Instant Coffee Market is Set To Fly High in Years to Come: $60.7 Billion By 2032

The instant coffee market was valued at $32.9 billion in 2022, and is estimated to reach $60.7 billion by 2032, growing at a CAGR of 6.4% from 2023 to 2032.

During the 1960s, instant coffee gained immense popularity for its appeal to the middle class as an affordable and quick coffee-making solution. However, contemporary innovations in production and quality have transformed instant coffee from a basic commodity into a sought-after product valued for its efficiency and enhanced taste. Presently making up 25% of total global retail coffee sales, the market share of instant coffee is consistently growing. The recent surge in home coffee consumption due to the pandemic has further boosted the demand for high-quality instant coffees as alternatives to home-brewed options.

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Instant coffee is a dehydrated coffee extract derived from brewing regular coffee at an increased concentration. It is produced by spray-drying or freeze-drying regular coffee to create fine coffee powder or granules. Both processes involve dehydrating pre-brewed liquid coffee to create a soluble powder concentrated with flavor and coffee soluble. Spray drying, a quicker and more economical process, utilizes hot air to dry brewed coffee particles. In contrast, freeze-drying is a slower, costlier method involving evaporation and freezing of brewed coffee into a concentrated syrup. The syrup undergoes sublimation in a vacuum chamber, ensuring no liquid forms, which results in granules that constitute the final instant coffee powder, preserving the flavor through this intricate manufacturing process. In addition, it is considered suitable for emergency preparations, travel, camping, and long-term food storage.

The instant coffee market size has experienced rapid growth, primarily fueled by the convenience offered through single-serve packaging. Single-serve instant coffee is a convenient option for many individuals with busy schedules and time limitations. The popularity of individual-sized packaging is attributed to its compact and portable design, that caters to the needs of on-the-go consumers. This has resulted in a significant rise in the demand for single-serving instant coffee packages, thus driving the instant coffee market demand. Consumers can conveniently carry and use the product without any additional requirements or equipment, contributing to its widespread appeal. Thus, this trend has played a significant role in boosting the demand for instant coffee in recent years. Moreover, the pre-measured portion control provided by single-serving packaging ensures that consumers receive an appropriate amount of coffee with each serving. This feature attracts individuals who are conscious of their coffee intake or those looking to manage their caffeine consumption more effectively.

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In addition, manufacturers have started investing in research and development activities to create innovative packaging solutions that enhance the convenience of instant coffee products. This includes specialty blends and 3-in-1 options that include coffee, creamer, and sweetener in a single serving. For instance, Nescafe 3-in-1 strong intense & rich instant coffee, Jacobs Milka 3in1 instant coffee sachets, G7 3-in-1 gourmet instant coffee, NY salted caramel instant white coffee with sugar 3 in 1 sachet, Narusa's 3 in 1 Coffee Premix Stick Pack, are few examples of different packages and categories available in the instant coffee market, which is expected to boost the instant coffee market demand.

Although the instant coffee market share has increased, it still faces challenges owing to the fluctuation in raw material prices. Instant coffee is made from processed coffee beans, and any fluctuations in the prices of raw coffee beans directly affect the production cost of instant coffee. Extreme weather changes such as drought, frosts, and pests significantly damage coffee crops, which reduces production and disrupts the timely supply of coffee beans to the market. For instance, in November 2021, global coffee prices surged due to challenging conditions in Brazil, including drought, frost, and unusual weather patterns. This trend continued into 2022, with a 14.8% increase in coffee product prices observed in grocery stores. Moreover, the return of El Nino weather conditions has been officially confirmed by the US Climate Prediction Center, and forecasters anticipate it to be possibly even a strong weather event. This weather phenomenon is expected to bring about hotter and drier conditions, particularly in key Robusta coffee-growing regions such as Vietnam and Indonesia. The increased risk of adverse weather conditions poses a threat to crucial coffee supplies from these areas, thus contributing to supply shortages and fluctuations in prices of coffee beans used in instant coffee production.

As per the data provided by the International Monetary Fund (IMF), the global price of coffee exhibited fluctuations throughout the year 2022, ranging from a high of 279.83 US cents per pound in February to a low of 210.38 US cents per pound in December. The manufacturers of instant coffee often operate with tight profit margins. Rapid or unpredictable increases in raw material prices can erode these margins, affecting the overall profitability of the business operating in the instant coffee market. These uncertainties may affect the quality of instant coffee and hinder potential investments and expansion efforts in the industry, thereby impeding overall instant coffee market growth.

The demand for premium instant coffee has surged in developing regions, leading to increased innovation and differentiation within the industry. This has created instant coffee market opportunities as more number of consumers are inclined toward premium instant coffee products. With globalization on the rise, consumers in these areas are exposed to global trends, including the growing popularity of premium coffee options. This exposure has increased the demand for premium instant coffee as consumers strive to align their choices with international preferences and lifestyle trends, which has also set instant coffee market trends. Consequently, numerous companies have begun introducing premium and innovative instant coffee products to capture market share and stay competitive in these regions. For instance, in February 2020 Nestle introduced its new ultra-premium instant coffee as part of the Starbucks lineup in China. This product comes in popular mini-can packaging and utilizes freeze-drying technologies to rapidly freeze the liquid, preserving the coffee aroma by sublimating some of it into gas. Despite the high production costs associated with this method, a set of 18 capsules is priced at $24.55, emphasizing its premium nature. Similarly, in January 2022, Sleepy Owl has launched premium instant coffee in three variants - original, French vanilla, and hazelnut, all of which are made from 100% Arabica coffee. This move aims to broaden the brand's product portfolio and enhance its accessibility as a coffee brand in India. In January 2023, Tata Consumer Products also entered the high-end instant coffee market with the launch of Tata Coffee Grand Premium in North India, expanding its instant coffee product portfolio into the premium segment. Thus, with the launch of premium instant coffee in developing regions, there are many upcoming opportunities for the manufacturers during the instant coffee market forecast.

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The instant coffee market is analyzed on the basis of type, packaging, production technology, distribution channel, and region. By type, it is divided into flavored and unflavored. As per packaging, it is categorized into sachet, pouch, and jar. By production technology, it is bifurcated into spray-dried and freeze-dried. Depending on distribution channel, it is fragmented into supermarkets-hypermarkets, convenience store, business-to-business, specialty store, and online sales channel. Region wise, it is analyzed across North America, Europe, Asia-Pacific, and LAMEA.

The major players analyzed for the instant coffee industry include Nestle SA, The Kraft Heinz Company, Starbucks Corporation, Tata Consumer Products Limited, Strauss Group Inc., The J. M. Smucker Company, Sleepy Owl Coffee Private Limited, illycaffe S.p.A., Unilever PLC, and Koninklijke Douwe Egberts B.V. 

KEY FINDINGS OF STUDY     

On the basis of type, the unflavored segment held the major share in 2022. 
By packaging, the jar segment held the major share in 2022.
As per production technology, the spray-dried segment held the major share in 2022. However, the freeze-dried segment is observed as the fastest growing segment for the instant coffee market.   
Depending on distribution channel, the supermarkets-hypermarkets segment held the major share in 2022.  However, the online sales channel segment is observed as the fastest growing segment for instant coffee.  
According to region, North America held the major share in 2022 in instant coffee market analysis. However, Asia-Pacific is expected to be the fastest growing region for instant coffee.  

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