THE constraints imposed by the pandemic on restaurant operations will force more consumers to prepare coffee at home, providing an opportunity for brands to sell more via groceries, according to Fitch Solutions Country Risk & Industry Research.

Consumers are also looking to spend less, limiting their purchases to essentials like groceries, which will make supermarkets the new battleground for coffee companies competing for space in their customers’ shopping carts, Fitch Solutions said.

“Within the coffee segment, this will play out with the substitution of on-trade coffee with coffee bought through retail channels,” it said in a report Monday.

The changes in consumer behavior will benefit not only instant coffee makers but also producers of premium coffee as higher-income individuals opt out of cafes, Fitch Solutions added.

“Between 2020 and 2024, coffee consumption is projected to increase from 3.9 kilograms per capita in 2020, to 5 kilograms by 2024,” it said.

Prospects for the coffee industry are also supported by estimated household spending on coffee of about $352 in 2020, much higher compared with Malaysia ($240) and Indonesia ($137).

Coffee is widely consumed across all income brackets, with instant coffee accounting for about 90% of the market.

“Breaking this down, coffee is the most popular non-alcoholic drink purchased through the mass grocery retail channel, accounting for approximately 43% of total non-alcoholic drinks spending. This is followed by fruit and vegetable juices, which account for a further 31%,” Fitch Solutions said.

By 2024, coffee as a proportion of total non-alcoholic drinks spending is expected to grow to 44%.

The country’s large young adult population could boost the outlook of spending on coffee products, it said. More than 35.1 million or nearly a third (32%) of the population are aged between 20 to 39.

“We classify this group as the trendsetting generation, who are earning incomes and have larger discretionary spending levels. These consumers are more likely to spend on more speciality and more premium products,” Fitch Solutions said.

It noted the growing middle-income population of the Philippines — those with annual disposable income of more than $10,000. It estimated this population at 4.5 million households, which Fitch Solutions expects to rise to 8 million by 2024.

“This target market will be key to supporting sustainable growth in spending on coffee products over the next five years,” it said. — Luz Wendy T. Noble