Southeast Asia currently spends US$3.4 billion annually on modern coffee, according to a new study conducted by Momentum Works. The results of the study are published in the ‘Coffee in Southeast Asia’ report, which provides in-depth analyses and insights into the business dynamics behind the modernizing retail of many Southeast East Asian consumers’ daily beverage.

In the spirit of 11.11 shopping festival, this report is currently complimentary until 30th November 2023. Get your copy of the ‘Coffee in Southeast Asia’ report now.

This report is part of Momentum Works’ F&B & new retail coverage, which includes ‘Bubble tea in Southeast Asia’ report, ‘Food delivery in Southeast Asia’ report, and ‘Sip, Innovate, Repeat’ Immersive Workshop.

Here’s a sneak peek into the report:

#1: Indonesia and Thailand are the largest coffee markets

In Southeast Asia, Indonesia and Thailand have the largest modern coffee market. Indonesia is the largest market in the region with an estimated $947 million annual turnover, while Thailand has an annual turnover of $807 million.

#2: The coffee industry is extremely competitive, but why are there still so many players in the market?

#3: New modern coffee chains in SEA fueled by venture investments

We are seeing an increase in modern coffee chain companies in the region – Kopi Kenangan, Fore, Flash Coffee, Tomoro.

#4: Bad news: Absolute coffee consumption in Southeast Asia has not been growing

Unlike traditionally tea-dominant markets, like China, Japan and South Korea, where significant growth is imaginable (or even realised), Southeast Asian consumers are already accustomed to drinking coffee. This leaves little room for further growth in terms of absolute coffee consumption. With the region’s rising purchasing power, future growth in the modern coffee market would likely come from the increase in the value of the coffee sold instead.

#5: The Silver lining: There are still ways to survive and beat the competition

For coffee chain players to grow their business, in addition to adding food and other items to the menu, there are two ways (which can be used in conjunction):

  1. Take market share from other players or forms of consumption; 
  2. Convince the consumers to upgrade and spend more on each cup (some call it premiumisation); 

#6: Don’t forget Luckin Coffee: The original inspiration for many tech companies to try to beat Starbucks 

Luckin Coffee was the fastest company to IPO on Nasdaq and beat the coffee incumbent, Starbucks in China. Although Luckin Coffee was later found to be fraudulent, delisted from NASDAQ, and had to restructure the whole organisation, its’ comeback story in 2022, and international expansion in 2023 is worth learning from. 

(P.S. To find out more about Luckin Coffee’s business and operational strategies, join our Sip, Innovate, Repeat Immersive Workshop)

#7: Luckin Coffee: New market, new Leadership, People, Organisation and Product (POP-Leadership) focus

#8 Companies (coffee or otherwise) need to determine which value propositions they want to give their customers to stay relevant 

Players, therefore, need to look beyond product level and start finding ways to improve their business models while leveraging tech and data to raise operational efficiency across multiple fronts. Such improvements must be supported by a strong leadership team, a solid organisation structure and capable people. The constantly evolving market offers many case studies, with lessons not only for this industry, but also for all organisations in different sectors looking to innovate.

We cover the insights on how industry front-runners are calibrating their tech and innovation playbook through our immersive Sip, Innovate, Repeat Immersive Workshop.

With more than 90% of participants “very satisfied” with the programme, we support participants to understand both where and how to engage, and discover ways to incorporate the insights and immersion in your work, products. 

Join us to immerse in this transformation journey with your favourite cup of coffee (tea or beverage of choice). 

Easter egg: Where does Starbucks sit in all of this? We are proud to launch our  Momentum Works Frappuccino Index on global purchasing power (and affluence)

The Frappuccino Index is created by Momentum Works to gauge the relative cost of living and disposable income of key global cities. Singapore scores 149 in the index, the lowest in Southeast Asia, suggesting that Starbucks is seen as less premium and the city has a broader base for international brands. The highest-scored capital city in the region is Hanoi (233), suggesting the premium positioning of Starbucks and the relatively low penetration of international brands. 

Find out the above insights, and more by downloading the full report here.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].