Six Changes to Brazilian Coffee in the Wake of Covid-19

During the pandemic, the Brazilian coffee market saw a number of developments that occurred in other markets as well: Overall consumption grew, but sales in the on-premise came under pressure, while off-premise and e-commerce channels enjoyed strong growth. The number of Covid-19 cases may be declining, but we don’t expect a return to normal. Rather, we see six important changes reshaping the Brazilian coffee market now and in the future.

Post-Covid Opportunities in the Brazilian Coffee Market

1. New on-premise models gaining traction.

The micro coffee shop has emerged. Operating with limited seating and fewer staff, this model has been able to provide good-quality coffee safely, and is expected to grow in the coming years.

2. The coffee pod segment remains strong.

The coffee pod segment performed well, rising 5% in 2020, and will continue to benefit from the structural shift to increased working from home.

3. Rising green coffee prices are felt on the retail shelf.

Green coffee prices have soared by 99% in 2H 2021, while supermarket prices have only increased by 27%. Additional cost increases will likely be passed on to consumers in the coming months.

4. Premiumization and sustainability are long-term trends.

Premiumization didn’t stop in 2020. In fact, consumers tried to replicate the coffee shop experience at home. As coffee shops start to recover, specialty coffee consumption should resume fairly quickly. Additionally, Brazilian consumers are increasingly demanding certifications and seals in order to know the sustainable practices of roasters and coffee shops.

5. E-commerce capabilities gaining importance.

E-commerce provided a lifeline for roasters, especially smaller roasters, during the pandemic. Total food and beverage e-commerce reached BRL 3.2bn, an astounding growth of 110% YOY. Some of those gains may recede as the on premise reopens, but e-commerce is expected to remain a much larger channel than it was prior to 2020.

6. New players and products in the market.

A great deal of uncertainty still exists, but new opportunities are emerging in a market estimated at BRL 27bn and poised for continued growth. The Brazilian coffee sector seems consolidated, but many investments are still happening, even among new and less traditional players.