The past few years have seen a steady rise in global demand in the functional and wellness tea market, and as consumers’ quest for health and vitality continues, market players expect this trend to kick into full gear.

The Covid-19 pandemic has become the biggest game-changer in the global market of functional drinks, according to analysts. “Following the Covid-19 pandemic, consumers face increased burnout due to a lack of separation between work and personal lives, leading to increased stress,” said Nathanael Lim, insights manager at Euromonitor International, a global market research firm. “At the same time, the pandemic has caused consumers to be more health conscious, looking after their own physical and mental wellbeing. This provides tea players an opportunity to launch functional ingredients in their tea products, appealing to consumer needs.”

According to the Whole Foods 2022 Trends predictions, functional drinks sales will continue to soar, doubling in the next decade. The analysts explained that consumers, especially those from Gen Z, are looking for healthier options than the traditional sodas their parents grew up on, and many are also interested in sober living.

Functional beverages include ingredients such as herbs, mushrooms, electrolytes, vitamins, minerals and probiotics. Some elements, like vitamins, consistently enjoy strong popularity, while others only start unravelling their potential.

In 2022, the retail value sales of immune support tea globally account for USD $2.7 billion globally. This is set to grow by 4 percent year on year, reaching USD $3.2 billion in 2027, Lim said. In Europe, retail value sales of immune support tea account for $77 million and are set to grow by 4 percent year on year, reaching $93 million by 2027, he added.

According to Market Research Future, another global market research firm, the functional and wellness tea industry has achieved a valuation of $7.2 billion as of 2022. Their projections indicate that by 2032, the industry is expected to reach a value of $12 billion.

“The demand for natural and organic production is rising, driven by concerns over synthetic additives and chemicals. The focus on preventive healthcare is increasing, with consumers taking proactive measures to maintain their health,” Market Research Future stated.

Science as a beacon

The list of functional ingredients available on the market today is long and diverse, but as an average customer grows more knowledgeable, businesses need to keep an eye on the science to make sure their products are appreciated by customers.

“Consumers are being more careful with how they spend their money, leading them to actively seek high-value ingredients – for 60 percent, this means those ingredients that are science-backed,” said John Kelly, strategy director for beverages with Kerry, an Irish food ingredients firm. He shared that “where immune health is concerned, this rises to 78 percent, while ‘clinically proven’ is the most sought-after claim for more than 80 percent of consumers. This echoes Kerry’s own research, which has found that 79 percent of consumers research ingredients for themselves.”

It is increasingly important to be able to provide high-quality research supporting the efficacy of the ingredients in your products, Kelly continued. Consumers are becoming much more discerning about which ‘healthy’ ingredients are actually supported by science. “Our own research last year showed that 79 percent of consumers say they conduct their own research into ingredients. Formulators need to ensure functional ingredients match expectations because, in the digital era, information travels fast,” he said.

Functional tea manufacturers agree that the science behind the offered functional ingredients remains the key to winning customers’ hearts.

Image: Smith Tea

“People are looking to improve their own health and well-being through the ever-increasing choices available in an expanding market,” commented Anish R Patel, a spokesperson for the UK-based functional tea manufacturer NutraTea Ltd. “Our NutraTea blends are created using only ingredients that have known health benefits, and nothing else.

The 8.8 percent increase in herbal tea consumption up to last year demonstrates that the market is on the rise, showing how the public is becoming more health conscious. This is especially true of the relaxation and pregnancy sectors where we have seen an evidential increase in demand for our products, Patel said.

“What sets apart the ingredients in our ProActive Health portfolio is the quality and quantity of the science supporting them. For example, BC30 TM, our patented probiotic ingredient, is backed by over 25 published papers, with research showing that it can help support digestive health, immune health, and may support protein absorption. Similarly, Wellmune® is the only ingredient of its kind supported by over a dozen published, peer-reviewed clinical studies,” Kelly said.

Stress-relief & immune-boosting teas are top performers

Different market players focus on their own niches, but the general consensus is that functional tea helps mitigate stress and fortify the immune system.

Stress relief, sleep aid and immune boosting features are key trends in the functional tea market for the future, Lim pointed out.

“With the stresses of everyday life, consumers want an easy way to support their wellness goals, and the demand for wellness teas will continue to increase,” commented Niya Vatel, founder and CEO of Tea and I, who also underpins the importance of the science behind the offered products.

“Social media and technological integrations have played a pivotal role in propelling the industry forward, attracting a fresh wave of functional tea enthusiasts from a younger demographic. As a result, the market has experienced a significant boost. Influencer marketing has amplified the popularity of wellness teas beyond the detox and weight loss niche,” explained Vatel.

Covid-19 undoubtedly was the main factor driving the consumer demand in the functional beverage market. Although the pandemic is officially over, its aftermath is still present.

“The big ‘mega-trend’ is increasing consumer proactivity when it comes to health and an active interest in everyday beverages as the vehicle for benefits. This has undoubtedly been accelerated by Covid-19,” Kelly said.

One of the findings of Kerry’s most recent global consumer survey was the increased scale of the impact of the pandemic on the demand for everyday beverages with functional benefits. Teas benefit from this demand as teas have a traditional positioning as wellness beverages.

“Their benefits in areas like stress relief have been enjoyed by people for thousands of years and are supported by a wealth of science. This inherent ‘health halo’ makes tea a great fit for functional products because consumers are most likely to expect benefits in categories that are traditionally associated with health,” Kelly said.

The list of reasons why customers opt for functional drinks is long. One study by Kerry, for instance, discovered both men and women attribute beauty support as the top reason they consume beverages with high nutritional value and are willing to pay a premium even amid global inflation. Men and women are both drawn to gaining beauty support from fortified beverages.

Image: Kerry

Skin is the top concern, with 51 percent when it comes to purchasing beverages fortified with nutrients. Skin support was essential to 58 percent of women versus 44 percent of men globally, revealing a small gender gap regarding the interest in beauty support.

Immune support, adaptogenic teas, and functional herbal blends are currently the main segments in the functional tea market, according to tea and herbal supplier, Hälssen & Lyon. The German-based company stated that “consumers are seeking beverages that offer health benefits beyond hydration, making functional and wellness teas an appealing choice. As consumers look for ways to proactively manage their health, functional teas, which are attributed to various health benefits, such as immune system support or stress reduction, are in high demand. The ageing population also contributes to this but is more focused on maintaining health and vitality.”

Emerging segments

The functional tea market is also expected to evolve fast, especially as the science behind more ingredients becomes increasingly convincing.

Hälssen & Lyon, for instance, expects nootropic teas to be among the fastest-growing segments in the following years. Nootropics are substances believed to improve cognitive function and may be included in tea blends. Ingredients like ginkgo biloba, lion’s mane mushroom, and adaptogens may enhance mental clarity, focus, and memory.

In addition, the company anticipates strong demand for plant-based functional ingredients, and sustainability and regenerative agriculture will stay at the centre of public attention.

