The Growth of Modern Coffee Business in Indonesia
In the last three years, the modern coffee business that sells RTD coffee has grown very rapidly in Indonesia. Based on research from Toffin, the number of coffee shops in Indonesia in August 2019 alone reached more than 2,950 outlets. This number has almost tripled compared to 2016 which was only 1,000 outlets. And the market value of this industry reaches Rp. 4.8 trillion.
Indonesia is the fourth largest coffee-producing country in the world. Some coffee beans from Indonesia are already very popular with coffee lovers around the world. The Indonesian coffee beans they are looking for a lot are coffee beans originating from Sumatra and Java. This makes the demand for coffee from abroad is very high. However, Indonesia still has to pay attention to the supply of quality coffee beans for domestic supply. This is because domestic coffee consumption is also high. In fact, domestic coffee consumption in 2019 grew 13.9 percent per year, exceeding world consumption by 8 percent. The growth of domestic coffee consumption in Indonesia is due to the existence of a modern coffee business. Here are some reasons from Toffin’s research on the factors that influence the growth of the modern coffee business.
Factors that affect coffee consumption
These factors also affect domestic coffee consumption at the same time. First, there is a habit of hanging out while drinking coffee. Second, increasing consumer purchasing power due to the more affordable price of RTD Coffee. Third, the dominance of the Indonesian youth population creates a new lifestyle in consuming coffee. Fourth, the presence of social media makes it easy for coffee shop businessmen to carry out marketing and promotional activities. Fifth, the presence of ride-hailing platforms (such as GrabFood and GoFood by Gojek) simplifies the sales process. Sixth, the low entry barrier in the coffee business. This is due to the availability of raw materials, equipment (coffee machines), and resources to build a modern coffee business. Seventh, the coffee shop business margin is relatively high.
Of the factors above, the most important factor is the influence of the younger generation. Hanging out in modern coffee shops has become a new activity among the young generation. They come to the coffee shops not only to drink coffee but also to do other activities. This is what makes modern coffee shops seem like they have become a trendy hangout place for the young generation. Further, apart from being consumers, some of them also open their own coffee shops.
ThThe impact of technology for the modern coffee business
Besides coming and enjoying coffee, coffee lovers who mostly are the young generation, really take advantage of technology. They don’t need to come directly for coffee. They only need to order and pay for it via a ride-hailing platform. They are also very social media literate, any offer through social media they will definitely accept.
The younger generation has a big influence on the growth of the modern coffee business in Indonesia. Toffin’s Head of Marketing, Ario Fajar, also supports this. He said that modern coffee shops that provide quality RTD Coffee at affordable prices are in great demand. Indonesia’s young generation currently dominates this. In the past year, 40 percent of Y and Z generations bought coffee drinks from this type of shop. The average share of wallet expenditure allocation is IDR 200,000 per month.
This is what makes the sales of RTD coffee products like coffee products sold in modern coffee shops continue to increase. According to data from Euromonitor, in 2013 the retail sales volume of RTD Coffee Indonesia was only around 50 million liters, in 2018 it was almost 120 million liters. This is one of the reasons why the modern coffee business is expected to grow significantly in the coming years. And one of the determining factors for the increase in this business is the role of the young generation as both business players and consumers.