How multinational investment pushes coffee brands into new markets

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  • Australian roaster Toby’s Estate was acquired by conglomerate UCC Holdings Co. and is now scaling up global expansion by entering the Gulf Cooperation Council market
  • With an expected annual growth rate of 9.6%, it looks like the GCC market could be the next big stop for expanding brands, and coffee conglomerates like UCC seem to be aware of that
  • For multinationals, it’s a strategy that is as much about global expansion as it is about tapping into emerging markets with a strong demand for specialty  

AS ESTABLISHED players seek to broaden their reach and diversify their portfolios, acquisitions and franchising agreements have become strategic tools for growth, propelling coffee brands beyond their traditional borders and into new territories.

A case in point is UCC Holdings Co., a leading Japanese coffee conglomerate, entering the Australian and New Zealand coffee markets after acquiring major coffee roasters Toby’s Estate, Caffe L’Affare and Atomic Coffee Roasters – all part of the Australian coffee business group Suntory Coffee Australia Limited (SCA). 

UCC has a vast global network of coffee interests that encompasses coffee estate management, retail coffee manufacturing and equipment distribution and sales. This move highlights the growing trend of multinational investment reshaping the coffee market, and marks a significant milestone for Toby’s Estate.

Today, the Australian company operates 17 stores in Australia, as well as 22 coffee shops across Indonesia, Singapore and the Philippines, and a growing worldwide portfolio reaching 100 stores. It’s now expanding across the Gulf Cooperation Council (GCC) coffee market.  

It achieved this through a combination of strategic partnerships, franchising agreements, smart adaptation to local preferences, and investment in marketing and brand-building efforts. By leveraging these key strategies, Toby’s Estate successfully established itself as a leading specialty coffee brand in new markets, further solidifying its position as a global player in the coffee industry.

Through a partnership with Kuwait-based franchisee Pinnacle Group, the brand quickly expanded across the GCC region, and successfully opened 20 outlets across Kuwait, Qatar, Saudi Arabia, and the UAE.

For multinational foreign brands to successfully enter the GCC coffee market, partnerships with local companies are crucial.  “You can see they (Toby’s Estate) have local staff on social media, they speak the language, they understand what the market mind is,” says Osamah Al-Awwam, co-founder of The Roasting House in Saudi Arabia. “They didn’t come with their international mindset thinking it would work locally.”

Is the GCC the next big market for coffee multinationals? 

For the last few years, breaking into the Chinese market has been the ultimate achievement for companies seeking international expansion and a global presence. 

While this still holds true, it looks like the GCC market could be the next big stop for expanding brands, and coffee conglomerates like UCC seem to be aware of that.

It’s a pivotal moment for the GCC coffee market. The six member countries – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) – are seeing unprecedented growth in domestic consumption.  Led by a young, digitally-savvy consumer base, the specialty coffee scene has high potential – and global brands are keen to get a piece of the action.  

The GCC coffee market size is projected to grow at an annual rate of 9.6% from 2023-2029.  Coffee’s big players have already made inroads into the GCC area, and some familiar names are already very well-established. Nestlé currently dominates the market, followed by Starbucks, Dunkin Donuts, Coca-Cola, and Jacobs Douwe Egberts.    

Meanwhile, an increasing number of strong domestic brands are emerging and establishing themselves, such as Saudi Arabia’s The Roasting House and The Coffee Bean & Tea Leaf.   Also flourishing are Crown Muscat in Oman, and 48 East in Kuwait, delivering roasting, wholesale and coffee shop experiences. Coffee Planet, based in the United Arab Emirates, is the region’s largest specialty coffee roaster, with a range of new products including convenience goods such as aluminium pods.

“Although the more recent remarkable growth percentages are likely to tail off, I predict the outlook the next 3 to 5 years will see continued expansion, although at a more moderate pace,” says Bogdan Prunila, general manager at Crown Muscat International. “Future growth in the coffee sector is closely linked to broader market and industrial trends, including a rapid development of tourism.”  

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What happens when a multinational acquires you?

By investing in relatively smaller specialty brands like Toby’s Estate that are agile and able to tap into niche markets, big coffee conglomerates like UCC are able to expand their global reach more successfully. 

For the specialty coffee companies being acquired, the allure lies in funds being poured into their operations, enabling them to invest in expansion, innovation, and marketing initiatives that may have been out of reach previously. 

Multinational investment provides coffee businesses with access to global markets and opportunities for international expansion. Whether through franchising agreements, joint ventures, or direct market entry, the company can leverage the multinational’s global footprint and market insights to establish a presence in new territories and capitalise on emerging markets.

Any specialty coffee chain backed by multinational money will broadly follow this route. If the brand has some status and resonates with specialty coffee consumers, investors will inevitably want to test it in emerging markets. The assumption is that if a coffee roaster has good brand equity, then it will perform well in capturing new market share.

A partnership with a multinational can achieve brand credibility by association and can get larger, previously untapped commercial consumer groups on board with these roasting companies. 

On the flip side, being acquired by a multinational can have the effect of losing a specialty coffee brand’s original edge, niche following and loyalty – the very qualities that multinationals find attractive in the first place.

Multinational investment can be beneficial for specialty coffee chains looking to scale up and reach new geographic markets. For multinationals themselves, it’s a strategy that is as much about global expansion as it is about tapping into emerging markets with a strong demand for specialty.  

Coffee Intelligence

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