Is coffee being disrupted?

A nefarious new force is disrupting the coffee market. 

Coffee is losing its biggest customer. No, it isn’t McDonalds or Starbucks or that guy in your office who is always slipping out for a flat white. The largest consumer of coffee is the kitchen sink and it is consuming less coffee every year, creating a headache for coffee growers around the world.

As recently as five years ago, most people in the rich world drank their coffee the same way: they brewed it in large pots. Coffee drinkers have long been more enthusiastic about brewing coffee than actually drinking it, so much so that brew poured down the sink was a significant consumer in its own right. All that is changing thanks to coffee pods.

Pods deliver a precise serve of coffee and, because they take brewing out of the hands of fickle drinkers, they are far more efficient and lead to less waste. Their ubiquity and efficiency are starting to be felt in world coffee markets.

In America, the world’s largest consumer of coffee, almost a third of all drinkers already own a coffee pod machine and another 20% claim they will soon buy one. That means upto half of drinkers will be utilizing machines rather than pots and wastage will be permanently lower.

This is already affecting prices (see Chart) and will do so even more in the future. The negative impact on coffee volumes comes despite pods contributing to higher coffee revenues and increasing servings. Keurig, a seller of pods, says per buyer spending on coffee has outpaced all other drink categories in the US and that pod volumes are increasing domestically and internationally. Yet higher pod sales cannot offset lower brewed volumes.

The great hope for coffee growers, like almost all other industries, is Asia. If traditional tea drinking nations like India and China can be encouraged to embrace coffee, pods – the destroyer of the coffee industry – might also turn out to be its savior. 

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