South America Coffee Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

South America Coffee Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

South America Coffee Market is projected to register a CAGR of 8.5% during the forecast period, 2022-2027.

More than 1.2 billion people rely on coffee for a living; the COVID pandemic was difficult for many in the coffee business; baristas were the first to close coffee shops, and several small coffee chains never reopened when the pandemic hit. The robust coffee supply network and coffee manufacturers ensured that consumers could acquire their coffee even during a pandemic. According to Brazilian Coffee Exports Council, Brazilian coffee exports hit 40.7 million bags in 2019, and annual domestic consumption is approximately 21 million bags. According to Brazil’s association of e-commerce, ABComm, home purchases of coffee rose by 35% in Brazil in the early weeks of closures in Brazil in 2020. The market uncertainties have been causing large global coffee buyers to strengthen their stocks, buying additional bags of coffee to extend out additional months. Another point in Brazil’s coffee chain that may be affected by the pandemic is from the farm to the export port. In Brazil, almost all coffee beans are transported in trucks from the countryside to the shores through highways. Many commercial establishments along these routes were closed, and the truck drivers are already having trouble finding support times such as restaurants, motels or other sleep stations. This delayed the flow of the beans in some regions of South America.

Over the medium term, the facility/outlet expansions of chains, like Starbucks, Havanna, Café Martinez, Bonafide, The Coffee Store, and multiple independent and premium specialist coffee stores, are attracting millennials. This is boosting the growth of the coffee market and increasing the consumption of the product.​

Brazil boasts of the prevalence of out-of-home coffee consumption, where different types of coffee, like espressos, cappuccinos, and other milk-based preparations, are prominent. ​In addition, companies, such as Nestle, have launched several flavored instant coffee options and coffee pods, which recorded strong performance in terms of sales volumes.​

Key Market TrendsIncreasing Spending Power Augmenting the Growth for Specialty Coffee

Increasing global exposure, western culture, and penetration of established coffee giants like Starbucks, Nestle, and JDE Peet's are anticipated to be the key factors that drive the expansion of coffee chains, especially in the South American region. Brazil is one of the top exporters of coffee. According to the World Bank in 2021, over the last five years, Brazil's economic stability and higher wages favored the ascension of more than 20 million people from the lower social classes to the middle classes. The per capita income increased from USD 6814.9 in 2020 to USD 7518.8 in 2021, and the new middle classes have already begun to influence consumption patterns.

Recently, coffee consumption witnessed tremendous growth as outlets gained popularity as hangout zones for friends, family, colleagues, and business associates, among others. Consumers in Argentina are inclined toward an improved quality of coffee and specialty coffee drinks as they continue to be exposed to a growing number of specialist coffee shops in the country. The Argentina coffee market is unique and lucrative, offering exciting business opportunities for new players and space for continued development and consolidation. According to a survey by USDA Foreign Agricultural Service in 2021, on average, coffee consumption in the country is recorded at a kilo of coffee per person per year, which is equivalent to one cup of coffee every two days.​

Supermarket/Hypermarket Holds A Prominent Share

Owing to the large retail space and the availability of diversified product ranges across various brands like Starbucks, Nestle, and JDE Peet's, hypermarkets/supermarkets remained to be the most preferred point of sales for coffee. ​ The wide product visibility at supermarkets/hypermarkets further boosts the consumer base, leading to escalated sales. The acts, such as business expansion and the rising number of hypermarkets and supermarkets, add to the sales of these retail formats and significantly contribute to the market​. For instance, in March 2021, Carrefour SA bought Walmart Inc.’s former Brazil unit to cement its position as the country’s largest supermarket operator.

The growing market share of the segment has increased the demand for purchasing products in bulk, as customers want to make fewer trips to the store and receive more value for their money, which, in turn, has also increased the sales of coffee across the world.​ In order to supplement their sales in this segment, key consumer brands, such as Nescafe, Bru, Folgers, and Jacobs, are progressively distributing their products through this channel. Some of the leading supermarket chains across South America are Walmart, Carrefour, Tesco, and Costco among others.​ Some of the major factors responsible for the growth of this segment are the growing retail industry, the establishment of numerous retail outlets, the availability of a wider range of products, discounted prices, and excellent shopping experiences.​

Competitive Landscape

The South American Coffee Market facilitates its operation in a highly consolidated market with various global and regional players in the market. The major players in the South American coffee market include Starbucks Corporation, Death Wish Coffee Co., JDE Peet's, Cafes La Virginia S.A., and Nestle S.A.

Emphasis is given to the merger, expansion, acquisition, and partnership of the companies along with new product development as strategic approaches adopted by the leading companies to boost their brand presence among consumers. For instance, in 2020 Três Corações Group (a joint venture with Strauss Coffee) acquired Mitsui Alimentos' Roast and Ground Coffee business in Brazil, thereby strengthening its leadership position in the coffee market across the country​.

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