Instant Coffee Market, By Packaging Type, Distribution Channel and Geography

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Instant coffee is coffee powder that is produced by coffee beans that have been brewed at a higher ratio of coffee to water as compared to the regular coffee. In the production of instant coffee, there are two methods for drying coffee including spray drying and freeze-drying. In spray drying method, a spray device is used, in order to dry the coffee extract. The device transfers the hot air into the container and converts the product into fine powder. Further, in freeze drying method, the coffee extract is freeze at approximately -40 degree Celsius and then, the ice particles are treated separately in evaporation and drying chambers to produce instant coffee flakes.

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Market Dynamics:

Convenience is the major factor propelling growth of the instant coffee market, as it is easy to prepare as compared to fresh coffee. The fast paced lifestyles of consumers is fuelling demand for convenient food products, which in turn, is supporting market growth. Furthermore, the longer shelf life of instant coffee as compared to the bean or ground coffee, owing to its powdered texture, is another factor, aiding in the growth of the market. Furthermore, coffee contains various nutrients, such as lipids, carbohydrates, vitamins, amino acids, phenolic compounds, alkaloids and minerals. Polyphenols in coffee, works as an antioxidants which fight against free radicals. Owing to the rising awareness regarding these health benefits, there is a growing demand for coffee worldwide. For instance, according to the International Coffee Organization (ICO), world coffee consumption, had increased from 148,891 thousand bags (60 kg) during 2013-2014 to 157,382 thousand bags (60 kg) during 2016-2017, witnessing a CAGR of 1.9%. Thus, the rising consumption of the coffee, is anticipated to support the global growth of instant coffee market, as well.

However, the high content of acrylamide in the instant coffee as compared to the fresh coffee is hindering market growth.  Acrylamide or acrylic amide is an odorless, white, crystal compound with chemical formula C3H5NO and is produced in the food products, when sugars and amino acids are heated above 120 degree Celsius. Acrylamide is neurotoxic and can damage peripheral and central nervous system (PNS and CNS) in both humans and animals.

Market Outlook:

Asia-Pacific market is expected to record the fastest growth during the forecast period, witnessing highest CAGR among all. Growing demand for instant coffee in China and India is majorly supporting the regional growth of the market. For instance, according to the United States Department of Agriculture (USDA), the export of soluble coffee (instant coffee) in India had increased from 1,667 thousand 60 kg bags during 2013-2014 to 1,833 thousand 60 kg bags during 2016-2017. In 2017, Starbucks announced to purchase more than 1300 stores in China, in a deal worth US$ 1.30 Bn, in order to cater the growing demand for coffee. Further, according to the International Coffee Organization (ICO), in 2015, the instant coffee had contributed approximately 99% and 98% in the total retail sales of Chinese coffee market by volume and value respectively. Thereby, growing coffee market in China, is supporting the overall growth of instant coffee market as well.

In 2016, Europe held the significant market share in the global instant coffee market. This is majorly attributed to the high consumption of coffee in the region. According to the International Coffee Organization (ICO), Europe recorded the highest consumption of coffee among all the regions during 2013 to 2017 and the total coffee consumption had increased from 50,179 thousand 60 kg bags during 2013-2014 to 51,693 thousand 60 kg bags in 2016-2017. Further, according to the CBI Ministry of Foreign Affairs, in Europe approximately 74 percent consumers prefer instant coffee over fresh coffee and in 2015, 2.5 Million Tons of coffee had consumed in European Union alone. However, due to the less coffee production in the region, Europe majorly depends on the imports, in order to cater the high demands for coffee. For instance, in 2016, Europe had imported 3.4 million tons of green coffee beans and the volume of imports had raised with an annual average rate of 1.6 percent between 2012 and 2016, according to the CBI Ministry of Foreign Affairs. Further, the instant green coffee is gaining popularity, owing to its various health benefits as it contains less caffeine, helps fastening weight loss and improve heart health.

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Key Players and Business Strategies:

The major companies operating in this market include Keurig Green Mountain Inc., Alpine Start Inc., Starbucks Corp, Nestle S.A., Tata Global Beverages Ltd., Unilever Plc, Tchibo Coffee International Ltd, Luigi Lavazza S.p.A., The J.M. Smucker Company and Strauss Holdings Ltd.

Frequent mergers and acquisitions, strategic collaborations and product innovation, are the key strategies adopted by these players. For instance in 2013, Nestle S.A. had launched its new instant coffee for hotels, restaurants and cafes in UK, under the brand name, Nescafe Azera. Further, Tata Coffee Limited, a subsidiary of Tata Global Beverages Ltd, in 2017, had announced to set up an instant coffee plant in Vietnam with a capacity of 5,000 metric tons per annum, in order to cater the growing demand for instant coffee and to strengthen the company’s business in Asia Pacific region.

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