Coffee is already considered a daily necessity in many parts of the world, and demand doesn’t seem to be slowing down anytime soon. In fact, it’s predicted that coffee consumption per year will reach 200 million bags by 2030.
The countries that currently produce the most coffee are Brazil, Colombia, and Vietnam, but there are other rising stars among the top ten: African countries like Ethiopia and Uganda. Amidst forecasts that Africa will eventually dominate the coffee industry, excitement has been high among investors.
Is Africa’s coffee industry really worth investing in? Here’s what you should know:
Africa’s Coffee Industry
Out of the regions of Africa, East Africa is a standout when it comes to coffee production. In particular, East Africa is one of the world’s most prolific producers of coffee. Its coffee industry has been growing in recent years, and it’s likely to go through 7.5% market growth from 2019 to 2024. There have also been speculations that it will be at the top of the global market within the next five years, ranking above South America.
The largest coffee producer in the region is Ethiopia. It’s also the birthplace of Arabica coffee, the most popular type of coffee around the world. Other prominent countries include Kenya, which is known for bright, acidic coffee, and Uganda with its robusta coffee. South Africa’s coffee industry is also thriving, with 13.3% increase in coffee consumption from 2014-15 to 2017-18.
Historically, Africa was focused on oil. But with the drastic drop in oil prices in 2014 and a major shift in the global economy, it was forced to diversify. More resources were channeled into agricultural industries like coffee, which became a source of economic growth for the region. Some top coffee companies in Africa today are Nestle, Starbucks, Jacobs Douwe Egberts, and Dunkin’ Brands.
Drivers of Growth
Global Demand
Consumers in Brazil, North America, and Europe are demanding more coffee than ever. Europe may be generating the largest part of the demand, with 44 million bags bought in 2017/2018, but other countries aren’t far behind, with Canada and Brazil both consuming more than 6 kg of coffee per person every year.
At the same time, income is also rising in new markets as people become more inclined to spend on coffee. Vietnam, India, and Indonesia are rapidly consuming more coffee, and even China has expressed its interest in the African coffee industry.
Local Interest
Africa’s coffee industry growth isn’t only about exporting. Locals are also increasingly interested in coffee. While coffee hasn’t been such a popular drink in Africa itself, higher income among the middle class has started a coffee movement in urban areas. On top of this, coffee is easier to purchase and more widely available. The more that locals buy coffee, the more Africa is cushioned from sudden changes in the global market.
Preference for Specialty Coffee
People aren’t satisfied with only instant coffee anymore. From artisanal coffee shops to Starbucks tumblers and accessories like HotShot Coffee Sleeves, coffee-drinking has become an experience, and there’s a marked preference for premium or specialty coffee. 50% of the coffee consumed in Europe and America is already premium coffee. Since Africa is home to plenty of excellent coffee beans that aren’t found anywhere else, it has already built up a loyal customer base globally.
Competitive Advantage
The current top coffee producers are from South America, but these are already facing obstacles because of unstable weather and worsening frost and droughts. As coffee production slows in South American countries like Brazil and Colombia, it’s possible for African countries to overtake them and dominate the market.
Challenges
Climate Change
This applies to the coffee market as a whole. With more extreme weather than ever, farmers must be able to adjust by using advanced technology and superior crops.
Inheritance Laws
Compared to other countries, farmers in Africa manage smaller coffee plots that are around 0.2 hectares. With inheritance dividing these plots even further, farmers must be willing to collaborate.
Access to Resources
Coffee farmers in Africa would benefit from more agricultural training and advice. Ideally, they would also have greater access to high-cost resources like fertilizers and stronger plant varieties.
Innovations
The following are some recent innovations that are helping drive Africa’s coffee industry forward:
Research Programs
Research institutions like Ethiopia’s Jimma Agricultural Research Centre (JARC) are studying how to improve coffee production, from breeding sturdier varieties to incorporating digital systems. They can then pass the knowledge on to farmers.
Sustainable Farming
Given the issue of climate change, sustainability is a must. The Rainforest Alliance and other organizations work together with farmers to ensure that coffee production is as environmentally friendly as possible. This is also a plus for marketing, as consumers in America and Europe prefer coffee that is sustainably grown.
Better Trade Infrastructure
While Africa has strong trade ties with other countries, its infrastructure for local trade isn’t as developed. USAID (United States Agency for International Development) is helping lower trade barriers in Africa through investment hubs, which encourage more local coffee purchases.
Conclusion
Coffee is already taking over the world. With Africa’s abundant natural resources and long history of coffee production, its coffee industry is poised to grow rapidly within the next few years, perhaps even dominating the global market. Overall, it’s a promising investment, especially when combined with social initiatives and sustainable farming.