Despite perceptions, Scandinavia offers opportunities for growth in coffee
Nyhavn, Copenhagen, Denmark. Image: Shutterstock
With a unique coffee culture deeply ingrained in its society, the Nordic coffee market is one that stands out. It is often seen as mature, with limited growth potential. However, a closer look reveals a dynamic and evolving landscape. By Vladislav Vorotnikov
While Scandinavia is a term commonly used to describe the region in Northern Europe, it is surprising that it has no clear definition. Most people imagine three countries: Norway, Sweden, and Denmark, though geographically, it is an area of the Scandinavian Peninsula dominated by the Scandinavian Mountains. This leaves Denmark out but includes the northern part of Finland.
The status of Iceland is also vague. The country has close linguistic and historical ties with Scandinavia and is considered a part of Scandinavia by many, though the island sits nearly 1,000 kilometres away from the Norwegian coast.
All mentioned countries share exceptionally strong coffee traditions and similar consumer preferences, though some differences exist. “[For example], in Finland, the volume [of coffee] consumed is much higher. In Norway, Sweden and Denmark, consumption is less, but consumers have a higher preference for high quality – specialty – coffee,” said Tjalling Jorrit de Boer, senior market analyst with Molgo, a Groningen, Netherlands-based research firm.
Kafferisteriet Merkur – a prominent coffee roastery established in 1993. Image: Wikipedia
A recent study conducted by Molgo showed that Norway, Sweden, and Denmark have coffee consumption levels that are well above the European average. Sweden, the largest coffee market in the region with a population of 10.5 million, ranks third in terms of per capita coffee consumption in Europe, following only Finland and Luxembourg.
Other Scandinavian countries are just a little behind. Norway, with a population of 5.4 million people, has a per capita consumption of 8.6 kg, the fifth highest in Europe. Denmark’s consumption of 6.6 kg makes it eighth. The high consumption makes the market relatively static with little room for volume growth, Salla Korpivaara, consultant at Euromonitor International, assumed.
Moreover, a number of factors in Europe have taken a toll on the Scandinavian coffee market in recent years. The Covid-19 pandemic definitely had an impact on the region, but to varying extent, Korpivaara indicated. For example, she said Sweden imposed a few restrictions on the HoReCa sector, and their lockdown was not as strict as Norway and Denmark. Hence, while in Norway, the coffee segment in HoReCa declined in 2020 by 27 percent and in Denmark by 19 percent. In Sweden, the decline was more moderate, around 14 percent. The HoReCa segment swiftly recovered starting the following year, 2021, for all three countries.
“At the same time, in 2020, all three countries saw a steep increase in the retail volume sales as Scandinavians, [like] the rest of the world, moved their offices to their homes,” Korpivaara noted.
De Boer said that it is hard to say how the cost-of-living crisis in Europe, which unravelled in 2023 and has yet to loosen its grip on the economy, has affected coffee consumption in Scandinavia. He assumed that it hadn’t had a significant influence on the volume, though it could trigger a small shift from the out-of-home to the at-home market and further small growth of the specialty segment.
Focus on innovation
Among the Scandinavian countries, the Danish coffee sector stands out for its innovative specialty segment. This segment is characterised by small-scale specialty coffee roasters who work closely together with each other and with their suppliers to create unique and high-quality coffee products. These roasters often experiment with different roasting techniques, sourcing methods, and flavour profiles, leading to a diverse and dynamic coffee market.
Scandinavian roasteries are willing to experiment. Image: Claus Sal
Local publication, Fodevare Watch, also recently reported a major shift towards innovation in the Danish coffee sector, with new companies, concepts, and ideas “springing up all over the country.”
The trend has become so massive that company managers are even starting to wonder whether there is room for so many new players in the market, especially in the retail segment, where the competition is particularly fierce. “I doubt there is room for so many competitors in retail because the shelf space is getting smaller. So, there will be a bigger battle for space in the future,” Tom Faurschou, managing director of Lavazza’s Danish division, told Fodevare Watch.
Henrik Aagaard, CEO of BKI Foods, on the other hand, argued that the Danish coffee market offers plenty of development opportunities, and those ready for bold experiments have good chances of being rewarded with strong consumer interest.