“Immune-boosting tea continues to remain relevant for consumers, especially with many unknown diseases expected in the future. With features such as vitamins and botanicals like ginger, this serves to strengthen consumer’s immune system and protect them from infections,” Lim said.

New technologies also let tea manufacturers explore new niches. Probiotics are a particularly exciting area, partly because of the growing awareness of their benefits but also because the emergence of spore-forming strains has created opportunities for tea manufacturers to create innovative new functional products, Kelly said.

Market Research Future reported that a collaboration between functional tea manufacturers, ingredient suppliers and retailers foster innovation and market expansion, noting these collaborations enable knowledge sharing, distribution network enhancement and the development of new product lines, ultimately benefiting both industry participants and consumers.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Coffee roasters are increasingly exploring ways to make their business climate positive, turning to advanced roasting machines to lower carbon emissions and improve energy efficiency. Roasting machine manufacturers, in turn, are putting ample effort into developing sophisticated solutions to meet their customers’ expectations.

On average, it is estimated that roasting contributes to around 15 percent of the overall footprint of coffee’s journey from field to cup. Making the roasting business more sustainable, among other things, helps the environment and helps companies to capitalise on responsible consumption trends.

A recent study by the United States think tank First Insight showed that a lion’s share of Gen Z shoppers prefers to buy sustainable brands, and they are most willing to spend 10 percent more on sustainable products. The report also found that Gen Z, along with millennials, are the most likely to make purchase decisions based on values and principles, including environmental.

In light of this, the leading coffee companies rolled out sustainability initiatives, looking to lower the carbon footprint throughout the supply chain to the maximum possible extent, including in the roasting segment.

Illycaffè has embarked on a decarbonisation roadmap which consists of actions along all the value chain: from green coffee to finished products, taking into account all the different steps, including transportation, packaging, distribution and use of coffee machines, said David Brussa, chief total quality and sustainability officer of illycaffè. The eventual goal is to reduce the carbon footprint to reach carbon neutrality by 2033 as a company.

“We strongly think that we need to act quickly to avoid impactful problems for the next generations—a climate disaster. As we often hear, the non-return point is very close to being reached, and we need to start acting responsibly for the sake of our planet and of the generations to come. We have a limited amount of time to put in place the necessary changes. But the change we should aim for is cultural first of all,” Brussa explained.

Nestlé has made the commitment for 100 percent of its coffee to be produced sustainably by 2025. In the roasting segment, the company said it considers lowering emissions by working in the field of consumption of energy, water and protecting atmosphere gases at factories. In addition, machinery use, waste generated at factories, employee commuting, and business travel are also to be reviewed and, if necessary, adjusted. Again, advanced technology is due to play a vital role.

Image: Bühler

Engines of sustainability

Sustainability consists of three basic pillars; all are necessary but not sufficient. Therefore, all must coexist to have a sustainable process: lower environmental impact, lower social impact, and lower economic cost, commented Elena Parmi, a spokesperson for Brambati Spa.

“The first engine of sustainability is tangible affordability for the user, basically lower energy consumption, lower maintenance cost, and lower operation cost. Automatically it leads to less environmental impact, meaning less energy is equal to less greenhouse gas, less social impact, meaning less need for night staff and emergency intervention leads to greater worker welfare, and greater economic sustainability as less need for energy, less need for spare parts, greater staff efficiency allows lower cost of operation,” Parmi said.

Brambati’s development program, which is already in place includes reducing the consumption and reuse of residual energy, reducing the number of components that make up the machinery, and permanent monitoring of the entire system with AI (artificial intelligence) that allows all operating variables to be under permanent analysis.

Parmi said that this is similar to if a person were being monitored with an electrocardiogram, blood analysis, and brain activity while doing a swimming competition or other physical and/or intellectual activities.

“Any deviations from optimal values are promptly identified when they are incipient, thus enabling timely intervention when appropriate and not in an emergency, avoiding the costs of interventions, spare parts and lost production,” Parmi said.

Among the concrete examples of how Brambati’s technological solutions help lowering carbon footprint, Parmi lists the elimination of transmissions with mechanical gearboxes, resulting in increased efficiency and reductions in components, weight, lubricants and maintenance. In addition, the reduction in energy consumption is achieved with regenerative and other innovative exhaust air abatement systems, as well as through intelligent system monitoring and management.

Preserving energy

Other companies also see energy consumption as the key segment, which could do wonders in terms of lowering carbon emissions. For instance, Berkeley-based coffee roastery Bellwether Coffee told Forbes in 2020 that its recirculating roasting technology eliminated particulates and volatile organic compounds in real-time during the roast process, eventually reducing the carbon footprint of each roasting cycle by 90 percent on average.

The company estimated that if a roaster uses renewable energy sources, it can save more than 157 metric tonnes of CO2 emissions. In addition, traditional coffee roasters use a single-pass system that intakes fresh air from outside the roaster, flash-heats it to roast the coffee, then releases it as exhaust through ventilation stacks. Bellwether’s roaster takes the exhausted air, cleans it, and reuses it. This provides hot, stable air throughout the roast cycle.

Image: Scolari Engineering

Energy efficiency and renewable energy are in the spotlight of several technology suppliers. “We focus on the efficiency of the roasting process by means of very fine control of the burner and energy recovery from the roaster stack, always focused on the coffee quality,” said Fabio Clivio, coffee roasting machinery engineer with Scolari Engineering SpA. “We have been doing this for years, so we have fine-tuned the software and the roaster to always get the best aroma from the coffee. We are using a smart green coffee preheater totally synchronized with the roasting cycle.”

In addition, Clivio said, the company has been continually reducing the quantity of CO2 emitted for a batch of roasted coffee by reducing the use of fossil fuels. Scolari realised that the roaster does not need a long warm-up, and when it is on standby, the software activates the energy-saving mode to reduce airflow and gas consumption.

“The preheating follows a specific profile of temperature and time; in this way, as the roaster is ready to load the new batch, the software ensures that the green coffee reaches the target temperature at the same time, with no risk of leaving the green coffee ìn the GBPH longer than necessary. In that way, the quality of the roasting process is guaranteed,” Clivio said.

“We are testing a roaster using a mix of natural gas and hydrogen. Also combined with electrical heating. The combination of hydrogen and electrical heating is the key for carbon-neutral coffee roasters,” Clivio explained, adding that the company uses the last generation of burners already designed to run with a mix of hydrogen and natural gas. “As the hydrogen will be available on industrial bases, our customers will be able to switch to hydrogen.”

Smart heat use

Bühler Group also has a roaster, though not for coffee yet, in its portfolio, running on hydrogen, commented Michael Blatter, head of business segment coffee and nuts, Bühler Group. “We are not only looking at the roaster but the entire value chain, and I think with our sustainability team, we are capable of offering unique customised solutions which are helping in various aspects of sustainability. The roasting process is one step, and we do have solutions in reducing fuel consumption, changing the type of fuel used and using the energy for alternative processes within a factory.”

