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Coffee is the preferred drink across the Americas, with only two exceptions – Chile and Bolivia -where tea is preferred by consumers. Tradition, expanded availability, development of new drinking occasions, flavour innovation and health and wellness trends are driving consumer preferences to new types of coffee and tea across the Americas and worldwide.
The region has significant differences by country when it comes to consumer drinking habits, tastes, offerings and the presence of international brands, making it an attractive market for manufacturers. The key to success is understanding the many differences between the countries and responding with products that reach out to the diverse consumers across the region.
In Argentina instant coffee has seen upbeat growth, at 8% in 2013 and another 5% in 2014, mainly as low and middle income social groups are demanding low priced options. The rising number of options also helped the category gain new consumers, as products become more “gourmet” and consumers are willing to try new options. Two main drivers have consumers paying more attention to the habit of drinking coffee in their homes. The first one is related to the health benefits of drinking coffee regularly, which improves concentration and contains antioxidants. The second reason is related to a continued double digit inflation suffered during the last two years that has led consumers to reduce their spending in cafés and restaurants, and begin buying price driven variants to drink at their homes.
Affordable prices put coffee machines in the spotlight in Brazil. The “break for a coffee” is one of the strongest social cultures in Brazil and since the launch of Nespresso machines and pods the market suffered a revolution. As its price positioning has always been high, especially in Brazil where import tariff and taxes are heavy, it opened room to varieties such as Nestle Dulce Gusto and, more recently Senseo, L´Or and Três Corações. These versions can be easily found in traditional channels such as supermarkets and hypermarkets at an attractive price, opening room to experimentation and consumption persistence of a good quality product.
In Bolivia, instant coffee continued to thrive in 2014. Consumers with busier lifestyles look for products that are affordable and easy to prepare. Local companies responded by offering affordable instant coffee. For example, in 2014 the leading food company Pil Andina SA launched its own line which has flavoured and standard versions and is being well received by consumers who get to try a different coffee for the first time. In addition, other companies are supporting the positioning of their 3 in 1 and 2 in 1 brands. Consumers are choosing these products more often than in the past because they have the means to pay for them.
Canada already has one of the highest per capita consumptions in the world, with well-established at-home and away-from-home coffee drinking habits. Pods continue to see significant growth in the country, supported by convenience as well as expansion of more premium positioned products (such as Nespresso and more recently Gevalia). However, given an already high level of per capita consumption, growth of pods is taking sales away from other categories, such as standard ground coffee. Nonetheless, new entrants continue to test waters and seek to capture share of throat and wallet, including 2014 launch of retail McCafe brand, including pods, by McDonald’s in collaboration with Kraft Canada.
Pods have been present in Colombia with the Juan Valdez brand during the last few years, but at the end of 2013 the arrival of Nescafé Dolce Gusto by Nestlé gave a boost to growth of these products. Nestlé has made significant efforts to position pods, with advertising campaigns oriented to educate consumers at modern grocery outlets. This strategy has reached a significant consumer base, mainly among high and middle-high income segments, and has made pods more visible in the market. During these advertising campaigns, Nestlé reached agreements with the major retail players to sell their machines at discounted prices, in some cases through the chain’s loyalty programs.
Flavored instant mixes are growing in the Dominican Republic with consumers attracted to and more open to adopting their consumption than in the past, due to international influence and globalization. For this type of product, it is important to take into consideration that the Dominican Republic has a high proportion of low income consumers that cannot adopt new products due to economic restraint.
Mexico’s coffee culture is still developing, and while the bulk of sales still come from low cost instant, premium is gaining strength. Specialty coffee shops have taken off in Mexico over the past decade, leading initially to a rise in on-trade growth but this premiumisation has leaked into retail sales. Growth of fresh ground coffee is on the rise, outpacing that of instant. Pods are still fairly niche but Nespresso is gaining some momentum amongst the well-heeled, enough to encourage local players such as Café Punta del Cielo to enter the market.
Instant coffee continues to gain consumers in Peru, attracted by its convenience. The inclusion of women into the workforce is forcing families to look for easier and more convenient alternatives to a faster breakfast. Additionally during the latest years a wide variety of products and brands entered the market, increasing the alternatives. Now consumers can choose from gourmet products to economic alternatives. Some companies launched very small packages for personal doses, to drink on the go, or for families with limited daily budgets. This strategy promoted low-income consumer consumption.
