Inflation is impacting coffee prices and consumption in South Africa

Photo by John Schnobrich on Unsplash

No matter how you enjoy your daily cup, coffee continues to be an essential part of our lives, delivering comfort and that much-needed boost.

It hasn’t been a great 12 months for coffee consumers, who have been under pressure as coffee prices have skyrocketed more than any other food or beverage product.

While the Reserve Bank has done well to bring inflation down below 4.5% for the country, coffee prices have been immune to those overtures.

Instant Coffee experienced the largest consumer price increase YoY of any food or beverage item in August 2024 at 22.3%, higher than eggs, the only other item that had higher than 20% inflation.

The average price for 250 grams of Instant Coffee was R67,37 in August 2024, up from R52,71 in August 2023. Interestingly, Ground Coffee and Beans fared much better, with a more ‘moderate’ 13.6% increase YoY.

Shift in consumer preference

The data clearly illustrates the shift in consumer preferences. According to MAPS, a survey of more than 20,000 South Africans, produced by the MRF, the number of people who say they drink Instant Coffee daily, is down 12%, but Ground Coffee and Beans has surged with a remarkable 58% increase compared to last year.

While down on last year, there are still a respectable ~20 million people (half of our adult population) who drink coffee daily. The survey segments consumption into several caffeinated categories, with the most popular being instant coffee / cappuccino with a whopping daily consumption by 18.8 million South Africans.

"Nearly half of coffee drinkers prefer Ricoffy, a clear favourite in South Africa, enjoyed by more people than the next five leading Instant Coffee brands combined—Jacobs Kronung, Frisco, Nescafe, Koffehuis and Douwe Egberts," says Andrew Fulton, director at Eighty20.

In South Africa, instant coffee drinkers consume an average of 1.7 cups per day, while ground coffee drinkers average just over 1.9 cups (rising to 2.08 cups daily for those drinkers aged 35 to 50).

Instant coffee drinkers are over-indexed for Indian people and Afrikaans speakers in the Western Cape and Gauteng, whereas ground coffee drinkers are over-indexed for English-speaking, middle-class White or Coloured couples.

Cold and iced coffee trending in the South African market

Insight Survey  28 Aug 2024

Eighty20 has created a national segmentation that has divided the South African population into 8 segments and 46 sub-segments. Two segments, the Middle Class and the wealthy Heavy Hitters, together make up 15% of the adult population, but make up nearly a quarter of the roughly 2.1 million Ground Coffee Drinkers.

One would think that with the ubiquity of coffee shops in major South African metros the number of Ground Coffee drinkers would be higher. The MAPS data shows that it is the wealthier population who are drinking ground coffee, with more than a quarter of consumption by the small group of LSM 9-10.

Coffee pod consumption is a slightly more niche market with 1.3m consumers, typically being wealthier than the average ground coffee drinker. Coffee pod consumption appears to have been significantly affected by inflation, with MAPS indicating a 30% drop in daily consumers compared to 2023.

For example, Nespresso’s Pumpkin Spice Cake Limited Edition pods retail for R163.00 for a pack of 10, making each pod about 10 times more expensive than a cup of instant coffee.

BrandMapp, a survey of South Africans from households earning over R10,000 per month, highlights the top coffee shops in the country.

The stores that South Africans plan to visit this year include Woolworths Café (21%), Starbucks (18%), Seattle Coffee (17%), and Vida e Caffé (14%). While the top four have remained steady over the past year, Starbucks has seen a notable increase in popularity.

"Coffee is a global commodity, with over 10 million tonnes produced each year and an astonishing 2.25 billion cups consumed daily. However, with rising inflation affecting coffee prices in South Africa, we are seeing a shift in consumer behaviour, reducing consumption and shifting to more affordable alternatives," says Fulton.