The use of soft drinks (including sodas and colas) is quite common in every region of the globe. Even if we are aware that the market for coffee is also quite large, the issue of how the two markets compare is a very important one.
The answer to this inquiry is not as straightforward as it may first seem. There are enormous disparities between the two markets, and expansion and consumer spending are both evaluated through quite distinct lenses in each one.
I spoke to market specialists from all across the globe to have a better understanding of the topic and to make a consumption comparison between the two. This is what they had to say about it.
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A Brief History Of Soft Drink Consumption
Although carbonated water was developed in England during the end of the 18th century, the first written mention of a flavouring agent being added to a soft drink (ginger beer) comes from the year 1809. Colas first appeared in the late 1800s. They got their name from the kola nut, which was used to flavour the drink and was native to Africa.
Just before to the beginning of the 20th century, Coca-Cola and Pepsi were established as two of the most successful companies in the world. Pepsi was first known as “Brad’s Drink,” and it was developed as a digestive aid, in contrast to Coca-Cola, which was established in the United States as a direct reaction to laws prohibiting the sale of alcoholic beverages.
Both brands had enormous growth during the 20th century and were instrumental in the development of mass manufacturing methods for soft drinks. During the first half of the 20th century, both businesses offered their goods in the form of syrups. However, in order to meet the growing demand for ready-to-drink (RTD) beverages, the firms also developed the bottles and cans that we are used to using today.
Their capacity for mass production resulted in bottles being sold at prices that were more accessible to consumers, which contributed to their rapid assimilation into Western society. According to a survey done in 2017, it was found that PepsiCo and The Coca-Cola Company accounted for a stunning 78% of the soda market in the United States.
I was told by the operations manager of a company that exports green coffee from Guatemala that he believes that soda and other types of soft beverages are significantly more popular than coffee. According to him, in producing nations, soda is more readily available and can be purchased at a lower cost than coffee.
According to him, this has resulted in the development of “a cultural element in the sense that people chat about soft drink brands rather than coffee at the local coffee shop.”
This observation is supported by the findings of a research that was carried out in 2017 by the Centers for Disease Control and Prevention (CDC). The study discovered that soft drinks grew “more inexpensive, more swiftly” in low- and middle-income nations.
Comparing Consumption Statistics
Consumption of soft drinks and coffee, on the other hand, is difficult to compare for a variety of different reasons. To begin, there is the matter of what exactly is considered to be a soft drink, which differs from one study to the next. Second, it is hard to be completely accurate since there is so much data and there are so many problems with obtaining it. This makes it impossible to be accurate. Last but not least, the intake of coffee is measured in kilos of beans (as opposed to litres, as is the case with soft drinks), which are then prepared using various ratios depending on the kind of beverage.
Nevertheless, we were able to arrive at some extremely approximate estimations by using a variety of different statistical sources. Please be aware that the numbers shown here are not correct. Instead, the purpose of these numbers is to indicate, in a very general sense, how large these two marketplaces are.
The consumption of soft drinks around the world comes to roughly 45 litres per person on average. This indicates that around 1 trillion cans are used each year (assuming that a can contains 330 millilitres of liquid).
In contrast, the total amount of coffee consumed throughout the globe in 2019 was little more than 10 billion kg. The SCA has determined that the “ideal ratio” for brewing coffee is around 55 grammes per litre, which is equivalent to approximately 18 grammes every 330 millilitres. If we use this number as an estimate and assume that each cup of coffee is the same size (330 millilitres), then we can deduce that around 555 billion cups of coffee are drank each year.
What Makes Soft Drinks Popular?
There is a degree of consensus on the two markets, despite the fact that precise figures are notoriously difficult to get.
The vast majority of studies and surveys suggest that the consumption of soft drinks is still typically greater than the consumption of coffee; however, this trend seems to be declining, although the consumption of coffee as a whole is expanding.
However, before we look at the rise in coffee consumption, we need to investigate the factors that contribute to the popularity of soft drinks.
Accessibility & Affordability
Because they are produced in vast quantities, soft drinks are readily available and inexpensive in any region of the globe. At instance, a can of cola in Guatemala or a bottle of Postobon in Colombia may be readily acquired for a price that is considered to be reasonably affordable. Finding a nice cup of coffee, on the other hand, might be quite challenging.
In addition to this, the research conducted by the CDC discovered that drinking soft drinks “undermines people’s capacity to avoid overconsuming sugar-sweetened beverages by reducing the unit price as product size grows.” This indicates that it is more appealing to purchase greater quantities of soft drinks in order to obtain a “good bargain.”
Additionally significant to the expansion of the soft drink industry was the development of RTD beverages. They are advantageous in that they are versatile and convenient. Despite the fact that the market for RTD coffee beverages (including cold brew and iced coffee) is expanding, it is still a very small business in contrast to the market for RTD soft drinks.
The marketing strategies used in the soda and coffee sectors couldn’t be more different from one another. Let’s see how Coca-Cola stacks up against Starbucks.
The gap between Coca-Cola and Starbucks’ respective revenues in 2018 was just over $7 billion, with the former coming in at $31.8 billion and the latter coming in at $24.7 billion. While Starbucks spent around $245 million on marketing in 2019, Coca-Cola spent over $4 billion, which is 16 times more than what Starbucks spent.
