Europe’s coffee market is complex and fragmented – too much for many roasters

  • In 2022, the EU27 consumed 2.54 million tonnes of coffee, representing 24% of global consumption
  • But Europe is made up of different countries with various cultural, operational, and regulatory landscapes
  • For international expansion, entering other European countries has great potential but isn’t as easy as some may think 

MANY OF the world’s largest coffee roasters were established in Europe. Family heritage brands such as Lavazza and Illycaffè were founded in Italy, Douwe Egberts in the Netherlands, Tchibo in Germany; the list goes on.

There is clearly a strong demand for coffee in Europe. In 2022, 24% of global consumption took place in the European Union.

Despite this, it can be difficult – but not impossible – for roasters to expand across Europe. Whether that’s existing European chains looking to expand elsewhere across the continent, or US roasters seeking to enter a wholly different market, options need to be carefully considered.

One reason for this is a diverse range of individual coffee cultures which are impossible to generalise to Europe as a whole.

For example, many Northern European countries have thriving third-wave coffee scenes, with trendsetting and innovative roasters hailing from this part of the continent. Scandinavia helped to pioneer modern filter coffee culture and often claims the credit for popularising the light roast. Similarly, many cities in the UK – such as London – boast a strong specialty coffee scene. 

Eastern Europe, meanwhile, is markedly different. While some major cities have rapidly-growing specialty coffee scenes, many countries in this region are still regarded as emerging markets with lower per capita consumption than other regions across the continent.

Meanwhile, in some Western European countries such as France and Austria, tradition still holds a lot of sway and has in some cases impeded the growth of third-wave coffee culture. For example, Parisian café culture is well-known around the world, and the term “French roast” reflects a widespread preference for dark roast coffee.

And Viennese coffee houses have even been recognised by UNESCO as an intangible part of the country’s cultural heritage, but they are known for serving drinks far more aligned with traditional Italian espresso and cappuccino culture than anything resembling specialty coffee.

Price & other cultural barriers

As well as these regional cultural changes, some markets within Europe are much more price-sensitive than others. An espresso in London can be upwards of £4, which may be a realistic price point for specialty coffee chains looking to expand. But in most regions in Italy, an espresso costs around €1, which makes it a challenging environment for specialty coffee brands to innovate and thrive.

“The European coffee market is quite diverse and I would say there are different coffee drinking cultures if not country by country so at least region by region,” says Ola Brattås, import and roastery manager at Kaffebrenneriet, a coffee bar chain and roaster based in Norway.

Coffee roasters often evolve with a sense of cultural identity that reflects where they have come from. This can make it challenging for them to broaden their market to regions where consumers may not identify with their brand or roasting style.

This is in contrast to coffee roasters operating in the US, where regional expansion has far fewer cultural barriers and businesses can have relatively easy access to the country’s entire population. There are also certain staples around the US which are fairly ubiquitous, such as drip coffee – which is a commonality across many different regions.

Operational irregularities across Europe

Beyond coffee culture, there are other challenges for roasters looking to expand in Europe. Language is one – requiring a different approach to expand between neighbouring countries that can be smaller than US states. Differences in currency are another.

On top of this, the US generally offers more significant access to capital markets, venture funding, and investment opportunities that can support the scaling of a coffee roasting business. In contrast, accessing the sort of funding that can see a roaster expand internationally is often seen as more complex in European countries.

Ultimately, the fragmented nature of Europe’s coffee market is not only a challenge in trying to appeal to such a large and diverse audience, but operational differences such as these make expanding across the continent an expensive endeavour. A culturally sensitive expansion approach that factors in what’s meaningful to consumers in each country could, however, yield positive results.

A fragmented regulatory landscape

Europe’s fragmented setup can seem challenging to roasters looking to scale up internationally, especially in contrast with the US’ relatively uniform regulatory framework.

“The fact that Europe consists of many countries and the US being one country makes it easier for roasteries in the US to expand state by state than it is for roasteries in Europe to do the same across national borders,” says Ola.

While there are federal and state regulations, navigating them is often seen as more straightforward than dealing with the diversity of regulations across European countries. And while the European Union may create a relatively consistent regulatory landscape for coffee roasters looking to scale, it by no means eliminates irregularities between different countries.

For example, VAT rates, excise duties, and other tax-related issues vary from country to country within Europe, affecting pricing and financial planning for coffee roasters looking to expand across the continent.

Similarly, environmental regulations, labelling, food safety, and health and safety regulations change depending on which country a business wants to operate in. For instance, the Work Time Directive in France, Germany, and Spain states that employees are entitled to minimum daily and weekly rest periods with a maximum of 48 hours per week. In contrast, the UK allows employees to opt out, permitting them to work longer hours. This has implications for how a coffee roasting business manages its staff and associated costs.

Additionally, enforcement practices and penalties for non-compliance with health and safety standards vary significantly. France, for example, sends thousands of cases to the prosecutor each year, with a high rate of fines and imprisonment for violations. In contrast, the UK’s Health and Safety Executive prosecuted a lower number of offences but with a high conviction rate, and Germany’s penalties can reach up to €500,000 for intentional offences.

This is just the tip of the iceberg in terms of regulatory differences between the UK and other European countries. Brexit has also been a significant deterrent for roasters looking to expand into what is a major consuming market within Europe. This sort of logistical and regulatory divide is a far cry from the US, where federal regulation provides a much more uniform framework.

Ultimately, Europe represents a multi-faceted and fragmented market that poses many challenges to scalability. But it’s also the largest market with arguably the richest history of coffee and the most robust demand, which is what makes roasters’ attempts to enter it worth it – regardless of the challenges.

Coffee Intelligence

Want to read more articles like this? Sign up for our newsletter here.