Five words that will define the coffee industry in 2024

  • Consolidation
  • RTD
  • Cold coffee
  • Credit
  • Retail

THE GLOBAL coffee industry has shifted tremendously over the last 12 months. Perhaps most notably, 2023 was largely marked by acquisitions and mergers across the board as specialty coffee continued to consolidate.

There are other trends to point to, however. Convenience continues to shape the industry at large. Sustainability legislation in the US and Europe threatens a change for coffee farmers and traders. China overtook the United States as the world’s largest branded coffee shop market by outlets. And rises in both general operating costs and interest rates mean the coming months will be challenging – more so for some actors than others.

So, as we look ahead to the next 12 months, we decided to set out five words that we think will define the coffee industry in 2024. 

1. Consolidation

Last year saw a number of historic acquisitions and mergers for the coffee industry – a trend that is likely to continue into 2024.

Driven by a desire to obtain market share in a rapidly growing industry where brand equity is everything, large companies will likely continue to acquire smaller specialty coffee brands as they aim to diversify their portfolios and tap into niche markets.

Nestlé set the tone when they acquired Blue Bottle in 2017, and last year saw numerous coffee conglomerates across the industry take a similar tack: Neumann Kaffee Gruppe (NKG) acquired a majority stake in Nordic Approach; Keurig Dr Pepper took a minority stake in La Colombe Coffee Roasters, which was later acquired by Chobani; De’Longhi finally made its commitment to La Marzocco public; and Tchibo merged with Matthew Algie in the UK and Ireland.

This is one of the central characteristics of the fourth wave of coffee: the mass commercialisation of specialty coffee. 

“The coffee industry has always been attractive for consolidation and divestiture of coffee brands,” says Spencer. “In my judgement, this is not a sign of weakness or concern for the industry. On the contrary, a healthy industry attracts investors and entrepreneurs – just like big businesses seek growth, investment and consolidation.

“However, as a traditionalist, I am saddened when multi-generational, family-run coffee businesses are consolidated and absorbed into larger corporations. Our industry thrives on brand identity, coffee stories, and points of differentiation. When consolidation means sameness, we all lose.”

2. RTD

This should come as no surprise, but RTD continues to dominate conversations across the coffee industry. Representing the apex of convenience purchasing in the coffee industry, it continues to grow at breakneck pace as a market segment.

However, as RTD expands, we’re likely to see greater diversification in 2024 – with more flavours and formats appearing on the market than ever before. 

“RTD will continue to expand and offer creative innovation for coffee-based beverages,” says Spencer Turer, vice president of Coffee Enterprises. “It provides opportunities for coffee-based cocktails and cordials as well. Diversification away from roasted whole bean or ground coffee into ready-to-drink is a natural progression of brand expansion.” 

“RTD has been instrumental to the growth and evolution of cold coffee,” says Lou Vastardis, co-founder and president of BKON. “The majority of RTD products are beverages where coffee is an ingredient, appealing to the same dominant consumer preferences that were shaped by coffee’s second wave. 

“The future growth and innovation of coffee will continue to be fueled by “coffee-as-ingredient” beverages.”

RTD will become more popular in the coffee industry in 2024

3. Cold coffee

Along with RTD, cold coffee seems set to drive the future of the industry. As it did in 2021, Starbucks reported last year cold drinks made up around three-quarters of its total sales in the US — which speaks volumes for the market at large. 

Much has been said over the last few years about why cold coffee has become so popular, and how it allows coffee brands to defy seasonality and temperature fluctuations. However, more recently, it has become clear that cold coffee is a vehicle for other consumer priorities – such as customisation, for instance.

Driven largely by younger (Generation Z/millennial) consumers, this is something brands are likely to increasingly prioritise as they incorporate more flavoured syrups and alternative milks into their offerings.

“Coffee is not a one-size-fits-all beverage, and one flavour is not for all,” says Spencer. “Like RTD, cold coffee is a natural progression of the beverage service and provides much-needed options to keep consumers in the category.”

To this end, we are likely to see significant innovation in how retail locations offer cold coffee to their customers – whether that’s by branching out into RTD, or technological advancements that improve a café’s cold coffee offering, like Starbucks’ Siren System. 

“If successfully navigated, cold coffee could produce the coffee industry’s largest growth phase to date by revolutionising how drinks are conceptualised, commercialised, shared, and enjoyed,” says Lou.

4. Credit

Interest rates remained high throughout last year, largely to counteract inflationary pressures and the risk of economic slowdown. Among the worst hit in the industry have been coffee traders, whose business model often relies on finance.

In short: many traders need access to cash to keep the supply chain moving. When interest rates are low and money is “cheap”, they can finance the purchase of green coffee lots to sell on at a profit. However, a perfect storm of rising interest rates and many roasters looking for cheaper coffees means that many traders have had already-tight margins squeezed. This has left some unable to sell inventory at a price to cover their debts.

In early 2023, it became clear this was an issue among smaller “boutique” coffee traders, with many suffering from financial difficulties at the beginning of the year. Some put themselves up either partially or wholly for sale, while others filed for bankruptcy entirely. In some cases, these smaller traders were even acquired by their largest creditor – which often happened to be a larger commercial coffee trader.

Expensive credit also means the cost of agroindustrial loans has remained high, and with traders being less than liquid, farmers have nowhere else to turn in terms of accessing finance or capital.

Going into 2024, we are in a situation where coffee prices continue to decline and interest rates remain high – making it difficult to anticipate any breathing room for all but the largest of coffee traders.

5. Retail

There were some notable supermarket entries by specialty coffee roasters in 2023 – a sign that more traditional marketplaces are recognising that their customers are looking for higher quality coffee.

Again, as the commercialisation of specialty coffee continues, this is something we can expect to see more of. As they grow, established specialty coffee roasters will need to pivot to new channels to reach a larger market – such as supermarkets.

In order to successfully operate in these arenas, however, these roasters often pivot. They start by offering a cheaper, more accessible blend – often with more traditional flavours – to cater to a wider market which is less aware of the higher end of third wave coffee.

“Retail stores are just like brands, they both need to acquire customers based on a merchandising program, price, image – and hopefully quality and value,” says Spencer.

“We should not perpetuate the false narrative that large companies and big brands cannot have quality products. The best coffees are the ones that sell and enjoy repeat sales from returning customers. Supermarkets, in-store roasting, retail chains, and even chain restaurants all have the same opportunity with different economies of scale, to offer high-quality coffee that meets customer expectations.”

This reflects a broader trend of consolidation as some specialty coffee brands grow to a point where they are forced to pivot – as the market size for third wave coffee isn’t big enough to sustain their growth.

In some cases, these roasters may keep high-scoring coffees with exciting processing methods on their menus as a marketing tactic – but the blends are really where the money is.

“Specialty coffee has proliferated the mainstream in the US,” says Jesse Hartman of The Coffee Podcast. “Its consumers are already indecisive about which coffee to try next because of copycat branding and marketing approaches perpetuated in the last 5-10 years.

“Even traditional non-specialty brands have begun to adopt this framework on grocery store shelves and online. Brands that have focused on customer loyalty will probably see a unique benefit from this, but otherwise, I expect creativity, novelty, and influencer recommendations will shine brighter in 2024.”

Coffee Intelligence

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