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Coffee and Tea Industry Challenges and Opportunities in 2021

For generations, consumers in the United States have enjoyed drinking coffee and tea. This important economic sector of the beverage trade encompasses a wide array of hot and cold drinks. The industry includes agricultural producers, processors, and retail shops specializing in these beverages, as well as brewed, instant, and ready-to-serve products. Consider some of the most significant issues concerning this business grouping today:

Recovering From Pandemic Constraints

Although the COVID-19 pandemic impacted the way many people obtained coffee and tea, it apparently did not permanently impact the demand for these products. In the United States, coffee drinking soared during 2018, reaching a level not previously achieved since 2012. While the 2020 pandemic lowered the annual global growth rate for the industry temporarily (from around 9% to 4.5%), this downturn appears short-term in nature. Analysts predict vigorous growth again by 2023.

In some places, emergency public health restrictions during the pandemic dampened the operation of “nonessential” coffee and tea retail outlets. Yet at the same time, some coffee subscription services witnessed flourishing growth. Innovations in automating harvesting also continued to generate headlines.

Product Development

One important ongoing trend in this industry remains the introduction of new product lines. A wide array of companies have developed specialty coffees and teas, for example. Some of these brands include additives widely perceived as health foods, including mushrooms, fruits, spices, algae, or other ingredients.

The proliferation of new coffee and tea blends contributes to variety in this industry. During 2019, global sales of coffee and tea accounted for an astonishing $142.1 billion. Reportedly, many consumers view these products as much healthier than some other available beverages.

Key Packaging Trends

The creation of ready-to-drink (“RTD”) teas and coffees has stimulated significant consumer interest. During recent years, for example, the sale of canned and bottled teas and coffees increased markedly among Millennials in the USA. This trend occurred even as soda pop and juice sales declined.

The trend towards shelf-stable RTD tea and coffee products reportedly prompted some large beverage companies to enter this market by introducing new lines. However, RTD pricing factors reportedly may somewhat limit sales volumes.

Meeting High Production Demands

Possibly one of the biggest challenges facing the coffee and tea industry lies in meeting surging global demand during coming decades. This concern also implicates equitable issues in agricultural production. Analysts project the demand for these beverages (especially for tea) will surge sharply in Asia during the next decade. Demographic analyses in India and China in particular indicate a large developing potential market with the rise of prosperous middle class consumers.

At the same time, agricultural production problems associated with unfair and illicit labor practices remains a problem in many places. For example, violations of labor laws reportedly persist on some coffee plantations in Brazil, one of the few exporting countries with a well-developed regulatory enforcement framework. From child labor and slave labor to the use of pesticides in violation of organic certifications, the tea and coffee agricultural production sector continues to struggle with fairness and exploitation issues.

Addressing Ongoing Sustainability Concerns

Another important issue for which solutions remain unclear at this point concerns the need to create sustainability for coffee and tea production. This issue apparently currently proves most significant with respect to tea. China, Kenya, and Sri Lanka currently export the most black tea, with Kenya accounting for the highest black tea export volume. China leads in the production and export of green tea.

Since coffee and tea plants will grow only within specific environmental and climatic conditions, changes caused by Global Warming may conceivably disrupt global markets for these beverages in the near future. Analysts have expressed concern about both temperature changes and altered weather patterns.

Preparing For a Prosperous Future

Companies engaged in the coffee and tea industry anticipate a robust demand for their products and services during coming decades. Significantly, young, economically well-positioned consumers should help spur the sales of these beverages worldwide. Meeting the global demand for coffees and teas will permit some businesses to thrive in this rapidly expanding beverage sector.