Don’t sleep through the next big transformation of the coffee industry! The D2C (direct-to-consumer) channel is the most rapidly growing segment in the coffee eCommerce space. What’s your share of this growing sector, and how are you going to tap it?
If you’re part of the coffee industry, D2C sales is an important new avenue to explore. Why? It is the segment that is fastest growing in the coffee industry. It boasts strong revenues, high growth forecasts – and massive potential for further transformation based on industry trends.
In this blog, we will be looking at:
- D2C Coffee eCommerce market statistics
- Top categories driving D2C Coffee eCommerce sales
- Key drivers of D2C Coffee eCommerce growth
- Challenges in Coffee eCommerce
D2C Coffee eCommerce market statistics
Coffee is known as a functional beverage, and younger drinkers love it! Pandemic-driven buying has boosted the coffee eCommerce market, and many consumers are now moving to niche D2C coffee brands that are catering to specific tastes.
- In 2022-23, world coffee consumption is projected to grow by 3.3% to 170.3 million 60kg bags. That’s up from 164.9 million 60kg bags in 2020-21. Most revenue is generated in the United States (USD 85,160.00m in 2022), with a per-person revenue of USD 254.40 in 2022.
- The global D2C coffee market is forecast to grow at a compound annual growth rate of 15.3% from 2022 to 2027 and record revenue of USD 2,722.3 million in 2027.
- Since 2016, US D2C eCommerce sales have more than tripled – from USD 36.08 billion in 2016 to USD 128.33 billion in 2021.
- Nearly 40% of all coffee purchases made in the next five years will be from D2C channels.
- While all developed nations are seeing a trend of rising coffee consumption over the past few years, Europe dominates the coffee D2C markets, driven by the more developed Western European nations.
- The Asia-Pacific region has the highest CAGR for D2C coffee eCommerce – about 9.4% over 2021-27.
Top categories driving D2C Coffee eCommerce sales
Convenience is driving category selection in the D2C Coffee eCommerce space.
- Over 70% of D2C coffee buyers are from the Residential segment.
- The convenience aspect makes the Solubles segment the most popular in the market, with 41.5% market share by product type.
- Airtight coffee jars keep the coffee fresh and retain its aroma. That is why they form the packaging segment with the largest market share – 37% market share by packaging type.
- Curation is currently the subscription model with the largest market share, worldwide.
- Unique international flavors can increase customer interest and accessibility.
- Some believe that D2C is used only for startups. However, it helps major coffee companies and brands, too. In January 2021, Nestlé’s Nespresso released the ‘World Explorations’ line of coffee capsules, sold exclusively through their D2C online store. Nespresso sales increased by 17%.
- Thanks to increased F&B eCommerce penetration, online D2C coffee sales are estimated to grow at a CAGR of 9.2% over the next five years.
There’s currently a lot of buzz around this industry. It’s growing fast in the coming five-year period, and is an exciting space. So why is D2C coffee eCommerce the segment to watch? We identified a few key drivers and challenges.
Key drivers of D2C Coffee eCommerce growth
We identified four major trends positively impacting the D2C coffee industry:
Since the start of the pandemic, work-from-home culture has driven eCommerce growth in the coffee industry. “App-based ordering saw its greatest increase in the earlier stages of the pandemic, spiking 63% from January 2020 to September 2020.” The eCommerce share of total retail sales is today about one percent higher (translating to USD 81.6 billion in eCommerce sales over the last four quarters) than it would have been without the post-pandemic surge in consumer usage of digital channels.
Other trends, such as sustainability and product innovation, further fuelled the growth of the D2C coffee eCommerce sub-segment.
Customers are increasingly conscious of sustainability in their purchase choices. D2C coffee brands can vouch for their own environmentally responsible farming, procurement, packaging and dispatch techniques, as they are in control of the product for the entire lifecycle from end to end.
There’s a lot of demand for new product offerings in the D2C coffee business. Product or packaging innovation to meet global tastes can serve as a differentiator in the busy D2C coffee sector. In the D2C coffee market, particularly in North America and Western Europe, these innovations include
- soluble products such as instant coffee
- accessible packaging forms such as coffee pods and capsules
- ready-to-drink coffee beverages
- single-serve coffee brewing systems
Payment innovation is also a growing sector. Since increasingly boutique coffee products are being innovated and purchased, prices are also rising, especially for niche brands and blends. The option of Buy Now, Pay Later (BNPL) is allowing coffee connoisseurs to look beyond their budget for the ideal packet of beans. “65% of US consumers who use or would use BNPL options say they are more likely to shop at stores that offer BNPL, and 21% of consumers are interested in using it to pay for groceries”.
Health-consciousness of customers has enabled the growth of D2C curation subscription models. Such businesses ship coffee directly from niche roasters to consumers around the world. This isn’t just more convenient; it’s also more healthy, as it passes through fewer hands and there is less risk of contamination.
Challenges in Coffee eCommerce
We identified two major challenges to the continued growth of the D2C coffee industry:
Since it’s a consumable commodity, coffee is subject to food and beverage rules and regulations. When you’re selling online, this is especially tricky as rules could vary from jurisdiction to jurisdiction, and they cover everything from storage to transportation and even brewing! Since it contains caffeine, coffee is subject to an additional slew of regulations. Most of these are likely to require third-party certification, but some may require self-attestation. eCommerce brands selling globally need to track these regulations closely, especially D2C brands as they cannot depend on other organizations such as distributors to be knowledgeable about local regulations.
D2C business structure
What should your business structure be, and how will it impact your D2C coffee business? North America has been seeing a large number of D2C coffee startups burgeon in the past few years. That’s because the flexibility of the startup structure allows the business to launch, experiment and innovate more effectively. At the same time, since there is significant competition in the D2C coffee industry, many market players are looking at inorganic market expansion, including mergers and acquisitions, partnerships and regional expansion. The busy global D2C coffee market is expected to consolidate in the coming five-year period.
What is the future of the D2C Coffee eCommerce segment? The demand for easy-to-prepare, unique and sustainable coffee that’s conveniently available is growing rapidly over the next five years. If you’re a brand in the coffee space, it’s advisable to equip yourself to sell your product direct to your consumers, through your eCommerce website. Thanks to Ziffity’s Enterprise eCommerce focus, we’re well-placed to help you in this mission. Talk to our eCommerce implementation team today.