So, how resilience is the coffee market?

by chee Leng (on coffee makers)
(Singapore)

This is the start of 2012 and we all know that Europe is probably the last place you would be thinking about operating a business -with consumer's confidence at a all time low.

Guess what, Autogrill just entered into a new agreement with Starbucks to do more expansion in Europe. Yes, Europe.

They would be opening new outlets in France, Netherlands. And if you are thinking that maybe they do not really know the business, it is exactly the opposite.

They manages more than 300 over stores in US and generate $300 million of sales there in 2010 (which I think is one of the worst years in US history economy wise.)

So, they have been through the worst in US, and it is probably still okay, so now they are going to expand in Europe.

Of course, one player is hardly the case study to highlight that coffee is recession proof. Then, we all know that Costa Coffee is expanding, Dunkin Donuts is expanding and Mac Cafe makes good money selling coffee.

All these despite the fact that consumers are spending less money and the economy is in a really bad shape.

There is probably an explanation for this behavior (probably some research is on going now), but regardless the case, numbers from CHD Expert (a research firm that assist Foodservices company) shows that the hot beverages market is big and is going to get bigger.

According to their research, the hot beverages market is worth about $14.4 billion growing continuously despite the sluggish economy.

And globally, they expect the hot beverages market to be worth about $69 billion dollars.

Now, you see the reason why Starbucks is going into so many partnerships, Autogrill, Dunkin Donuts, GMCR etc. Dolce Gusto (Nescafe) is aggressively marketing in Asia or Mac Cafe is growing their outlets globally.

The fact is coffee sells and makes money but there is a downside.

Here is my $0.02

The catch about doing coffee business is its low entry barrier, anyone can do it. So, while it is very profitable, it is also extremely competitive.

Just take a look at the marketing and promotion that coffee companies are undertaking, it is aggressive. When they market, they are doing integrated and full suit.

And coffee companies are early adopters of new technology in all aspect of market, i.e. how many companies you know are embracing the AR technology?

The established coffee companies are highlighting one point, to get market share, you need to first get "mind share".

And reach and awareness are some of the key success factors for this industry.

The marketing that they do are so varied, you probably would not find it in marketing text. The migration of Starbucks reward cards to apps in Canada with 1 million subscribers is a good example.

By offering multiple rewards, Starbucks manages to get 1 million people on to their apps and potentially these folks would visit their outlets 30 times, probably spending $5 per visit.

Now, if this is not creative marketing, what is?

So, while coffee is recession proof, you need to position yourself correctly to enjoy the full reward that it would bring...