Yuan More Coffee? Profiting from the Boom in Asian Coffee Demand

Asian coffee demand growth will be exceptional in the coming years. From 2005 to 2015, major Asian markets, excluding Japan, accounted for 35% of the incremental growth in world coffee demand—and this growth appears set to continue.

Report summary

Empirical analysis suggests a strong correlation between rising per capita income and coffee consumption. Asian economies are expected to remain the fastest-growing in the world in the foreseeable future, and as a result, Rabobank expects emerging Asia to take an incremental 3.5% share of the world coffee demand by 2025.

“Out-of-home consumption and new formats will be key,” according to Sudip Sinha, Senior Analyst – Beverages. “Urbanisation and improvement in communications are other key factors that will have a major impact on the future size and direction of coffee consumption.” Outside of coffee-growing areas, this remains an unfamiliar beverage and cafes appear to be the first point of introduction to coffee culture for most consumers. Rabobank estimates that the non-retail channel will continue to increase its share of overall coffee demand owing to these factors. In the next ten years, coffee shops in emerging Asia will account for nearly 50% of regional coffee revenues. Once this happens, on-trade coffee consumption will exert a greater pull on overall Asian coffee demand. In general, a hybrid business model, which combines a specialist coffee shop with a traditional café menu and ambience, could emerge as the dominant format in the region.

Demand growth varies across Asia

The Philippines led the growth in consumption in the previous decade and China will offer the highest growth potential in Asia for coffee shops in the next decade. On the other hand, Japanese and South Korean chained coffee shops are struggling to grow outlet numbers. Thus, we could see leading Japanese and South Korean coffee shop brands expand outside of domestic markets for future growth.

With the upwardly mobile Asian consumers in major urban areas, rising affluence will push the demand for coffee machines (and pods) in emerging areas—especially Singapore, Hong Kong, China, and Taiwan. 

Access to growth

The third wave of coffee consumption continues to fundamentally impact the global coffee value chain, as well as the industry landscape. The emergence of Asia as the driver of future growth in the global coffee market will create attractive investment opportunities for strategic investors and existing food & beverage players seeking business diversification. 

Acquisition of Asian coffee shop chains offers access to growth category with a high share of premium wallet. Acquisition allows newer market entrants to avoid lengthy and expensive timeframes needed to establish their brand name, although there are not many brands available in the market. But investors seeking entry points in this category are well advised to have a holistic view of coffee shops, which includes the traditional cafés with a ‘food plus’ format.