Emerging markets have seen a boom in coffee consumption, but has SA hit its peak?

If you were a coffee snob on a road trip in South Africa 10 years ago, you would have faced long stretches of drought. You would have been miserably beverage-less in much of the Eastern Cape, Northern Cape and Limpopo, only adequately catered for in Jo’burg and Durban, and greeted by a few fledgling coffee roasteries in Cape Town.

Nowadays, the same trip would be a happy undertaking. Not only would you be well catered for in the cities, you’d also find specialty coffee shops in the middle of the Karoo, Bloemfontein and Tzaneen.

By the time you got to Cape Town, you’d have a range of independent ground roast coffee shops and local coffee franchises, as well as international chain stores, to choose from.

“There has been a massive boom in coffee and coffee-orientated companies in South Africa,” said Wayne Oberholzer, South Africa’s barista champion 2016 and director of coffee affairs at the Portland Project.

“It seems there’s a new one opening every week. That said, there seems to be a new one closing every two weeks.”

Some speculate that the number of high-end coffee shops, usually opened and run by a member of the passionate subculture of coffee aficionados, is outpacing the market in South Africa. In one trendy part of Cape Town, there are no less than 10 coffee roasteries in a 5km radius. “Guys sometimes get in each other’s faces,” said Oberholzer.

Yet he is confident the market is not yet saturated.

“There are five to six million South Africans fuelling the high-end coffee market, “but it’s growing”, he said.

Iain Evans, the publisher of Coffee Magazine, said: “The SA coffee scene is radically different to what it was 10 years ago. South Africa has caught up to global standards … You can now go into a high-end roastery in South Africa and have an experience on par with Melbourne or Vancouver.”

Coffee drinking is growing fastest in emerging markets, according to the published portion of a report by Insight Survey.

In 1993, traditional markets consumed 67% of the world’s coffee, while emerging markets consumed 12%. Twenty years later, traditional markets consume 50% and emerging markets consume 19%.

New consuming countries have registered growth of 2.7% since 2010, compared with about 1.3% growth in traditional markets over the same period.

Statistics South Africa has recorded steady growth in the “restaurant and coffee shop sector”. Income from the sector had increased by 4.5% in May compared with a year earlier. Growth on the month was similar, up by 4.7% from April.

“The average independent coffee shop sells about 300 cups of coffee per day,” said Oberholzer. Take into account that each cup is sold for between R20 and R35 – usually accompanied by a meal or snack – and the turnovers are healthy.

Then there are the start-ups innovating to draw in more people. Take The Department of Coffee, a shop next to the train station in Khayelitsha. It uses a specially roasted blend of beans to produce a wide range of espresso-based coffees and filter coffee. To meet the budgets of its consumers, the shop sells a cappuccino for just R8.50.

“The industry is young, but it’s aggressive,” said Oberholzer.

Evans and his business partner Mel Winter, the editor of Coffee Magazine, are equally optimistic.

Four years ago, the publication was available in 25 independent coffee outlets. “That number has now grown to between 200 and 250,” said Winter. “And that’s just the independent coffee shops, and doesn’t include the franchises and chain stores that have opened up.”

“I think the important thing to bear in mind is that the high-end coffee experience is about the experience,” said Evans. “Coffee is a major part of it, but it’s not the only part. You’re also getting supersonic broadband, enjoying the latest décor, listening to your favourite vinyls, and so on.”

Most coffee lovers agree that once you’ve become accustomed to the fresh alternative, instant coffee is no longer an option. “You can never go back,” said Evans.

A discerning coffee drinker is willing to spend a significant amount in-store. Some of the regular clients at Durban’s Bean Green Coffee Company rack up bills of between R1 000 and R2 400 a month on drinks and coffee beans alone.

It’s part of a lifestyle, said Evans. “That same consumer is not afraid to spend R40 on a craft beer or R100 on a bottle of wine.”

Even the increasing popularity of Nespresso, a high-end, home espresso-making machine, has fuelled the coffee shop culture, said Oberholzer. “Then they come into a coffee shop, order an espresso and wonder why it tastes so much better. It starts the conversation.”

The Insight Survey report shows that demand for instant coffee – something alien to coffee shops –has remained stable for the past three years. The survey asked respondents how many cups of instant coffee they had drunk the previous day and 36% said they had drunk one cup. Incidentally, a stable 29% said they had drunk three cups.

“There’s definitely always going to be a demand for instant coffee for a number of reasons, mainly cost and ease of use,” said Winter.

A similar trend is happening in the tea market.

“The proportion of black tea consumers had decreased between 2011 and 2015, from 58.6% to 51.5%. However, the percentage of South African rooibos consumers increased from 29.4% in 2011 to 30.9% in 2015,” the Rooibos Tea Council said. Spokesperson Ernest du Toit attributes the shift to the health benefits of rooibos.

“There are a number of consumers who are now drinking other beverages in preference to black tea: some are drinking coffee, others are drinking rooibos; still others are drinking a number of other beverages available on the market.”

There are many reasons, but “health is an overwhelming consideration”, said Du Toit.

So where does this leave the future of coffee?

“I do think that there is still great potential for growth in the coffee market,” said Du Toit. “Consumers are fascinating creatures,” he said. “On the one hand, you have health consciousness pervading across every element of society. On the other hand, people want to reflect a certain status and wear a certain brand. People will embrace a product that enhances how they are perceived.”

Coffee enthusiasts say the drink has many health benefits. In the United States, for example, coffee has been found to be the biggest source of antioxidants in the average person’s diet.

In short, despite increasing competition, a sustained demand for instant coffee and an increase in health consciousness, the local coffee market is still in the black. 

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Thalia Holmes
Thalia Holmes

Thalia is a freelance business reporter for the Mail & Guardian. She grew up in Swaziland and lived in the US before returning to South Africa.

She got a cum laude degree in marketing and followed it with another in English literature and psychology before further confusing things by becoming a black economic empowerment (B-BBEE) consultant.

After spending five years hearing the surprised exclamation, "But you're white!", she decided to pursue her latent passion for journalism, and joined the M&G in 2012. 

The next year, she won the Brandhouse Journalist of the Year Award, the Brandhouse Best Online Award and was chosen as one of five finalists from Africa for the German Media Development Award. In 2014, she and a colleague won the Standard Bank Sivukile Multimedia Award. 

She now writes and edits for various publications, but her heart still belongs to the M&G.     

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