Coffee in Middle East and Africa: Insights and Opportunity
Historically, the Middle East and Africa region has not been a significant consumer of coffee. However, in recent times, the coffee culture has gained prominence in the region and has become an essential component in social gatherings for welcoming guests. The retail value sales of coffee have exhibited a notable surge from around 5.08 billion in 2017 to 10.14 GBP billion in 2022. Based on current trends, it is expected that this growth trajectory will persist for the next five years, with a projected twofold increase in the retail value to 20 billion in 2027. These developments indicate a promising potential for the expansion of coffee sales in the MEA region.
Here is the overview of the current coffee market in MEA and potential opportunities for growth.
Saudi Arabia is a major contributor of coffee sales
Throughout the 2017-2022 period, numerous countries within the region demonstrated positive growth rates in their coffee sales, even amidst the challenges posed by the COVID-19 pandemic. Saudi Arabia, which represents the largest market, experienced the most robust growth rates in both fresh and instant coffee sales, driven by factors such as quality, flavor, health, and convenience. Freshly ground coffee, including pod varieties, and instant coffee mixes have exhibited particularly dynamic growth trends in Saudi Arabia.
Egypt also demonstrated a strong performance between 2017 and 2022, with Nestlé's investment of EGP250 million in a new factory in 2019 serving to meet rising consumer demand for instant coffee in the country. This new facility will focus on producing coffee for the Bonjorno range, with the majority of its output being sold domestically within Egypt.
In Cameroon, standard fresh ground coffee has emerged as a significant contributor to new sales, with factors such as accessible pricing and the presence of domestic producers such as Sogecaf and UCCAO Cameroun bolstering demand.
Offline Retail are still the fore in MEA
In MEA coffee market, offline retail sales still take the domain role, accounting for 99% of the region's retail volume, with e-commerce representing a mere 1%. Within offline channels, small local grocers constitute the largest retail volume share (59%), followed by supermarkets (19%), hypermarkets (8%), and food/drink/tobacco specialists (7%). Broadly speaking, it is possible to see a split between the Middle East, where modern grocery retailers tend to be most prominent, and Africa, where traditional grocery retailers tend to play the leading role. Notably, in Middle East, the prevalence of advanced or modern coffee shops includes those offer automatic coffee vending machines, exquisite ambiance, and customised service techniques.
While the e-commerce market in most countries within the region remains negligible or very small, online retail sales did experience an upsurge since 2020 due to the COVID-19 pandemic. For some consumers, the convenience of purchasing products online and receiving home delivery during a pandemic made e-commerce an attractive option. Consequently, the e-commerce channel's volume share increased from less than 0.4% in 2017 to nearly 1% in 2020. Companies have also been focusing on developing their omnichannel strategies, while pure e-commerce players have expanded their delivery capabilities to reach the last mile.
Health and wellness driving growth
In the MEA region, there is a discernible trend towards health and wellness, which is likely to be a significant factor in new product development, particularly with respect to instant standard coffee and instant coffee mixes. As a result, more manufacturers are expected to offer healthier versions of these products. There emerges an anticipated strong growth in the decaffeinated instant coffee mixes and organic fresh coffee market segments. For example, Nestlé’s Nescafé 2in1 Sugar Free was launched in Saudi Arabia in 2020.
The influence of the health and wellness trend has also been increasingly visible in coffee in the United Arab Emirates. Since the government began levying excise taxes of 50% on sugary soft drinks and 100% on energy drinks in the historic period, coffee has been gaining popularity as a healthier alternative to these product types. Recent years have also seen many coffee manufacturers respond to consumers’ rising health consciousness with the launch of all-natural and organic varieties as well as reduced-sugar instant coffee mixes, with similar launches expected over the forecast period.
Fresh ground coffee pods will continue to be most dynamic
Fresh ground coffee pods, while still considered a niche item in some countries, are expected to experience strong growth over the forecast period in the overall MEA region. This growth can be attributed to increasing demand from consumers who seek to replicate a café-style experience in the comfort of their own homes. Additionally, the market's growth is further supported by the entry of global players such as Starbucks, which launched its own line of fresh ground coffee pods in Israel through Shufersal outlets. However, it is worth noting that some markets, like Algeria, are experiencing threats from the illicit trade of coffee pods, which is accounting for a significant portion of sales.
In the United Arab Emirates, interest in speciality coffee is on the rise, driven by the wider selection of certified coffee products, availability of niche and sophisticated coffee varieties, innovative experiential concepts and in-store roasting facilities. Additionally, the expansion of modern grocery retail chains and the UAE's position as a key regional and global trade hub for coffee have made specialty products more accessible to consumers. The country's large and diverse expatriate population has also contributed to the heightened awareness and appreciation of various types of specialty coffee from around the globe.
The MEA region represents a significant opportunity for coffee brands due to the growing importance and continual development of the coffee market. In order to succeed in this dynamic market, speak to our team today to discuss the available support and solutions that we can provide to help you enter and grow in the MEA coffee market.