Among the concrete measures applied to lower carbon footprint, Blatter lists, recirculation of hot air to reduce fuel consumption, preheating of coffee beans with off air from the roaster, and the use of heat recovery systems. In addition, a sustainability service analyzes the CO2 footprint of a factory and implements solutions into existing plants.

“We are working together within different businesses to use ideas and concepts, which already exist,” Blatter said, adding that the company has an R&D roadmap and is working on several solutions called to curb carbon emission of the roasting operations. However, Bühler is not disclosing the concrete details to the public, he added.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

The post High tech is key to reducing coffee roasting’s carbon footprint appeared first on Tea & Coffee Trade Journal.

As the global tea market continually becomes more sophisticated, tea-packaging tech is following the same path. Helping tea manufacturers meet the demand for more sustainable, environmental-friendly packaging is one of the critical challenges in the present time, and yet there are several other vital goals that must be chased.

The global automatic tea bag packaging market is expected to see a 4.9 percent average growth through 2026, owing to surging tea production and consumption in the coming years, primarily in the emerging economies of India and China, forecasted Mordor Intelligence (MI), an Indian think tank.

Packaging has a significant role to play in the expanding tea market as it not only protects and preserves the product within but also enables brand communication. It is perceived to be almost as crucial as the selection of the tea product itself and is a driving factor for the increasing versatility of tea packaging, with luxury aesthetics and smart carton design at the forefront of consumer attraction, MI analysts stated.

“Consequently, the packaging equipment manufacturer must explore long-term investment opportunities in versatile and adaptable packaging equipment to increase output, reduce labour costs, and maintain a foothold in the market,” per MI.

Among the key vendors in the tea packaging market, the MI study lists Teepack Spezialmaschinen GmbH & Company KG, Selo Group, Xiamen Sengong Packing Equipment Co Ltd, Liaoyang Conoval Machinery Co Ltd, ACMA SpA, FUSO International, IMA Group and Sammi Packing Machine Co Ltd.

All tech suppliers tend to shape up their offer in their own way, but there are some common trends everyone in the industry clings to.

Individually tailored solutions

Teepack recently presented a new model of the Constanta machine family – a highly popular tea-bagging line. Mario Kuhn, Teepack’s sales and marketing manager, disclosed that the company kept the characteristics of the old Constanta by being a rugged, reliable machine that does what it is supposed to do: producing good tea bags around the clock.

In addition, Teepack added flexibility by implementing a platform approach using standardised modules and connecting points. “If the machine is delivered in a certain configuration, it is easily upgradable and amendable in the field. For example, the version with a speed of 180 bags per minute (BPM) can be rebuilt in the field into the 250 BPM version,” Kuhn said.

“The same goes for envelopes: if your machine is equipped to produce heat-sealed envelopes, the machine can be upgraded in the field to produce also crimped paper enveloped bags. This benefits a customer in that the machine can grow with their requirements and allows them to react flexibly to new market developments, without having to buy completely new machinery,” he explained.

This approach also allows Teepack customers to use a multitude of consumables. The customer can decide which modules fit into the slots for consumables, so that they can produce with their current supply. The customer can choose from a total of 1320 possible configurations: two bag sizes, two types of envelopes plus naked bags, two speed versions and three types of removal options are just a few of the options available.

“We are especially proud of our newly developed pre-grouping system for the Constanta. The ejection chute is formed in a way, that an empty box can be put in front of the opening and the pusher pushes the stack into the box. With that innovation, the speed of 250 bags per minute can be operationally used without having to acquire additional staff. For the mature markets, a box erector with filler and lid closer is available, further automating the process if so desired,” Kuhn said.

With Industry 4.0 pushing network-centric connectivity, Teepack is currently looking into how to best apply these new and exciting opportunities for the benefit of its customers. Integrating the machines into a network and presenting the machine’s data in an easy-to-understand way helps to further improve reliability and profitability. Virtual reality is also a field in which there is a lot of potential. This technology enables customers to train personnel while being able to continuously produce with their machines, Kuhn explained.

Sustainability seems paramount

The desire to be more sustainable has become a primary concern in the tea bag packaging industry, the MI study has shown. Packaging equipment manufacturers are increasingly adopting automation in their production lines and adhering to sustainable trade initiatives throughout the world.

Nandini Roy Choudhury, client partner of Future Market Insights (FMI), an Indian consulting agency that recently conducted a comprehensive study of the global pyramid tea-bagging market said that the switch towards pyramid-shaped tea bags itself is one of the key consumer trends tech vendors need to address. The growth in this segment in the coming years is expected to outpace the rise in demand in the global tea market.

“Pyramid tea bags have gained popularity as premium tea products for several reasons. First, pyramid tea bags offer a higher quality tea experience compared to traditional flat tea bags. The pyramid shape allows for more space for the tea leaves to expand and infuse, resulting in a better flavour and aroma,” Choudhury said, agreeing that sustainability plays a particularly important role in the tea bagging industry now.

“Consumers are becoming more environmentally conscious and are looking for products that are packaged in a way that minimises their impact on the environment,” Choudhury explained, adding that customers globally are becoming increasingly aware of the impact of packaging waste on the environment. A particularly important factor is that consumers are willing to pay more for products that are packaged sustainably. “Pyramid tea bags that are packaged using sustainable materials and practices are becoming more popular as consumers look for ways to reduce their environmental footprint.”

When it comes to the growing popularity of sustainable solutions, there are several factors in play. Many governments around the world are introducing regulations to reduce packaging waste and promote sustainable packaging practices. This means that tea bag brands that adopt sustainable packaging practices can avoid regulatory penalties and maintain their market share, Choudhury said.

“Sustainable packaging practices can also create opportunities for innovation and differentiation. Brands that use innovative sustainable materials and packaging designs can differentiate themselves in a crowded market and appeal to consumers looking for new and sustainable packaging solutions,” she added.

Different tastes

The MI study disclosed that when choosing tea-bagging equipment not all tea manufacturers seek the same features. For instance, larger manufacturers in developing nations are anticipated to increase their use of tea packaging materials and adopt new packaging technologies to address issues such as contamination, extend the shelf lives of their products, and make them more aesthetically appealing.

Smaller firms in these countries are expected to mechanise tea-packaging processes to expand output and increase efficiency, further boosting tea bag-packaging machinery demand.

Laura Maria, sales area manager with Italy-based IMA Maisa said that the company primarily focuses on providing customers with easy-to-use solutions. “Our machines are very simple to operate with high performance, extreme simplicity, and mechanical sturdiness which are the most outstanding advantages we offer,” she said, adding that customers are also looking for better automation of their packaging lines.

The FMI study further disclosed that sealing is an important field in which a growing number of companies see room for improvement. “Traditionally, heat-sealing has been the most common method for sealing tea bags, but there is growing interest in alternative methods such as ultrasonic sealing, which can offer faster production speeds and reduce the need for adhesives,” Choudhury shared.

MI also said that the demand not just for an individual tea bag but also overwrapping for a tea bag is gaining popularity to preserve freshness, and for those consumers wanting hygienic and premium design. “Thus, packaging manufacturers are [developing] machinery that not only forms the bag but will also wrap the product,” MI analysts disclosed.

