European Coffee Market, Uganda Coffee Marketplace

What makes Europe an interesting market for coffee

Europe is a large coffee market, accounting for about one-third of global consumption. Although consumption is expected to stabilize in the long term, Europe will remain attractive to coffee exporters worldwide. Especially the growing specialty coffee market in Europe offers interesting opportunities. In this segment, you can compete by focusing on quality and establishing long-term relationships, rather than on price. The statistical analysis in this post relates to green coffee beans, based on HS codes 090111 (Coffee, not roasted, not decaffeinated).

Europe is the world’s largest coffee market

Europe accounted for 33% of global coffee consumption in 2020/21, amounting to an estimated 3.244 million tonnes of coffee. This makes Europe the largest coffee market in the world. Asia and Oceania rank second with a market share of 22%, followed by Latin America with 20% and North America with a market share of 19%.

Between 2017/18 and 2020/21, Europe’s coffee market was expected to increase only slightly at an average annual rate of 0.5% in volume. In general, demand in Europe is expected to remain stable in the long term, as the European coffee market is saturated. Nevertheless, consumer demand for specifically higher-quality coffees is expected to increase in Europe.

Europe is the main global destination for green coffee suppliers

As the world’s largest coffee market, Europe is also the largest green coffee importer. Total European imports of green coffee amounted to over 3.6 million tonnes in 2020, showing an average annual decrease of -1.3% between 2016 and 2020. This decrease is likely to be the result of the global COVID-19 pandemic, which resulted in supply chain disruptions and the closure of out-of-home establishments such as cafés and restaurants across Europe.

The value of green coffee imports decreased by -2.1% on a year-to-year basis during the same period, reaching €7.9 billion in 2020. This drop in value is also in part due to the pandemic, but it also reflects the fluctuation of coffee prices due to (unforeseen events in) world market supply and demand, volatility in currency markets and investments in coffee commodities by hedge and pension funds. An example of these unforeseen events is the frost that damaged coffee plants and production in Brazil.

These and the other factors mentioned above affect the New York and London coffee futures markets, to which most coffee trade is connected. The exception to this is specialty coffee, traded with a differential above futures market prices, which absorbs most volatilities of the bulk market. Specialty coffee may also be traded at a flat rate negotiated between the buyer and seller, where the futures market price is taken out of the equation altogether.

European importers sourced approximately 87% of their green coffee beans directly from producing countries in 2020, corresponding to 3.1 million tonnes. The largest direct importers from producing countries are Germany (35% of total European imports) and Italy (18%). Belgium (10%) and Spain (8.4%) follow as the third and fourth-largest direct importers in 2020. Intra-European trade accounted for 13% of European supplies in 2020, amounting to 454 thousand tonnes.

Europe has the highest per capita coffee consumption worldwide

The European Union (EU) has one of the world’s highest average annual per capita consumption at just above an estimated 5 kg of coffee per person a year. The leading country in per capita consumption in the world is Luxembourg, where the average annual coffee consumption is over 11 kg per capita. Other large coffee-consuming countries are the Netherlands and Finland at 8.2 kg per year per person, followed by Sweden at 7.7 kg, Denmark at 7.4 kg and Norway at 6.8 kg per capita per year.

The average per capita consumption in the abovementioned European countries is expected to remain stable. These countries specifically provide interesting opportunities for exporters in producing countries as consumers are increasingly drinking high-quality coffees. This is largely led by a strong growth of consumption in specialised coffee shops in Western Europe, where mostly high-quality coffees are served. Between 2010 and 2018, sales at coffee shops serving specialty coffee in Western Europe increased by 140%.

Europe is a major market for specialty coffees

Europe is the largest and most important market for specialty coffees, together with the United States of America. This is reflected in the large and still rising number of specialty roasters, coffee shops and local coffee brands in Europe, as well as more knowledgeable and demanding European coffee consumers. In general, coffee shops and small and medium-sized coffee roasters lead the way for the introduction of high-quality coffees.

In 2020 specifically, the demand for specialty coffee was lower than usual across all of Europe. Although online sales showed growth, the effects of the social distancing measures and health concerns of consumers resulted in a decline of out-of-home consumption. However, what the pandemic has shown so far is that the interest in high-quality coffees across Europe remained strong.

Prior to COVID-19, it was estimated that the European branded coffee shop market would continue to grow at an average annual rate of 3.9% from 2020 to 2025. In 2021, this forecast was readjusted to an average annual growth rate of 2.9%. The expectation is that the European coffee market will be back to pre-pandemic levels towards the end of 2022 or beginning of 2023.

The growing interest in specialty coffees in Europe, for both Arabica and Robusta, brings growing opportunities on the European market. These opportunities are especially interesting for exporters which manage to offer consistent supplies of high-quality coffees that meet the Q Arabica (Specialty Grade) and Q Robusta (Fine Robusta Grade) standards. Read more about the specialty market in the market segment section below, and in our study about specialty coffee on the European coffee market.

