How the world lockdown has affected the coffee industry

Right now, millions of people all over the world have been asked or instructed to stay at home, as governments aim to keep people safe and protect health services. In many countries, businesses not listed as ‘essential’ are either forced or encouraged to close or continue operations remotely.

For the coffee industry, this is already having a significant effect.

From out-of-home to at-home consumption

In 2018, coffee drunk out of the home represented 26.1% of global consumption. But with cafes, coffee shops and restaurants closing their doors around the world, there’s been a dramatic shift to people drinking coffee at home.

And as consumer habits shift, brand owners and retailers are watching the market to adapt to the situation.

Nestlé recently reported a shift to in-home consumption across its markets. Their out-of-home channels posted negative growth, with significant sales declines for Nestlé Professional, water and Nespresso boutiques. However, ecommerce sales for the business grew by 29.4%, exceeding 10% of total Group sales for the first time. Coffee is one of several categories to see growth in the last three months.

Changes to consumption habits might see an increase of single-serve sales

Figures from the European coffee report 2018-2019 found that in 2018 the share of coffee capsules, as part of the total volume of coffee, reached its highest levels in France (32%), The Netherlands (31%), and Belgium (27%).

Capsules also appeal to coffee drinkers wanting to mirror the coffee tastes and experience they usually get from their coffee shop, at home. And companies are moving to adapt to at-home products to reflect this. Earlier this year, Starbucks announced its range of coffee capsules for the Nespresso original system with eight different coffee blends.

Recent research also found that online orders placed for coffee capsules grew by 53% in the past 12 months and accounted for more than half of all coffee orders online. The online retailing segment had a value share approaching 27% of the single-serve coffee maker market in 2018 and this is only expected to increase now that many consumers will move to both drinking coffee at home and shopping online for the foreseeable future.

Related read: Amcor’s Covid-19 response

Wider impacts of global economic change

As guidance to adopt social distancing continues worldwide, there are potential impacts on the coffee industry responding to a decline in GDP. According to a report from International Coffee Organization, a 1% drop in GDP globally is associated with a 0.95% lower growth in coffee consumption. A larger drop could see coffee consumption levels stagnate – or even decline – compared to prior years that were characterized by a steady growth (2-3% annually).

Further analysis, particularly of the impact on supply, will be needed to understand the overall global impact of the pandemic on the industry.

Adapting for a changing market

We don’t know yet how long policies like social isolation, and the closure of the hospitality sector will last. But we do know that there will be impacts on the coffee industry in the coming months at least, and brands and retailers will need to continue to adapt to consumers’ new habits.

What we do know is people are still drinking coffee right now. With many of us working and spending more time at home, coffee breaks are as important as ever. Whether it’s with colleagues in a virtual space, or over breakfast with family, people still want to enjoy a good cup of coffee.

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