Streamlining operations

Manufacturers are designing solutions to make tea-bagging lines more effective. New Jersey-based Munson Machinery does not manufacture tea-bagging equipment, but its mixers are typically positioned upstream of tea bagging and packaging lines, which as explained by Susan Schaaf, office manager of Munson, require totally uniform blends to maintain consistent flavour.

“Because Rotary Batch Mixers continue to rotate during discharge, they prevent stratification and segregation of the batch regardless of disparities in the size, shape or bulk density of ingredients. This is especially critical when filling individual tea bags, since variations in blend ratios are likely to increase as the size of a given sample decreases,” Schaaf said.

While Munson Machinery offers eight types of mixers and blenders, the company’s Rotary Batch mixer design remains the clear preference among tea processors worldwide remains due to its tea-specific performance advantages including: rapid, gentle blending, fast cleaning, and equal efficiency, Schaaf added.

New form, new meaning

Sustainability has truly taken center stage across all sectors, and tea bagging is not an exception, said Viju Vasishta, sustainable materials expert at PA Consulting, which has recently rolled out an innovative product — tea sheets, designed to be an alternative to conventional tea bags. Vasishta said that the product is currently in the prototyping phase, though the company has already demonstrated the proof of principle in terms of performance compared to standard tea bags.

Brand owners will have to make their packaging sustainable, especially for end-of-life purposes such as recyclable and plastic-free, due to both consumer and regulatory pressures, Vasishta claimed. “Currently, some branded tea bags are packaged in foil wrap and other flexible plastic packaging, and the sector needs to be innovative to either fully eliminate the wrap or use alternative sustainable materials which can be recycled,” he explained, adding that paper and pulp are emerging as key substrates across many food and FMCG packaging and a similar movement regarding these materials is seen for the tea sector.

Generally speaking, the tea-bagging sector lacked groundbreaking innovations in the past few decades, Vasishta shared. “Consuming tea should be a moment of joy for the consumer, and we haven’t seen much innovation in the tea-bag market over the last few decades. We see the same format of tea bags with slightly varying shapes, and the consumer experience feels pretty flat,” Vasishta admitted.

“The [coffee sector], for example, has made the concept of coffee into a premium product. The tea sector has not yet reached that level of innovation. There is an appetite for the tea sector to transform itself, but brand owners are risk averse, and therefore, we are seeing low levels of innovation,” he said.

Digitalisation on the horizon

Automation and robotics are already being used in tea-bagging production to some extent, but the industry may see further advancements in this area, particularly in terms of the use of artificial intelligence and machine learning to optimise production processes.

Choudhury assumes that integration with technologies is not limited to automation. “There is already some integration between tea bagging and technology, such as the use of smart labels or QR codes to provide consumers with more information about the tea they are consuming. We may see further integration in the future, such as the use of augmented reality or virtual reality to enhance the tea-drinking experience.”

“Overall, as consumer preferences and technological capabilities evolve, the tea-bagging industry will likely continue to see innovation and advancements in production processes,” Choudhury added.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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“Let food be thy medicine and medicine be thy food” harkens back to Hippocrates, the Greek founder of western medicine. This famous quote is a thousand years old, though it has never been as relevant as in the post-Covid era.

Functionality is the most prevalent trend in the non-alcoholic beverage industry, said Jochen Kistner, director of category marketing, EMEA, at Chicago-based Archer Daniels Midland, adding that what originally began in Europe in the 1980s with energy drinks for athletes has now turned into a much broader social phenomenon, with 68 percent of consumers worldwide in 2021 preferring to buy drinks with additional functional benefits.

The list of functional ingredients used in the coffee industry is long and constantly grows as more companies enter the segment with new offerings. Cannabidiol, mushrooms, superfruits, spices, antioxidants, and herb extracts are the most common examples, but the opportunities in this area are far from being exhausted.

The market is heading up

Analysts expect functional coffee to enjoy a strong growth in popularity in this decade. International think tank, Research and Markets, projects global sales to rise on average 5.9 percent per year between 2022 and 2027.

Image: Capsoil FoodTech, by Prodalim, Ltd

Technavio, a London-based consulting firm, forecasts a similar growth pace in 2021-2026, resulting in a rise in global sales by USD $2.36 billion during this period.

There is no consensus between the analysts about the current size of the global market, though. ReAnIn, an Indian research and consulting firm, also puts the compound annual growth rate of the global functional coffee market at 5.9 percent in 2018-2028, calculating however, that this would boost sales by only $1.1 billion to around $3.3 billion. This confusion primarily comes from the difference in research methodology and criteria of what coffee to attribute to functional.

Nevertheless, all analyst groups agree that the demand will rise in the next several years as consumers want double-duty from their favourite beverages.

“Consumers are developing an affinity for functional beverages seeing them as a suitable, convenient, and healthy alternative to soft drinks. The organoleptic versatility associated with functional coffee makes it open to manufacturers to innovate alongside the healthy trends,” Research and Markets said.

Technavio estimated that one of the key factors driving the global functional coffee market growth is the increasing popularity of coffee among millennials.

“An improvement in economic conditions and an increase in job opportunities have made different types of coffee more affordable to young consumers. Millennials tend to spend more on premium beverage brands and are also keen to experiment with new types, brands, and flavours of beverages,” the analysts said.

Millennials also tend to socialise more, especially in coffee shops. This has led to a surge in the number of coffee shops, which has further strengthened the global functional coffee market. In addition, rising disposable incomes in emerging Asian, Eastern European, and Latin American consumers is also contributing to the growth.

No compromises

“The challenge for developers is to find the right balance between functionality and taste,” Kistner said, adding that consumers want targeted nutrition, including ingredients benefitting alertness, relaxation, or concentration. On the other hand, consumers don’t want to compromise on taste to enjoy the product.

When functional ingredients become part of a beverage formulation, product appearance, taste, and even texture can all be impacted, which often becomes a challenge.

“Our first attempts at functional coffee were ridiculous as hell. We just took ginger root, grated it and kneaded it into the coffee. It was still ugly. But more importantly, it had nothing to do with that idea of a functional drink,” said Alexander Afanasiev, spokesperson for Biwell International SA, the manufacturer of Swiss premium, functional infused coffees. In 2019, the company launched Da Maestri capsules, a family of offerings compatible with Nescafé Dolce Gusto’s professional-grade single-serve coffee machine.

“At this point, we clearly realised the obvious — we will have to work very hard and for a very long time,” Afanasiev said, adding that it took the company years of time and tonnes of R&D to make a range of coffee that is functional and has an appealing taste.

Image: Biwell International/Da Maestri

The types of functional coffee mostly in demand on the market are those improving brain and memory function and cardiovascular system. The Covid-19 pandemic also bolstered the demand in the segment of coffee for immunity and digestive system, Afanasiev said.

