Who is Driving the Demand for Coffee?

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Millennials are consuming coffee at a rate like no other demographic in the United States. As a consequence, demand for coffee has surged in recent years, and new trends are emerging. From decaf coffee to cold coffee beverages, millennials are shaping coffee trends across the country and beyond.

This article examines just how much influence this demographic has had on U.S. coffee consumption, and assesses the consequences for coffee manufacturers, suppliers and consumers.

Millennials and Growth

Millennials, a demographic between the ages of 19 and 34, are a powerful driving force in the world of coffee. According to Bloomberg research, American millennials are pushing consumption of coffee in the U.S. to historic records. Since the U.S. is the world’s largest consumer of coffee, world demand is growing too.

According to Carlos Mera Arzeno, a commodities analyst with Rabobank International, coffee consumption is growing by approximately 1.5 percent per annum. According to Bloomberg’s research, Millennials consume 44% of coffee in the U.S., while consumption by adults between 40-60 is decreasing significantly.

Research suggests that adults “60 and older saw a drop to 64 percent from 76 percent, and [that] there was also a decline for the 40-to- 59 age group.”

How Millennials are Driving Demand

For millennials, coffee consumption is starting earlier in life than in older generations. For example, according to Bloomberg’s research millennials born after 1995 started drinking coffee at around 14 years old. Conversely, those born closer to 1982 began drinking coffee at around 17.1 years. Millennial Chris Choi, 23, remarks that “It starts when we are very young…I started in high school. The thing to do when we had free time would be to go out and go to the local Starbucks.” Given that Millennials are joining the coffee craze so much earlier than older generations, it is no wonder they are driving demand.

Another reason why millennials may be consuming more coffee is that “Coffee has everything millennials love: status, experience and personalisation”, consultant Gabrielle Bosche, suggests. As Choi remarks, “It’s very trendy to drink coffee. You will never be judged going out and getting coffee. You find more people into that.”

Further, millennials have entered the coffee market in a variety of ways. Nowadays, cold coffee beverages and decaf coffee drinks are becoming increasingly popular among millennials. Other trends include Starbuck’s seasonal Pumpkin Spice Latte and cold brew coffee. Millennials have therefore popularised coffee in all its forms, driving growth even further.

While this increased demand may boost profits for coffee manufacturers and retailers, managers must ensure they are well stocked to avoid mishaps with inventory control processes.

What is the Impact for Coffee Retailers?

While increased demand for coffee may be welcome news for coffee retailers, according to Bloomberg’s research the increase is causing a tightening of supplies. This tightening of supplies is pushing bean prices for certain varieties to their highest levels since early 2015.

Retailers should keep an eye on this increase and be proactive in inventory control processes to ensure supply keeps up with demand. Inventory software may help manufacturers to keep an eye on consumption trends so that managers can predict future demand levels and maintain inventory control.

What about Consumers?

Whether the tightening in supplies and increase in the cost of beans has increased the cost to the consumer is uncertain. However, Harish Sundaresh, portfolio manager and commodities analyst for the Loomis Sayles Alpha Strategies team, suggests that “Coffee demand in the U.S., China and India has been running well above expectations, thereby tightening coffee markets significantly.”

Sundaresh says he expects coffee prices to increase in the future because stores tend to pass the increased cost of supplies on to the customer. Retailers should be aware of the increase and adjust prices accordingly, to ensure that they are offsetting the costs of manufacturing.

Looking Ahead

Millennials are driving coffee trends and growth, and businesses in the coffee industry need to be aware of their influence. Managers should keep track of the various trends and the increases in demand. This will allow them to get a better handle on their inventory control. They may also benefit from employing certain marketing strategies to take advantage of the millennial coffee craze.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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