Other than the consumption of traditional ground coffee, Dominicans have adopted the use of instant drinks such as Nescafe cappuccinos, mochas and lattes. Instant machines are now very popular in cafeterias, fast food chains, food shops and some stores. Before these machines, people did not consume instant coffee because Dominicans are used to the taste of fresh ground and instant jars are very expensive for low income people to buy. Pods were introduced by Nespreso in the Dominican market a few years ago but were a very expensive alternative and they no longer have a store in the country. Specialized shops have come to the market offering brands such as Illy, Segaredo Zanetti, and the local Café Santo Domingo.
Coffee culture in Chile has slowly but steadily developed over the last few years, alongside with the development and success of specialist shops like Juan Valdéz and Starbucks. Chilean consumers are slowly shifting from traditional instant coffee, which is commonly known as Nescafé, regardless of the actual brand to fresh ground, pods and even fresh beans among more sophisticated consumers. The aforementioned specialist shops have proven to be tremendously successful in the country, particularly with the case of Starbucks which since 2003 has opened more than 60 stores, 95% of them in Santiago alone.
Consumption is growing in Colombia due to efforts from programs such as Toma Café by the Federación Nacional de Cafeteros (National Coffee Trade Organization). Toma Café is focused on increasing consumption amongst new consumer segments such as students and young adults, who are gravitating toward the coffee culture due to the popularity of specialist shops. The outstanding growth of these outlets has reached these new consumers at their homes, as more and more consumers are brewing at home and preferring niche and premium blends, which are growing faster than the overall market.
Guatemala’s coffee is renowned globally for its good quality. Local consumers have a strong coffee drinking tradition, but due to prices and the country’s socioeconomic conditions, the bulk of the market consumes lower quality products. In the last few years, the rise of specialized gourmet shops has enabled urban consumers with higher purchasing power to enjoy premium products. International companies such as Nestlé Guatemala have also contributed to the trend towards higher quality products, with its recently introduced Dolce Gusto machines and pods. Although this trend does affect sales positively, it is still mostly concentrated in Guatemala City and among high- to mid-income consumers who can afford this type of product.
Sophistication through flavours, innovation and specialization drive growth in Uruguay. The several flavoured instant coffee option, mostly from Nestlé and the launch of coffee pods have contributed to the overall good performance of coffee volume sales. Coffee pods are showing the fastest growth rates and instant coffee growth was significantly better than fresh coffee, mainly due to new flavoured varieties from several brands which revitalized the sector. Specialized cafes have been opening in Uruguay, most of them installed in shopping centres and several in neighbourhoods with mid- and high-income households.
In Costa Rica, consumption of coffee continues to decline as a result of several factors such as changing consumer preferences, lack of coffee culture within new generations, and demand for convenience. Producers and toasters are opting to apply further levels of diversification to promote locally produced coffee both inside and outside the country. They have received significant support from the new country brand certification Esencial Costa Rica, not only through distinctive factors such as location, fair trade, social responsibility, organic, ecological, coffee quality, but also more convenient products alternatives, such as pods, RTD coffee, boutique, scented, and even fresh ground(coffee. These are all accompanied by well-organized advertising efforts such as the latest campaign launched by the local toasters organization and the coffee institute (ICAFE) with independent toasters.
In Venezuela the industry is threatened by price controls. After more than 15 years of having price regulations in fresh coffee, manufacturers have lost the incentive to produce value-added products as profit margins are subject to government restrictions. At the same time, Venezuelans have lost the incentive to buy expensive products since those that are regulated are more affordable. The policy of price controls within the coffee industry has led to a slowdown in innovation across all coffee categories. Whilst no new brands/manufacturers have entered the market, existing companies have cut advertising expenditure as profit margins are too tight. As a result, fresh coffee is no longer segmented and ground coffee has become a commodity. At the same time, importers of instant coffee withdrew their products from the market because it became impossible to compete against price-regulated fresh coffee, in spite of the convenience offered by the instant version. The disincentive towards the purchase of premium products and the loss of segmentation in coffee has made the entrance of coffee pods an unappealing business with no pod coffee machines being sold in the country.
On-trade sales are defined as sales through consumer foodservice outlets that serve the general public in a non-captive environment. Outlets include cafés/bars, FSR (full-service restaurants), fast food, 100% home delivery/takeaway, self-service cafeterias and street stalls/kiosks. Sales to semi captive foodservice outlets are also included. This describes outlets located in leisure, travel and retail environments. • Retail refers to units located in retail outlets such as department stores, shopping malls, shopping centres, super/hypermarkets etc. • Leisure refers to units located in leisure establishments such as museums, health clubs, cinemas, theatres, theme parks and sports stadiums. • Travel refers to units located in based in airports, rail stations, coach stations, motorway service stations offering gas facilities etc. Beyond the scope of the foodservice research are captive foodservice units that serve captive populations around institutions such as hospitals, schools, and prisons. This is also known as institutional sales.