Why specialty instant coffee never quite took off

instant coffee sachets running
  • Instant coffee accounts for 25% of all coffee consumed in the world
  • With demand for convenience on the rise, some specialty coffee brands have experimented with high quality soluble products
  • However, high production costs and a saturated market mean specialty instant coffee isn’t the hit it hoped to be

SPECIALTY COFFEE’s relationship with instant has gone full circle. Once considered a product inferior to what the specialty market offered, it was then reimagined as a product that could make specialty grade coffee accessible, and expand market share. 

Now, the specialty industry’s experiment with instant coffee seems to be waning, and risks being overshadowed by other convenient products. 

In 1890, a patent was awarded to David Strang for a soluble, instant coffee that could be dissolved with water. By 1938, bolstered by the growing popularity prior to and during the First World War – and to remedy a coffee surplus following the Wall Street Crash – Nestlé partnered with the Brazilian Coffee Institute to launch its first powered instant coffee, Nescafé. 

In the 1970s, a third of all coffee imported into the United States was turned into freeze-dried instant. Today, the Brazilian Soluble Coffee Industry Association (ABICS) maintains that instant coffee accounts for 25% of all coffee consumed in the world, and that its consumption has been growing over 2% per year. 

“Instant coffee provides a quick dose of caffeine wherever we are, and there are always bound to be people for whom quality is of great importance, but for most it’s still just coffee,” says Łukasz Jura, Sales Manager at Coffee Machines Sale.

Despite instant coffee’s global popularity, the specialty coffee sector has historically preferred to distance itself from it, favouring a more artisanal approach – the very antithesis of the instant coffee product.

In recent decades, specialty coffee has had a change of heart – or at least, has tried to. The ‘elitism’ and higher prices of the specialty sector have come under fire, and emerging competition from other markets has forced specialty coffee to rethink its approach.

To offer consumers the convenience and high quality they demanded, many specialty businesses began developing products such as capsules and soluble instant coffee to remain relevant in a changing market. 

However, marketing convenient specialty coffee through the soluble  product has been less straightforward than anticipated, and has led to a stagnation of soluble coffee in the specialty market today. 

The cost of convenience

The beauty and success of instant coffee was that it never asked much of its drinkers – hot or cold water is the only ingredient required, and no preparation skills are necessary. As one mid-20th century instant coffee advertised, “no coffee pot, no grounds, no waste.” 

Specialty, soluble coffee should have been similarly straightforward, simply with a higher quality coffee beans. However, targeting a crowd that is notoriously picky about taste and quality with a product that is mostly about convenience is a challenge for even the best marketer.

“The narrow range of customers for such products may be due to the fact that the product doesn’t meet their taste preferences,” says Łukasz.

Overall, soluble specialty coffees haven’t quite met the mark with any segment. For the average coffee drinker, specialty soluble has a price tag that is too hefty for a convenience product. For the specialty coffee drinker, its taste and quality aren’t worth taking a bet on it, especially with more affordable and arguably higher quality specialty options now permeating the market.

Popular US retailers advertise $10.48 USD for 10.5oz of instant coffee, equivalent to 150 cups – or just under 14 cents per cup. At the same time, some specialty roasters advertise their instant for upwards of $18 for 48oz, or six 8oz sachets – around $2.50 per cup. 

Even chain specialty stores such as Blue Bottle – in which Nestlé owns a majority stake – sell “craft instant coffee” for nearly more than double the price per cup compared to other Nescafé products.

Of course, the quality and price of green coffee will invariably have an effect on the consumer price. But with a number of additional costs associated with producing soluble and instant coffee, it has also become an untenable exercise for many specialty businesses – especially as consumers seem unwilling to absorb these costs. 

Does soluble have a future in specialty? 

While specialty businesses may have banked on soluble coffee products to succeed, they’ve proven to be a hard sell. However, the demand for convenience isn’t going away. Does this leave room for soluble coffee in the specialty market? 

For specialty businesses, additional barriers and costs may stand in the way of the future success of their soluble products. In countries like Germany and Romania, excise duties and additional tariffs on soluble coffee – €4.87/kg and €900/tonne, respectively – eat into revenue and drive up production costs.

Additionally, overheads associated with the production of soluble coffee pile onto the final consumer price. These include the freeze-drying process, the purchase of equipment, or employing a third party. 

“The market for specialty coffee customers is incomparably smaller than the overall coffee market. It is only natural that the product will reach a smaller number of potential customers,” Łukasz says. “The cost of production itself is similar; the difference lies in the price of raw materials and, naturally, in the scale of this production.”

While specialty’s soluble products may have blundered, other convenient products like drip bags have seen more success. Although the global drip bag market is currently smaller than instant coffee, it already has a reasonable market share and is expected to steadily grow. 

For specialty coffee businesses, products like drip bags also offer a more cost effective means to manufacture convenient coffee, as they require considerably less equipment and investment to produce than their soluble counterparts.

“Certainly, the cost of production is lower than soluble coffee, even on a small scale – we can produce drip bags ourselves in our own roastery, giving us more control over how the final product will taste and how it will be prepared according to generally accepted standards,” says Łukasz.

The growth of these products in the specialty market also indicates that customers want convenience, but with an element of craftsmanship that makes the experience more authentic.

“It’s an option for people who prefer their coffee prepared in a more advanced way, as it allows for precise control over the pouring rhythm,” Łukasz says. 

Specialty soluble coffee faces challenges from other sectors as well. Growing segments like RTD are also quickly gaining market share, capitalising on demands for convenience and accessibility

Although specialty coffee’s experiment with soluble instant coffee hasn’t been as successful as the industry might have hoped, it may not have been entirely in vain.

Despite its relatively low success rate, it shows that the specialty sector is willing to adapt to changing times and consumer demand, while still maintaining its tenet of high quality.

Coffee Intelligence

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