SolaBev, a US-based proprietary single-serve capsule system for making filter coffee, also spent a lot of time developing functional coffee drinks, said Michael Szyliowicz, the founder. “The two types of drinks we have developed are CBD-infused and mushroom coffees. Both types represent trends that I believe will continue to grow as more consumers become aware of the benefits of both,” he added.

One of the most surprising discoveries the SolaBev team made was that the functional coffee market was full of misleading information about the available products. “Last year, one of our coffee roasters partnered with a CBD company to provide single-serve capsules infused with their CBD. Although there are many different coffees available with CBD, we found that most of the claims that were made were very misleading. Most of the CBD coffees for sale tout the amount of CBD in the bag or in the K-Cup, but do not address the issue of how much CBD is actually present in the cup after brewing,” Szyliowicz said.

“We tested a number of brands and found that most of the claims were wildly inaccurate. Because SolaBev is a proprietary capsule, we were able to ensure that the amount of CBD claimed, in this case, 15mg, was the amount measured in the cup,” he added.

CBD-infused coffee is believed to be one of the fastest-growing segments of the functional coffee market. Analysts put the annual growth in sales on the CBD coffee market between 14 percent and 27 percent in the coming years. On the other hand, coffee with mushrooms is a slow-growing category, Szyliowicz said.

Health benefits under question

The concept of functional coffee is tightly linked to adaptogens — plants and mushrooms believed to help your body respond to stress, anxiety, fatigue and overall well-being.

Over the years, people used to take adaptogens by adding them to food or beverages or take them as tinctures. Their popularity spiked during the Covid-19 pandemic, but so far, the science of adaptogens remains disappointing.

Image: Haley Sliwa

The term ‘adaptogen’ was first proposed in 1940 by Soviet scientist Nikolay Lazarev when he described “Schisandra chinensis” (plant with high potential for beneficial health effects such as anti-cancer, anti-aging; anti-obesity, anti-diabetes) and other herbs with the following definition: plant-originated adaptogens that can non-specifically enhance the human body.

Soviet nutritionists heavily studied several adaptogens during the World War II in an attempt to improve the performance of soldiers on the battlefield. In the following years, more than 1,000 studies were conducted on dozens of various adaptogens. In the 1980s, adaptogens even became a part of the popular myth of the Kremlin Pill – a legendary top-secret medicine that was said to cure all diseases.

A 2018 review conducted by a group of Chinese researchers on studies of adaptogens showed the clinical application of plant-originated adaptogens and their use in healthcare products remains in the preliminary stage. Some of the most widely used and popular adaptogens have never been adequately tested or appeared to have no suggested health benefits.

In a blog at the website of McGill University, Jonathan Jarry, MSc, pointed out that adaptogens have had a thick glop of marketing smeared all over them. “Product labels and social media influencers will parade limitless claims: adaptogens are said to sharpen your memory, boost your sex drive, rid yourself of exhaustion, help stabilise your blood sugar, and fight cancer. They might also assemble your IKEA furniture for you and help you with your financial investments if they had opposable thumbs and direct access to your bank account,” he said.

The relatively few studies on adaptogens done in humans tend to be disappointing. They often lack randomisation, recruit only healthy people, and they don’t specify the dose of the herb that was tested. Reviews of the evidence often conclude that, at best, adaptogens may help with stress and fatigue and that more studies are needed. At worst, there is no indication they have the claimed clinical benefit, according to Jarry.

The same goes for CBD, which seems to be everywhere, but scientists still don’t know much about it. The Food and Drug Administration (FDA) of the United States has approved only one drug containing CBD, Epidiolex, after clinical trials found it reduced seizures in children with two rare, severe forms of epilepsy. However, most studies on the effect of CBD on the human body remain controversial.

Scientists admit that CBD, as well as some other ingredients currently widely used to produce functional coffee, enjoy a lot of hype, but as customers are constantly becoming more demanding and knowledgeable, the long-term growth of the market is not guaranteed.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Still, analysts express concerns that some companies try to present their products as more eco-friendly than they actually are. There is even a special term to describe such dishonest behaviour: greenwashing. It was coined in the 1980s by environmentalist Jay Westerveld originally to describe a widespread practice under which hotels were marketing their reusable towels as part of an environmental conservation effort while, in fact, this was only a cost-cutting solution.

Some recent marketing studies have shown that more than half of consumers in the Western world opt for products marked as environmental-friendly, sustainable or having a lower carbon footprint. Most importantly, consumers say they are ready to pay more for eco-friendly products. This trend is here to stay, and it’s already proved its resilience in the face of a pandemic, economic crises, and even wars.

Over the past few decades, green labelling was thought to be a silver bullet for combatting greenwashing, but currently, it is equally different for consumers and company executives to make sense of the existing environmental labels. The European Commission estimated that there are 200 environmental labels active in the EU and more than 450 worldwide. Furthermore, there are more than 80 widely used reporting initiatives and methods for carbon emissions only. Some are more reliable than others, but the system remains confusing for consumers and manufacturers.

Some countries have designed a comprehensive legal framework to battle greenwashing. For example, London-based law firm Freshfields Bruckhaus Deringer LLP recently stated that greenwashing claims were rising in Germany over the past few years, adding that the law requires businesses to disclose more details about their products rather than using some cliché.

For instance, the lawyers explained that most courts found that advertising a product as ‘climate-neutral’ has an insufficiently clear meaning to consumers. In this background, businesses are best advised to be cautious about their climate-related advertising claims and should be prepared to prove the accuracy of such claims.

Some green solutions require no explanations. For example, Migros and its subsidiary Delica AG have recently introduced the first coffee capsule system without a capsule, known as Coffee Ball. The innovation is available throughout Switzerland and France and will be launched in Germany in spring 2023. The Coffee Ball is a small ball of pressed coffee covered only by a protective layer. Instead of aluminum in this system, an oxygen barrier is used to protect the coffee from the loss of aroma.

The environmental impact of such innovations is clear. The coffee pods – usually constructed from plastic or aluminum – take a mammoth 500 years to decompose. Millions of pods end up at landfills every year, despite efforts of the government to ramp up plastic recycling volumes.

Other market players are paying attention to this problem too. For example, Nespresso has created a paper-based home compostable capsule that will be piloted in Spring 2023. The company said that is uses biopolymer lining inside the capsule which protects the coffee against spoiling through oxidisation. Instant Brands has also introduced new compostable coffee pods and espresso capsules.

Fighting against greenwashing is crucial so that sound companies, truly investing in eco-friendly innovations and making a difference, could eventually benefit from their achievements.

In Europe, some positive development in this field might be in the pipeline. In March 2022, the European Commission published a proposal amending the Unfair Commercial Practices Directive and the Consumer Rights Directive, the main target of which was to enable consumers to make more informed purchasing decisions.

The proposal extended the list of unfair commercial practices to those associated with greenwashing and amended the list of product characteristics about which businesses must not deceive a consumer to include environmental or social impact, durability and reparability. This is considered a positive and timely development, but will unlikely end greenwashing, including in the European tea and coffee industry, completely.