Europe has a large coffee-roasting industry

Europe is home to many coffee roasters of all sizes and types. However, the European market is mainly dominated by a few large multinational roasting and grinding companies, namely Nestlé (Switzerland), JDE Peet’s (the Netherlands), Melitta (Germany) and Lavazza (Italy), as well as Starbucks (United States) and Strauss Coffee (Israel). The top-10 roasters in the world are responsible for roasting 35% of the world’s coffee.

According to PRODCOM figures, Germany has the largest coffee-roasting industry in Europe, with a sold production volume of 572 thousand tonnes of roasted coffee in 2019. Italy has the second-largest coffee-roasting industry in Europe, with a sold roasted coffee production volume of 508 thousand tonnes. The roasting industries of Germany and Italy are followed by Spain, the Netherlands, France and Sweden.

Europe is the world’s largest exporter of roasted and ground coffee. Europe accounted for about 84% of the total roasted (excluding decaffeinated) export volume in 2020, amounting to an estimated 1.0 million tonnes.

Between 2016 and 2020, European exports of roasted coffee grew at an average annual rate of 3.7% in volume. In 2020, the largest roasted coffee exporting countries in Europe were Italy and Germany, both with market shares of 23% each. Other large European exporters of roasted coffee include the Netherlands (9.3% of the European volume market share), Switzerland (8.8%) and Poland (6.1%).

A wide variety of suppliers serves the European coffee market

According to data from Eurostat, Brazil and Vietnam are the largest suppliers of green coffee to the European market. These two countries account for almost half of Europe’s imports: Brazil supplies 28% of total European imports, and Vietnam 18%. Other significant suppliers of green coffee to Europe include Honduras (6.3%), Colombia (5.5%), Uganda (4.7%), and India (3.4%).

Each supplying country plays a different role, targeting certain segments of the European coffee sector. Brazil is a large supplier of both Robusta and Arabica varieties. In 2020/21, an estimated 71% of Brazil’s production was Arabica. Between 2016/17 and 2020/21, the total Brazilian coffee production volume increased at an average annual rate of 5.7%, reaching nearly 4.2 million tonnes of green coffee in 2020/21. Brazil’s coffee exports to Europe amounted to 999 thousand tonnes in 2020, registering an average annual increase of 0.4% between 2016 and 2020.

Vietnam, India and Uganda have a strong focus on Robusta production. Vietnam’s production volume consisted of 97% Robusta in 2020/21, Uganda’s 85% and India’s 73%. Between 2016 and 2020, Indian and Vietnamese exports to Europe decreased on average by -5.7% and -3.2% respectively, while exports from Uganda increased by 8.0% over the same period. India’s exports to Europe have been declining in the last decade due to a stronger need for value addition in different stages of coffee processing as well as to the rising demand for specialty coffees. Uganda’s increase in exports in recent years is attributed to an increase in production by newly planted coffee trees and favourable weather conditions, as well as to the high affinity for Ugandan coffee in Europe.

Colombia and Honduras are known for their large and exclusively Arabica production volumes. Colombia is the world’s third-largest coffee producer, producing an estimated 858 thousand tonnes in 2020/21. Colombia’s production decreased slightly between 2016/17 and 2020/21, at a rate of -0.5%. Supplies to Europe also decreased slightly, at a rate of -3.8% yearly, reaching 198 thousand tonnes in 2020.

In Honduras, Arabica production decreased at an average annual rate of -4.5% between 2016/17 and 2020/21. Nevertheless, Honduras’ green coffee exports to Europe grew at an annual growth rate of 3.8% between 2016 and 2020. Honduras is Europe’s second-largest supplier of organic coffee beans (after Peru), with supplies amounting to 41 thousand tonnes in 2020.

Peru’s production of Arabica varieties and organic-certified coffees also provides potential for specialty and niche markets in Europe. Coffee exports from Peru to Europe showed a year-to-year decline of -4.5% between 2016 and 2020, reaching a share of 2.9% of total European coffee imports. Reasons for the declining export volumes are the long-lasting damaging effects of the coffee leaf rust outbreak in 2015, as well as the fact that coffee farmers in Peru have been facing financial difficulties in the past three years as revenues have not met production costs. Peru is the largest supplier of organic coffee to Europe, with amounts reaching 44 thousand tonnes in 2020. A large share of Peruvian coffee supplies is directed to Germany, the main organic market in Europe.

Ethiopia is also a well-known supplier of Arabica coffee and organic-certified coffees. Only 37% (87 thousand tonnes) of Ethiopia’s exports was directed to the European market in 2020, mostly to Germany, France and Belgium. Large destination markets for Ethiopian coffees outside of Europe are Saudi Arabia, Japan and the United States. Ethiopian supplies to Europe declined slightly between 2016 and 2020, at a year-to-year rate of -0.1%.

Nicaragua’s coffee exports to Europe showed a sharp increase between 2016 and 2020, at a rate of 19% per year. European imports from Nicaragua amounted to 51 thousand tonnes in 2020, 1.2% of total European imports. Nicaragua is known for its Arabica production, yet the country has a small production of Robusta too. Nicaragua’s exports to Europe have been boosted by a public-private effort in the framework of the Association Agreement between the European Union and Central America.