No 30

Latin America: an Increasingly Sophisticated Coffee Market

September, 2015

TRENDS

Latin America: an Increasingly Sophisticated Coffee Market

The long coffee tradition of some producing countries and the growing purchasing power of their populations help the demand for differentiated coffees, the sophistication of consumption and alternative brewing methods to grow steadily.

In Latin America, coffee is the hot drink par excellence, except in two countries where tea consumption leads the market (Chile and Bolivia), according to a recent study by Euromonitor International. Thanks to the growing dynamism of the market, innovations in brewing methods and development of the origin as added value, consumption of high-quality coffees has been growing in most of the region’s countries.

In Latin America some producing countries, like Colombia, have coffee traditions of more than one century, but only in the last decade the consumption has become strongly sophisticated, which has resulted in the entry of specialty coffees, specialized stores and consumption of responsible or sustainable products. Similarly, the increasing middle class in the region, with about 87 million families whose income was between US$ 10,000 and US$ 45,000 a year in 2014, has created a market with greater willingness to pay for added-value products.

In Latin America there has been a steady growth of specialized coffee shops, a good indication of consumer sophistication. In general, out-of-home coffee consumption has steadily grown in recent years: it currently accounts for 42% of total coffee consumption. In Chile, a market where coffee consumption is dominated by instant coffees, specialized coffee shops such as Juan Valdez and Starbucks have driven a consumption sophistication process. Ground coffee consumption in Chile has grown 101.1% in the last 5 years and specialized coffee shops have grown 52%.

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Source: Euromonitor

On the other hand, single-cup coffee brewers in producing countries such as Colombia, Brazil and Mexico have been well received, especially in sectors of the population with greater purchasing power. The growing penetration of these brewers partially replicates what has happened in markets such as North America and Europe, where the single-cup coffee segment is already mature. Single-cup brewing increases non-traditional consumer options, and it is also a great platform to market high-quality coffees.

In the case of Mexico, even if most of sales correspond to instant coffee, there has been a significant growth of the premium coffee market (including ground coffee) in the last decade. Consumption of single-cup coffees is still a niche, but chains and brands such as Nespresso, Juan Valdez, Starbucks and local players, such as Café Punta del Cielo, are driving this type of preparation.

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Source: Euromonitor

Other markets in Latin America with less sophisticated coffee consumption cultures simply tend to diversification of instant coffees due to their practical nature: it is the case of countries such as Bolivia, Ecuador and Peru. In Venezuela, due to internal restrictions, premium coffee consumption is almost non-existent and ground coffees do not feature significant differences of price or quality compared to instant coffees.

The Latin American market is constantly evolving as regards consumption habits. In the next few years there will be increased opportunities for specialty coffees and non-traditional brewing methods in many of these countries, which represent also significant opportunities for Café de Colombia and the 100% Program brands; currently 185 brands of the Program are commercialized in Latin America. Specialized coffee shops are well received in the urban areas of the major Latin American cities. This means greater willingness of consumers to pay higher prices for their coffee, for the benefit of the whole value chain from seed to cup, including producers and their families.


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