the only company turning its sights on the blockchain. Caffè Barbera, which claims to be the oldest coffee roasting company in Italy, recently announced a new partnership with Algorand to use its blockchain for immediate and decentralised payments.
In 2021, Caffè Barbera started accepting payments in cryptocurrencies but limited to Bitcoin, Ethereum, and XRP. The new partnership will expand this list to ALGO, USDT, USDC, BUSD, DAI, BNB, Litecoin, Bitcoin Cash, XLM, and Tezos. In addition, this partnership will also be extended to business-to-consumer payments, using the Bleumi Pay payment aggregator, the company said.
The Organic Segment Looks Promising
The organic segment, which in other product categories has significantly influenced consumption trends and the organisation of on-shelf products, has been only slightly growing in the coffee market, perhaps less than expected, with a limited impact on the category, Peyresblanques said.
Nielsen estimated the organic segment turnover at €9.1 million in turnover in 2021, which corresponds to 0.7 per cent market share in value, and 0.5 per cent market share in volume. However, the demand from the market and the interest from younger consumers suggest that even this trend could have wide margins of growth.
“This is why our range –already including a wide option of premium blends –was enriched by organic products many of which present the Rainforest Alliance certification, the most accredited in the coffee market at present, synonymous with sustainable agriculture and better opportunities for the farmers, their families, and our planet,” Peyresblanques said.
The green agenda is not only limited to organic coffee. Italian customers are also paying a lot of attention to the package.
“In line with these trends, we are working to offer 100 per cent sustainable products, with recyclable or compostable packs: we have almost abandoned the packaging used on the market until now, consisting of dissimilar materials and therefore not recyclable to allow the disposal of our packaging in their cycling circuits, so to avoid waste creation,” Peyresblanques added.
- Vladislav Vorotnikov is Moscow-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.