Brewing
There are eight billion people on Earth, each consuming 120 cups of coffee a year on average. Do the maths and you’ll see why the small bean is the second most traded commodity, fuelling a huge industry.
It’s no hyperbole to say that coffee revolutionised the world. In the 17th century, beer and wine used to be the go-to breakfast beverages, while tea powered people through the day. After coffee was discovered in the Ethiopian highlands – legend has it a herder noticed his goats jolting with energy after eating berries off a certain tree – it made its way across the globe, quickly taking over as the most consumed beverage after water.
So what makes java stand out from the rest? A popular answer is its ability to bring people and ideas together in a sprightly way that no other drink can match.
From the moment coffee was introduced to Europe in 1615, it only took a few years for that hit of caffeine to bolster the establishment of hundreds of “coffee houses”. Finding the brew stimulating (as opposed to depressants like alcohol), patrons much preferred the social energy that coffee houses offered. This experience of community and hospitality was also what enticed Howard Schultz to bring coffee houses to America and to the rest of the world. We now recognise his enterprise as Starbucks ($SBUX).
This year, total revenues of the global coffee industry are expected to reach almost US$500b. To put that in perspective, the tea market’s total revenue is just under US$250b, while the whole cocoa industry is at around US$20b. The Finnish people drink the most coffee at four cups a day per capita, while 1.6% of the U.S. GDP comes solely from the coffee industry.
Today there’s rising demand for specialty and high-quality coffee, fuelling companies that produce innovative coffee products. Organic and green coffee make another fast-growing segment, with companies like SunOpta ($STKL) capitalising on the trend.
Instant coffee – such as Nestle’s ($NSRGY) Nescafe and J.M. Smucker’s ($SJM) Cafe Bustelo – is also expected to grow its market share in the beverage industry as consumers shift away from soda and alcohol. And as coffee lovers seek to enhance their drinking experience at home, the global market for domestic brewing machines is forecast to reach US$29b by 2025. This would benefit Nestle’s Nespresso and Breville’s ($BRG) multitude of coffee appliances.
Thomas Jefferson called it “the favourite drink of the civilised world”. Can you stay sharp without it?