• Vladislav Vorotnikov is a Batumi, Georgia-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Russian tea and coffee industry association Roschaicoffee forecasted a 5% to 7% drop in consumption in 2022. This is described as a technical correction, not comparable to a 30% slump in demand during the first lockdowns imposed in the country to slow down the spread of Covid-19 in the first half of 2020. So far, coffee roasters across the country have managed to maintain business as usual. 

In August, the Russian Agricultural Ministry ensured Russians that no shortage of coffee or tea on the domestic market was anticipated. It was said that almost all supplies of raw tea and coffee came from countries deemed as friendly. The largest tea suppliers to Russia are Kenya, Sri Lanka, China, and Vietnam, while in coffee it is Vietnam, Brazil, Italy, and Indonesia. Except for Italy, these countries have not joined the Western sanctions imposed against Russia over its invasion of Ukraine. 

However, the Russian government’s optimism is not entirely justified. Between April and May, Russian imports of raw tea and coffee were halved compared to the year-ago period. Ramaz Chanturia, general director of the Roschaicoffee, attributed these dynamics to the logistics crunch, as the majority of product batches from Asia and Latin America were passing through European port hubs. However, the world’s leading cargo carriers have refused to call the Russian ports, and the Russian vessels are banned from calling the European ports. 

Russian companies are struggling to rebuild the logistics chain redirecting supplies to Iranian and Chinese ports, Chanturia disclosed, expressing confidence that the problems would be eventually solved. Still, there are signs that even so, the new logistics schemes are associated with extremely high costs and extended delivery times. Local market players warned that, on average, it takes 90 days for a shipment to be delivered to Russia, compared to the usual 35 to 40 days. 

In 2022, tea and coffee jumped in price in retail in Russia by 30% to 60%. Russian retailers attribute the upward price rally to problems with package and logistics. However, the rise in costs is still partly downplayed by the strong ruble. Most forecasts expect the Russian currency to weaken substantially in 2023, so the Russian market will likely be braced for another upward price rally. 

Western Business is Fleeing 

Since 24 February, over 1,000 companies have withdrawn from Russia, as estimated by Yale University. This list includes the largest tea and coffee companies and keeps growing. In August, Rotterdam-based tea company Ekaterra announced plans to leave the Russian market. The company, which owns some of the most popular tea brands in Russia, such as Lipton and Brooke Bond, promised to suspend production in the country by the end of the year. 

Russian newspaper Kommersant reported that the Unilever factory in St Petersburg where Ekaterra products are packed, may be shut down permanently. 

However, the Russian government threatened foreign businesses suspending operations in the country with forced nationalisation of their production assets. The strategy called to prevent an outbreak of unemployment means that by simply setting the production facilities offline, the owners could eventually lose them. This has already happened with the Renault plant, nationalised by Moscow authorities in May to revive the production of an old Soviet brand. 

In this background, most companies severing their ties with the Russian market prefer to sell their production assets to Russian investors, providing they manage to find any. Thus, in August, Laurens Spethmann Holding AG & Co, owner of the Milford brand, sold its Russian division to local management. A similar step was made by Tchibo, which sold the Russian business to the general director of Tchibo CIS, Mikhail Kovalevsky. Beginning in 2023, Tchibo CIS must stop using any brands and labels related to Tchibo. 

A Delayed Effect 

Under the pressure of unprecedented Western sanctions, the Russian economy has not crumbled, and things seemingly remain normal from the outside. However, it would be wrong to say that the sanctions are not working. 

Russia may face a longer and deeper recession as the impact of US and European sanctions spreads, handicapping sectors that the country has relied on for years to power its economy, Bloomberg reported in early September, citing an internal report by the Russian government. 

The report paints a dark, gloomy picture of a deep and protracted recession, expanding sanctions, a drop in exports and a lack of critical imports. Furthermore, the Russian budget would lose the lion’s share of its revenue from selling oil and gas — a backbone of the Russian economy for the past few decades. The Russian economy could return to the 2021 level only around 2030 or even later. Mass immigration of the most skilled workers coupled with the demographic crisis would also take a toll. 

The crisis is expected to cause slow but steady degradation of the Russian economy, affecting all segments of the consumer markets without exception. The Russian population’s falling purchaser power will gradually change consumer habits, as customers would be forced to switch to lower quality, cheaper alternatives, avoid unnecessary purchases and start counting calories. The Russian tea and coffee markets will likely shrink in the years ahead. 

In addition, there are huge concerns over the future of the Russian tea and coffee factories. Russia produces nearly 85% of consumed tea and coffee domestically, but all factories run predominantly on Western equipment and technologies. Importing equipment and spare parts into the country is a tricky task right now. This factor already hurts several other industries. 

The Russian government has introduced a parallel import scheme to help the economy face this challenge so that the necessary goods and equipment could be imported through third companies, including in neutral countries like Turkey and China. However, this tool has not proved worthy so far. All in all, the future of the Russian tea and coffee industries look exceptionally challenging and highly unpredictable. 

• Formerly based in Russia, and now living in Georgia, Vladislav Vorotnikov is a multimedia B2B freelance journalist writing about the tea and coffee industry. 

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Coffee is a fundamental part of Italian culture. There are about 162,000 coffee bars in Italy on average serving 175 cups of simply espresso every day, the Italian Federation of Public Exercises estimated. As many as 97 per cent of Italians drink coffee several times during the day.

An average Italian spends EUR €260 a year on coffee, which includes consumption at home, at the coffee bars, and in the office, according to Coffee Monitor Nomisma. Some researchers even suggest that Italians drink so much coffee because of having a gene that influences the daily need for caffeine. In other words, Italians may have a passion for coffee written in their DNA.

Image: Segefredo Zanetti Italia

This makes Italy the third-largest coffee-consuming country in Europe. The Italian coffee market was valued at USD $3.16 billion in 2020, research conducted by Mordor Intelligence showed.

“Espresso is an icon of Italian consumption habits. Its rituality is codified and is hardly affected by major changes or fashions,” commented Nicolas Peyresblanques, CEO of Segafredo Zanetti Italia.

When it comes to consumption preferences Italian espresso has its own distinctive features, mostly linked to geographical areas, as in southern Italy the most consistent and strongest blends are preferred, whereas in northern Italy the roundness of flavour and the softness of extraction are favoured, Peyresblanques said.

The Italian market has always been considered rather conservative. There are certain rules of coffee consumption: a cappuccino with breakfast, a caffè macchiato – or two – as an afternoon pick-me-up, and espresso after dinner.

Image: Illycaffe

As explained, by Peyresblanques the charm of the traditional moka pot is handed down from generation to generation, so much so that coffee prepared with moka pots still accounts for 70 per cent of the consumption at home.

However, the demand for premium products has been increasing across the board. For example, the turnover in the 100 per cent Arabica coffee segment increased by 8 per cent in 2021 to €224.4 million compared to the previous year, research conducted by Nielsen showed. The single-origin coffee sales soared by 35 per cent to €12 million. Organic and capsule coffee products also enjoy rising demand.

“A new value system embracing all aspects of Italian people’s lives is taking hold making their future technological, green, healthy, and ethical,” Peyresblanques said.