The position of Chief Product Officer of Chameleon Cold Brew is held by Matt Swenson. He believes that cold brew and the increasing popularity of other RTD coffee drinks would be beneficial to the expansion of the business.
According to Matt, people all across the world are starting to put more of an emphasis on their health. He feels that cold brew, which provides a healthier alternative to soft drinks, has the potential, with the correct marketing, to steal some of the market share away from soft drinks.
The StoneX Group has appointed Albert Scalla to the position of Senior Vice President of Trading. He says that promoting the use of coffee and promoting the consumption of soft drinks are two completely distinct things. As a consequence of this, he maintains that it is difficult to evaluate both of them side by side.
But Albert is afraid that “coffee overstock implies market prices [will] fall” as a result of the current situation. According to him, the fact that there is an excess supply indicates that the business has to “alter its methods” and put more emphasis on encouraging people to drink coffee.
Ricardo Pereira serves as the Chief Operating Officer at Ally Coffee. He believes that even if there has been a significant increase in the consumption of coffee in producing nations, the taste profile of soda is still more favourable since producing countries still don’t have a lot of excellent grade coffee left over.
He praises Brazil and Colombia as producing nations that have made significant gains in increasing the amount of coffee that is consumed inside their own borders. On the other hand, much like Albert, he believes that there is still a significant amount of work to be done.
A Decrease In Soft Drink Consumption: Can Coffee Capitalise?
Consumers are more concerned about their health than they have ever been before, according to the patterns that have emerged in the market over the previous ten years. IBISWorld reports that between 2005 and 2017, the income generated by the sale of soda in the United States dropped from almost $27 billion to little more than $15 billion.
In addition to this, in recent years a number of nations throughout the globe, such as the United Kingdom, Ireland, France, Chile, Norway, and Malaysia, have instituted what is known as a “sugar tax.” The sales of sugary soft drinks like Coca-Cola and Pepsi are certain to be impacted as a result of this.
How then can coffee take a portion of the market share away from it?
Promote Consumption, Especially In Producing Countries
In order to reduce the negative effects of overstock and gain market share at the expense of the business producing soft drinks, the coffee industry has to place a greater emphasis on encouraging consumer usage.
Although advertising and social media initiatives with a greater reach will be helpful in this regard in nations that currently drink a significant amount of coffee, we also need to encourage the domestic consumption of coffee in nations that produce coffee.
In nations that are producers of the good or service in question, there are already a number of grassroots efforts that have been effective in increasing domestic consumption. The one in Brazil is the most well-known, but other countries like Colombia and Guatemala have already begun their own campaigns to increase consumption.
Deliver Healthy, Traceable & Transparent Products
The coffee industry has an opportunity to capitalise on the trend of more health-conscious customers who also expect greater transparency in the products they buy. A emphasis on traceability and transparency is already present in the specialty coffee industry, and this focus may be leveraged together with the fact that coffee is healthier than sugary soft beverages and sodas.
For instance, children often consume soda before coffee in the house, despite the fact that coffee is generally considered to be more of a “adult” beverage. If the discussion on the adverse impact that soda has on health is continued, and coffee is positioned as a “healthier alternative,” it is possible that coffee will be able to take some of the market share away from soda.
Ricardo makes the observation that speciality coffee has a natural advantage over soft beverages in the form of more transparency. “When it comes to soda, it is really difficult to be open because there are more aspects and substances that need to be looked at,” he adds. “[T]here are so many different things that need to be considered.”
“As the behaviour of customers continues to shift in new directions, the importance of transparency and traceability for consumers will only continue to grow.” In contrast to other consumer goods, such as wine, chocolate, and coffee, soda lacks the infrastructure necessary to support increased levels of openness.
Offering Convenience: RTD Coffee Offering Convenience: RTD Coffee
Since its introduction to the market, it is common knowledge that cold brew and other forms of iced coffee have seen phenomenal sales growth. Even though both of these products are still in their infancy and on a very modest scale, there is a considerable probability that ready-to-drink (RTD) coffee may prove to be an effective replacement for soft drinks in the long run, particularly sugary sodas.
There is a possibility that cold brew may take a portion of the market share now held by companies such as Coca-Cola and PepsiCo. It is a cool drink that is very refreshing, yet has caffeine in it, and is a far better alternative to sodas than drinking them.
Matt argues that people are beginning to “embrace the concept that coffee can be an ingredient, such as in pancakes, protein drinks, and so on.” This is happening in addition to the popularity of cold brew coffee. It’s possible that cold brew is a healthy alternative to sodas and other sugary beverages, but if coffee flavourings become more mainstream, there will be more business possibilities for everyone involved in the coffee supply chain.
It is impossible to draw an appropriate comparison between the consumption of soft drinks and coffee due to the nature of the data that is currently accessible.
However, there is one point that cannot be disputed. If carbonated soft drinks continue to struggle in the market and consumers continue to cut down on their usage, ready-to-drink coffee might capitalise on the situation and promote itself as a viable option.