28 February 2022, Jos Algra
The ‘waves’ in the coffee industry trends
The concept of “waves” was mentioned in the February 16th blog. In the analysis of the coffee market, this concept is widely used to describe changes in trends in the market and coffee consumption. This is important to understand what factors cause changes in consumption and in the coffee market, as well as to know where the next trend is going. But first a brief prehistory.
Coffee was introduced from Ethiopia via Yemen to Europe in the 17th century, mostly through coffee shops. Later it became popular and people began to prepare coffee at home. Back then, parchment coffee was imported, the processing plants were in the ports of consuming countries, and the coffee was roasted at home. If you want to know more about how the coffee business came to be in 17th century Amsterdam, read The Coffee Trader by David Liss.
In the 18th century, Haiti and other countries of the Caribbean basin were the main producers of coffee, along with Ceylon (Sri Lanka) and Indonesia, before the first place passed to Brazil, never to leave it.
In the 19th century with industrialization process, coffee roasting began to be industrialized too, in order to supply factory workers, and the first brands emerged. Mobile roasters followed troops on war campaigns, before soluble or instant coffee was introduced.
The first wave: the coffee industry is born
With the rise of the coffee industry, the first wave began. The first brands were local and had to convince the consumer that coffee was not bad for health, a discussion that continues to this day. Several of those brands exist to this day, having migrated from company to company. Vacuum canned coffee was introduced, so it could be stored for a long time, without going rancid, and sold in stores instead of having to be roasted on the spot.
The 2 world wars and the great depression of the 1930s had a profound impact on the consumption and production side of coffee. In the 1950s, coffee consumption rebounded, the demobilized military had become large consumers of coffee, and with the reconstruction of the economies, consumption grew in general.
The type of coffee varies by region and country, much Robusta in southern Europe, more Arabica in northern Europe and North America, but within those markets the type of coffee was fairly uniform. Generally speaking, people drank a blend of coffee, black, hot and bitter. The way it was prepared wasn’t that important.
Local and regional brands became national and a continuous consolidation process started in the coffee industry, which to date has left 10 roasters that roast 35% of all the coffee in the world. Coffee became a commodity, the second in value after oil, the quantity was more important than the quality. The emphasis was on the innovation of processing, packaging, and marketing of coffee, not on the coffee as such and on the quality.
Initially the coffee was considered to be “good to the last drop” (a phrase from former President Theodore Roosevelt, used by the Maxwell House brand), but gradually the quality began to decline. An increasingly lighter roast, to reduce weight loss, an increasingly rare coffee (“Is it tea or coffee? If it’s coffee, I prefer tea”) and increasing use of Robusta (read the previous blog The differential — 2nd part , to see how the mix changed).
Especially young people lost interest in drinking coffee, switched to coke and other drinks, a whole generation of consumers was being lost. Per capita consumption in the United States fell from 8.6 kg in 1946, when it was at its highest point, to 4–4.5 kg from the mid-1970s onwards. The consumption of soft drinks increased fivefold in the same period of time.
For those who want to know more about the history of coffee, I recommend reading the book that Mark Pendergrast published 20 years ago, Uncommon Grounds.
The second wave: Coffee shops, lattés and baristas
The erosion of quality and the drop in coffee consumption provoked a reaction. In 1966 a Dutch immigrant opened Peet’s Coffee in Berkeley, California. He began roasting quality coffee, giving it a darker roast and serving a stronger cup of coffee. He also began to train young people in the art of coffee, teaching how to cup and how to prepare coffee. The barista was born.
In the early 1970s, a number of coffee shops such as Starbucks followed Peet’s example. They had in common the dark roast, espresso type, but later with a lot of milk. In fact, those coffee shops today sell more milk than coffee. That is why Stefano Ponte talks about the latté revolution. They also began to experiment with flavours and then iced coffees, to make them more attractive to young people and thus recover it as consumers.
There was more interest in the origin of coffee and many single origin coffees instead of pure blends without knowing where they came from. The best quality Arabica coffee dominated, although critics were of the opinion why so much emphasis on quality if it is lost in such a dark roast.
It is not only the sale of coffee that these coffee shops offer. It is an experience and a place to meet other people (in the case of Peet’s it started with the hippies). There is talk of the third place, after home and work or the study centre. It helped a lot that coffee shops started offering free internet.
From small local coffee shops, they gradually developed into large chains with coffee shops all over North America, which later conquered the world, spreading out to the other continents. Starbucks grew to 32,660 coffee shops in 2020 all over the world. In Europe it took time for the chains to conquer their space, because there was already a wide culture of coffee shops, which were more adapted to local customs and tastes than the big chains.
The exception was the United Kingdom where coffee consumption was very low, just over 2 kg per capita, and 80% soluble coffee. Fertile ground for coffee shops offering cappuccinos, a new experience, a place to meet friends and free internet.
In the next blog more about specialty coffee, the third, the fourth and the fifth wave.
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