Sting of the Pandemic

Wreaking havoc on the traditional coffee bars and locking people at home for an extended period of time, the Covid-19 pandemic has seemingly made a major shift in consumer preferences.
“The pandemic had a very strong impact on the hospitality sector, as bars and coffee shops were very affected but, at the same time, [retail] sales increased a lot,” commented Giacomo Vannelli, co-owner of Vannelli Coffee.

Vannelli explained that Covid-19 “let people re-discover the beauty to find the right time to make a coffee at home. Drinking a coffee in Italy has always been a fast ritual at the bar counter but finally, we can see that the trend is changing, and some people prefer making a coffee at home, maybe using different extraction methods despite the ‘classic ones’ such as the moka pot or espresso.”

The most recent statistical data shows that nearly 7,000 coffee bars were closed in Italy during the Covid-19 pandemic. The worst affected was Lazio, where the number of bars dropped by 10 per cent or 1,860 units. In Marche and Friuli Venezia Giulia, the number of bars dropped by 6 per cent, while in Tuscany, Veneto, Lombardy, and Trentino Alto Adige by 5 per cent.

The Covid outbreak had a strong impact on the out-of-home segment, leading to losses that have reached 37 per cent compared to last year, the Italian statistical service Istat estimated. The sales are yet to return to the pre-crisis level.

Image: Vannelli Coffee

“In such a challenging scenario, Segafredo Zanetti has tried to support its customers and agents at its best, both financially and emotionally, as we are convinced that the human factor is the engine of relaunching in crisis periods,” Peyresblanques said.

In 2021, the market recorded a slight drop in turnover by 1.5 per cent compared to the previous year. In light of this, the single-serve segment continued its path, already begun in the previous years, settling on higher turnover levels than in 2019, reaching 44 per cent of the market value, Peyresblanques said, citing the Nielsen research.

Rise of Specialty Coffee

The pandemic also pushed some consumers to try specialty coffee, opening a new chapter in the history of this segment in the Italian market.

“Choosing to have some time for themselves, people chose also to get better quality products and so many approached the specialty coffee world,” Vannelli said. “The young generation is, in our opinion, the main driver of the specialty coffee market. Young people are looking for high-quality products, caring about values of sustainability, traceability and human rights.”

“The traditional coffee offer has been increasingly enriched by specialty coffee recipes in bar and restaurant menu cards to satisfy the expectations of those demanding consumers who aim at experiencing a totally fulfilling coffee ritual,” Peyresblanques said.

Alberto Polojac, owner of Bloom Coffee School and the national coordinator of the Specialty Coffee Association (SCA) Italy, commented that while the specialty coffee market in Italy has huge potential, the market as a whole is still yet to recover.

“The positive sign is that big companies and brands are going into the specialty coffee segment. For example, Lavazza has recently launched its own brand in 1865, which is the foundation year of the company, and there is a lot of buzz about the specialty coffee in food magazines, and newspapers”, Polojac said.
“The market is very traditional, and it’s definitely growing,” Polojac commented, adding that SCA Italy spends a lot of effort to improve customer awareness about specialty coffee, including attracting influencers, with a famous Italian model Chiara Ferragni is the most recent example.

Image: Lavazza

“I see a huge potential of this segment in combination with traditional pastry, which is growing here in Italy. We see good examples in France, where pastry shops and the boulangerie are matched with specialty coffee shops. This is not happening yet in Italy, but we anticipate a boom in this segment in the next few years,” Polojac said. On the other hand, the current price fluctuations in the coffee beans market don’t help the coffee consumption, including in the specialty coffee segment, Vannelli said.

“People mustn’t lose purchasing power: we hope for no more restrictions, which could hinder the sale of a primary good, turning it into a luxury good,” Vannelli said, adding that despite everything, the company maintains a positive future perspective where the demand for specialty coffee will grow along with a conscientious and aware consumption.

Era of Blockchain

In the meantime, Italian coffee companies have also started employing new digital technologies both to improve traceability and to offer new payment methods.

For instance, Segafredo decided to launch a single-origin 100 per cent Arabica Rainforest Alliance-certified organic coffee, with an entirely transparent and traceable origin thanks to the blockchain technology that tells the full story behind each cup, enabling consumers to enter the farmers’ world and making them aware of the long journey it took and how much effort and passion it required, always respecting the people, the communities and the countries involved.

In a 2020 IBM survey, 44 per cent of all Europeans said it would be very valuable to have more information on the farmers who grow their food. A staggering 92 per cent of Italian consumers agreed that having food traceable on the blockchain would be valuable.

Segafredo is not the only company turning its sights on the blockchain. Caffè Barbera, which claims to be the oldest coffee roasting company in Italy, recently announced a new partnership with Algorand to use its blockchain for immediate and decentralised payments.

In 2021, Caffè Barbera started accepting payments in cryptocurrencies but limited to Bitcoin, Ethereum, and XRP. The new partnership will expand this list to ALGO, USDT, USDC, BUSD, DAI, BNB, Litecoin, Bitcoin Cash, XLM, and Tezos. In addition, this partnership will also be extended to business-to-consumer payments, using the Bleumi Pay payment aggregator, the company said.

The Organic Segment Looks Promising

The organic segment, which in other product categories has significantly influenced consumption trends and the organisation of on-shelf products, has been only slightly growing in the coffee market, perhaps less than expected, with a limited impact on the category, Peyresblanques said.

Nielsen estimated the organic segment turnover at €9.1 million in turnover in 2021, which corresponds to 0.7 per cent market share in value, and 0.5 per cent market share in volume. However, the demand from the market and the interest from younger consumers suggest that even this trend could have wide margins of growth.

Moka pot. Image: Pexels/Elle Hughes

“This is why our range –already including a wide option of premium blends –was enriched by organic products many of which present the Rainforest Alliance certification, the most accredited in the coffee market at present, synonymous with sustainable agriculture and better opportunities for the farmers, their families, and our planet,” Peyresblanques said.

The green agenda is not only limited to organic coffee. Italian customers are also paying a lot of attention to the package.

“In line with these trends, we are working to offer 100 per cent sustainable products, with recyclable or compostable packs: we have almost abandoned the packaging used on the market until now, consisting of dissimilar materials and therefore not recyclable to allow the disposal of our packaging in their cycling circuits, so to avoid waste creation,” Peyresblanques added.

• Vladislav Vorotnikov is Moscow-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012.

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Changing consumer habits and the development of grocery retailers are shaping up the private label segment of the tea and coffee market across Europe. The growth potential in this segment is yet to be exhausted, especially in the eastern part of the continent, where market players are now catching up with Western trends.

Over the past few years, private label coffee has been increasing its presence in the European market. Numerous European supermarket chains put their own brands on the shelves, such as Perla from Dutch supermarket Albert Heijn, E.Leclerc’s L’origine du goût in France, and Tesco Finest and Marks & Spencer in the United Kingdom.

