Cold Coffee Revolution In Southeast Asia

Tuesday, September 12th, 2017

Coffee shop culture and the love for coffee products are growing amongst Southeast Asian consumers, presenting opportunities for manufacturers in these vastly expanding markets. By Davina Patel, global food & drink trends analyst at Mintel

Over the past decade, international coffee chains like Starbucks have built up a strong regional presence within Southeast Asia (SEA). However over the past half a decade, a surge of independent cafés have developed and changed the landscape of SEA’s retail coffee sector.

The growth of café culture in the region has been driven by a younger set of aspirational middle class consumers—a small but influential group—who have been heavily influenced by branded coffee chains. That being said, they are now in search of something more, and are thus looking for more premium varieties of coffee, from speciality to most recently cold brew.

Alongside this, there has also been a rise in ‘third wave’ coffee trends across parts of the SEA region like Singapore, Malaysia, Indonesia, Thailand, as well as the Philippines. The ‘third wave’ is what Mintel defines as a further step up in coffee appreciation, focusing intensely on where beans are sourced, how they are roasted and a renewed focus on brewing methods.

The growth of the coffee shop culture has helped total market coffee consumption to grow steadily across Indonesia, Malaysia, Philippines, Thailand and Vietnam over the past few years, although consumption is still relatively low in global terms, according to Mintel estimates. The coffee market in each of these countries is projected to continue to grow from 2016 to 2020.

Sea’s Diverse And Growing Middle Class Is Impacting Coffee Trends

Within SEA, with the exception of Singapore, the size of the urban middle class still remains comparatively small. However, strong economic growth over the last few years has increased regional consumer spending, with coffee being one of the beneficial sectors.

Additionally, rising disposable incomes among today’s middle class have led to higher buying power and more demand for aspirational goods, which is good news for specialty coffee.

Rapid urbanisation and large-scale migration to the wealthier urban areas, where opportunities are more plentiful, are also benefitting coffee sales. The growing number of Asians travelling overseas is another factor which has boosted the development of SEA’s coffee shop scene.

Cold Brew Coffee Is Starting To Establish Itself In Southeast Asia

Western markets are continuing to experience a cold coffee revolution. This trend has been driven by foodservice and coffee shop outlets that are pushing frappés and increasingly cold brew and cold brew nitro products.

Cold brew coffee is positioned as a more natural and artisanal cold coffee option and cold brew brands are increasingly experimenting with plant-based milk blends and even added flavours as they seek to widen usage.

Cold brew coffee is prepared by soaking ground beans at room temperature for 12 to 24 hours, to produce a heavily caffeinated concentrate which is then diluted with water and finally served chilled.

During this process, the acidity is often reduced and the coffee ultimately obtains a purportedly naturally sweet, aromatic and mellow flavour. Some coffee connoisseurs believe this format imparts more of the subtle taste notes of the beans.

Cold brew is also migrating to European retail and is now starting to establish itself among the growing aspirational consumer base of SEA. In the SEA region, this type of coffee is still considered niche. However, there is potential for this type of coffee to attract the attention of the wider middle class consumers across the region.

Research from Mintel’s Consumer Metro Study shows that 67 percent of Indonesian and 75 percent of Thai consumers believe the quality of coffee is more important, rather than how easy it is to make. This suggests that perceptions of coffee are graduating from refuelling to greater appreciation.

According to Mintel Global New Products Database (GNPD), Indonesia accounted for 13 percent of the world’s coffee innovation in 2016 with the words “Cold Brew” written on-pack, falling behind South Korea at 18 percent while the US leads at 40 percent.

Hitting The Retail Shelves: Ready-To-Drink Cold Brew Coffee

Hitting The Retail Shelves

Gambino Coffee, an Indonesian coffee producer, last year introduced their own cold brew coffees to consumers in Jakarta. It is said that the owner of Gambino Coffee chose to use the unique medicinal shaped bottle for their 10 different cold brew products due to its practicality.

The products come in a range of flavours including Swiss Hazelnut Latte, Red Velvet Latte, Italian Tiramisu French Vanilla Latte, Flat White, and Dutch Caramel Latte to name a few. This range of cold coffee brews is aimed at on-the-go consumers who are looking for something quick and convenient to consume, without having to compromise on quality.

Mintel’s Metro Consumer Study also shows that as many as 43 percent of Indonesian and 44 percent of Thai consumers will drink ready-to-drink coffee products because of convenience.

Bringing Things Into Perspective

As both coffee consumption and café culture continue to rise in SEA, there will be an increasing opportunity for manufacturers to target consumers in the region. Amidst rising disposable income, SEA’s growing middle class population will increasingly demand more aspirational goods such as cold brew coffee, and there is an increasing opportunity for coffee brands to start producing a range of products made using this technique.

That said, while cold brew coffee has gained some traction among early adopter urban coffee shops within SEA, the brew is likely to continue to grow but remain relatively niche due to its high price point.