Insight

Food and Beverage update Q2 2021

A Brewed Awakening – Coffee in 2021. This quarter’s report focuses on how coffee continues to be one of the most dynamic areas of the global beverage industry

Ross Colbert

Ross Colbert

Managing Director, KPMG Corporate Finance LLC

+1 212-997-0500

Coffee remains a dynamic and growing category, which has created a new beverage battleground

In this quarter’s Food & Beverage newsletter, we are taking a deeper dive into coffee, one of the largest beverage categories globally. Today, coffee is a $175 billion category, and remains poised for significant growth in the coming years.

Similarly to many other Food & Beverage categories, the impact of COVID-19 affected every corner of the coffee industry. Due to lockdowns, out-of-home consumption quickly shuttered, virtually eliminating occasions in the office workplace, coffee shops and within restaurants as governments tried to manage the spread of the virus. The abrupt change to the on-premise had coffee searching for new outlets of growth. Purchasing habits quickly shifted online, and consumption remained focused around the “At-Home” occasion. For example, at-home coffee consumption is estimated to increase by 4.9% in 2020 alone, having only increased by 3.9% in the four years from 2015 to 2019.1

Nevertheless, the coffee category remained resilient this past year. Coffee companies embraced digital integration, which accelerated the roll-out of digital tools like mobile ordering, curbside pickup, and direct-to-consumer (“DtC”) e-commerce platforms. Starbucks quickly adapted to the evolving consumer behaviors, stating that 80% of new store development in the future will include a drive-thru format.

As we slowly emerge from the pandemic, we expect consumers to slowly return to the “new normal,” venturing out of the home and once again embracing coffee shops to socialize. Coffee subscriptions and brewing at home will remain important in the consumer daily schedule, but at a lower share than during COVID-19.

Given the increased time spent in the home, consumers have obtained a greater knowledge and appreciation for coffee. From the different varieties and origins, to the producers and processing methods that coffee has to offer, we can expect to see coffee continue to become more ethical, transparent and sustainable, which brings significant opportunity for the continued growth in premium and specialty coffee.

Key trends driving the global coffee industry

Sustainability

Consumers have become increasingly aware of the impact of waste on the environment; choosing products based on product/package & purpose – doing what’s right for the earth, community and self.

Digitalization & Convenience

Routes to market are evolving in post-pandemic recovery. Coffee companies are dramatically accelerating the roll-out of digital tools, including mobile ordering, curbside pick-up, delivery and e-commerce platforms for retail coffee in order to provide consumers access to their beverage on their terms.

Premiumization

Desire for quality & authenticity has become increasingly important to consumers. Coffee’s “third-wave” shifts focus to the experience of making a superior-quality coffee product at every point across the supply chain.

Functionality

Consumers are expecting more functional and health benefits from their drinks with minimal effort. They want clean ingredients, mental clarity, more energy, improved athletic performance and lower stress.


In this issue, we explore the vast and dynamic global coffee category, and identify multiple themes that will drive the category’s growth in the coming years.
To read the full report, download the PDF below.

Footnotes

Source: 1Perfect Daily Grind, Euromonitor, International Coffee Organization, Guggenheim


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KPMG Corporate Finance LLC’s investment bankers have extensive Consumer Markets transaction and industry experience, which enables them to understand the industry- specific issues and challenges facing our clients.