Private label tea at Netherlands-based grocery store, Albert Heijn. Image: World Brand Design Society Website

Nowadays, it is believed that the share of the private label tea and coffee products is the highest among discounters, and they could drive growth in sales in Europe even further.

“Private label genesis and evolution are impossible without developed modern grocery retailers. Further penetration of discounters, especially in Eastern Europe, brings more space for private label moves and initiatives,” commented Julija Poliscuk, senior analyst of London-based market research company, Euromonitor International. “This is the main factor for healthy dynamics of retailers’ own brands across hot drinks. Channel shift transforms private label to comprehensive and trusted brands,” she added.

The entire European market is currently under an influence of the rising production costs, which affect all links in the production chain, and change consumer attitudes, Khansaa Ruiz, export manager of the Alicante-based coffee factory Burdet Coffee said. “There is a major crisis. Roasting factories are suffering at the moment because of the increase in coffee prices. We have been struggling to keep business going. The coffee prices have escalated tremendously due to the Covid-19, then due to the transport problems, and now due to the war. So, it’s a bit chaotic.”

“As for the private label coffee the trend is towards higher quality coffee, or at least this is our business, and we do see an increase here,” Ruiz said. She explained that there is a relatively high demand for new brands on the market. In general, many small businesses and people are looking for small business opportunities, and the market witnesses a very important increase in small businesses, including those wanting to create online websites to sell coffee.

“As for the quality of the coffee, we see that more and more a single-original coffee is being sold better. [This concerns] pure coffee, such as Colombian, Ethiopian, Guatemalan, Costa Rican, etc. People are starting to appreciate the meaning of good quality coffee,” she added.

Alberto Lusini, head of Northern Europe at Massimo Zanetti Beverage cited New York-based consultancy, Nielsen, estimating that private label share in the European coffee market is between 10 per cent and 25 per cent. “This data has had a relatively constant growth in past years. Private labels in the mass market and food service are no longer synonymous with entry-level pricing,” he explained.

The private label segment developed an important evolution in terms of innovation and improvement in quality, typical of the branded business, Lusini said, explaining that trade labels are answering the needs of consumers for additional transparency, and traceability, in case of single origins, and sustainability. “The increased sales of coffee beans is proof of a trend to bring the barista experience at home,” he added.

Poliscuk said that another reason why private label coffees are so popular is that there is more variety. “Most supermarkets offer several quality options and coffee from different origins. Many supermarkets have entered the premium segment and are expanding their range of certified coffee products. Retail sales of organic-certified private label brands are increasing. Examples of organic private label brands in Europe include REWE Bio in Germany, Carrefour Bio in France, and Waitrose Duchy Organic in the UK.

Covid-19 as a game-changer?

The coronavirus pandemic has reshaped the European grocery-retail landscape tremendously. With restaurants, cafés, and bars remaining largely closed in most countries during at least the first wave of the pandemic, consumers rushed to stock up on groceries.

The out-of-home coffee market was greatly affected during the Covid-19 crisis, said Utrecht, Netherlands-based consultancy ProFound-Advisers, in a post shared by the Dutch Centre for the Promotion of Imports from developing countries. Many coffee shops closed, and people worked and drank coffee at home instead. Coffee sales at supermarkets went up, which benefitted private label brands, and created a trend.

“Early in the Covid-19 pandemic, consumers around the world rushed to supermarkets to stock up on products. Retail sales went up a lot. Retailers also developed online sales and delivery solutions for consumers. This made supermarkets the main source of food and beverages during the pandemic,” the Dutch analysts added.

MZB says the demand for private label coffee is growing across Europe. Image: Massimo Zanetti Beverage

Lusini agreed, adding, “The Covid-19 pandemic and, even further the strong inflation on raw materials from Q4 2021, has pushed consumers towards private labels. In particular, the inflation driven by the strong price increases in green coffee has polarised the consumers towards entry-level prices on one side, and premium products on the other. Private labels could possibly take advantage of this.”

However, it is yet to be said that the Covid-19 pandemic has been a game-changer for the hot drinks market in Europe. Poliscuk explained that financial hardship caused by the pandemic forced consumers to re-think their spending, so value for money embodied in private label quickly became a priority, but that trend is primarily related to soft drinks. “Branded products remain important within hot drinks, due to their indulgence and rituality essence, in addition to the request for quality differentiation. Neither tea nor coffee of retailers’ owned brands did not gain share in 2020,” she added.

The European market is uneven

Private label hot drinks’ presence in Europe is not homogeneous and differs regionally and from country to country.

In 2021, almost 16 per cent of value sales of coffee and 14 per cent of tea in Western Europe were under retailers’ house labels. Meanwhile, in Eastern Europe this indicator does not reach 5 per cent for coffee and is 7 per cent for tea, Poliscuk said.

“The significantly stronger presence of private label in the Western part of Europe is explained with strongly developed chains of modern grocery retailers and already earned trust to own brands. Eastern Europe is only catching up with Hungary, Czech Republic, Poland, and Slovakia pursuing a Western model, with the strongest share of retailers’ brand overall and in hot drinks too,” Poliscuk noted, adding that these countries successfully adopted international – or developed their own – discount chains.

Single origin coffee is making its way into the private label segment. Image: Burdet Coffee

Different levels of development of store-owned brands define the way companies raise these products’ awareness. Thus, Eastern Europe usually puts the focus on low cost. More advanced chains enter the mode of portfolio expansion and product range broadening. Eastern Europe has already witnessed the evolution of basic needs’ satisfaction to catching up with expertise from brands they mimic, Poliscuk said.

Rising beyond the low-cost segment

As the popularity of private label products in Europe promises to gain traction in the coming years, this segment starts playing an increasingly important role for market players.

“We have a long-standing experience in private labels, both in mass market and food service. The management of private labels is part of our ongoing relationship with the trade at the global level and it represents one-fourth of our total turnover. We leverage our strong expertise in green coffee and the roasting capabilities of 18 plants located all over the world to support our PL clients,” Lusini said.

Poliscuk said that further projected penetration of modern grocery retailers and especially discounters will support the development of private labels across Europe with the highest dynamics in its Eastern part. “Private label in Western Europe is entering a new era where penetration of modern grocery and a developed omnichannel allow them to evolve towards something new and unique. Retailers’ own brands are ready to rise beyond low-cost, wide assortment and segmentation,” she said.

Currently, these brands target specific consumers’ needs and higher expectations with little or no sacrifice in terms of product quality. Poliscuk is confident that this will result in more private label coffee pods and fresh coffee beans with the underlined origin and technology of roasting, and private label tea will be able to offer more varieties and added value via functionality.

“As modern consumers are eager to buy sophisticated, premium organic or sustainable products, even price-sensitive private label [will be able to] enter the niches,” Poliscuk shared, adding, “It’s worth mentioning, that ever-continuing expansion of e-commerce with forms of dark stores and delivery services will draw new horizons for coffee and tea private label across Europe.”

• Vladislav Vorotnikov is a Moscow-based multimedia B2B freelance journalist writing about the tea and coffee industry since 2012

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