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 per cent over the past five years, while India has had a CAGR of 15.1 per cent and Vietnam 14.9 per cent. Overall, the global coffee market continues to grow steadily, with expected retail volume growth of 2.7 per cent in 2016, following a 2.5 per cent 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 per cent, followed by Australia (0 per cent), Poland (0.1 per cent), the Netherlands (0.5 per cent) and Belgium (0.5 per cent).
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 per cent. In comparison, the number of tea products launched has risen by a comparatively low 55 per cent in the same time period.
Global Drinks Analyst at Mintel, Jonny Forsyth 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 per cent of all coffee launches in Asia Pacific were ready-to-drink cold coffee products, compared to just 10 per cent 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 per cent of all retail coffee launches in Asia, up from 12 per cent in 2014.
However, instant coffee still dominates the retail market in Asia. Two in five (42 per cent) coffee launches in Asia Pacific were soluble coffee granule products, compared to just one in five (20 per cent) launches in Europe and a mere 6 per cent 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 per cent) of all global coffee retail innovation in 2016, up from 11 per cent 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 per cent) coffee products launched in 2016 was a coffee pod, up from 4 per cent 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,” Forsyth 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 per cent of coffee products launched in Asia in 2016 carrying a premium claim up from 11 per cent 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 per cent) of all global ‘third wave’ coffee retail launches. While 16 per cent 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 per cent of Indonesian metro consumers believe that the quality of coffee is more important than how easy it is to make, while 22 per cent believe they are knowledgeable about coffee and over half (53 per cent) 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.” Forsyth concludes.