Competition in a market where sales volumes have already reached all possible heights and a further rise in volumes seems unlikely drives coffee companies to be more creative. “We are looking into a relatively stable market, but the requirements to develop and launch new concepts will only become more important in the future,” Aagaard said.
Market players indicate that Scandinavian coffee lovers are increasingly becoming more discerning, searching for new tastes and flavours, as well as new places and rituals associated with drinking coffee. However, the existing traditions are here to stay. “[Scandinavian] coffee culture is unique. In many gatherings and meetings, coffee has a key role. In Sweden, there is a tradition called ‘fika’. This social event is where people gather to enjoy coffee, often with sweet pastries or cakes,” Korpivaara said.
Analysts agree that innovation is the key for market players in Denmark and other Scandinavian countries’ markets to stay successful. This is particularly true, as some forecasts envisage that generation change can drag down coffee consumption in some segments. “Younger consumers are likely to consume fewer cups of coffee than their older counterparts but are likely to spend slightly more on each cup,” Korpivaara said.
According to Molgo’s research, innovative Scandinavian roasters have a significant influence on the global specialty coffee scene. In this context, the analysts pointed out that the Specialty Coffee Association originated in Norway. Furthermore, despite the projected limited growth options, the number of roasters in Scandinavian countries is increasing, particularly the number of micro-roasters. Many of these roasters distribute their coffee to local cafés but also have their own coffee shops. For instance, Sweden alone is home to around 80-100 micro-roasters.
Scandinavian countries have some of the highest coffee consumption rates in Europe. Image: Christian Caffe
Surprisingly enough, the innovation trend goes hand in hand with consolidation. Multinationals are taking over promising brands in the Nordic specialty segment, de Boer indicated. This is largely in line with the general trend of increasing consolidation in the mainstream coffee segment in Europe in the last few years.
Ethical consumption dominates
Observers also pointed out that demand in the Scandinavian market is increasingly being reframed by principles of ethical consumption. “Products with organic and ethical certificates, as well as products underlining the product’s origin, are seeing good growth in fresh coffee. This is in line with both the health and wellness trend and the increasing interest in ethical consumption, with many younger consumers prioritising quality and compatibility with these consumption trends over quantity,” Korpivaara noted.
In this background, she added, coffee pods registered a decline in volume sales last year in all three markets despite the convenience that these products offer. In an increasingly environmentally conscious market, pods are not seen as a sustainable solution. Many consumers would now rather look for coffee bean machines to have convenient, high-quality coffee. Competition in this area is intense and there has been some discounting on pricing.
Molgo analysts stated that Rainforest Alliance/UTZ, Fairtrade, and organic-certified coffees are particularly interesting to consumers in Scandinavia, where about 90 percent of all coffee sold in retail is certified. As a part of the same trend, Scandinavian coffee lovers have shown increasing interest in organic coffee. However, the European economic crisis has weighed on this segment in the past few years.
“We do not have exact figures for organic coffee, but we know that the high inflation and weakening of purchasing power in Scandinavia have led to a decline in the overall organic market,” Korpivaara said.
Promising niches
Sustainable, specialty coffees and premium quality coffees continue to be promising segments of the Scandinavian coffee market, Euromonitor International analysts claimed.
Scandinavia sees a growth consumption of specialty coffee. Image: Mork
“Fresh coffee beans are expected to continue to grow. Consumers are showing increased interest in fresh coffee beans as they look for products that they see as healthier, higher in quality and more ethical. An increasing number of Scandinavians will have a coffee maker [with a bean grinder] at home, and they will use it more on a daily basis rather than only on special occasions as was previously the case,” Korpivaara explained.
Foodservice coffee volumes are expected to see healthy growth in the forecast period as Scandinavian consumers will be spending more time out of their homes and retail outlets are looking out for new coffee formats to offer, she noted.
The coffee shop culture and takeaway coffees are also becoming more popular in the region, providing a further boost to sales. Retail e-commerce is expected to continue to see positive growth over the forecast period as online grocery shopping becomes a normal part of life for more and more consumers. “In addition to ordering supplies of conventional coffee via online grocery retailers, consumers will increasingly order more exotic coffee blends, beans and pods online from specialist coffee sites,” Korpivaara said.
- Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industries since 2012.
