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U.S. Demand for Coffee Is Expected to Grow.

Consumption increase of 2% a year until 2020 seen outstripping rest of world.

U.S. demand for coffee is set to outstrip the rest of the world until 2020, as lagging economic growth in other major markets drags on consumption, according to the International Coffee Organization.

Coffee consumption is expected to grow at 2% a year until 2020 in the U.S., the world’s largest national coffee market, a spokesman for the London-based ICO said last week in an interview. By contrast, it expects global consumption to grow at 1.3% a year.

“We’re seeing surprising growth in the United States,” said spokesman  Vicente Partida.

The U.S. accounted for 16% of global coffee consumption in 2015-16, according to the ICO.

The strong pace of growth for coffee reflects the strength of the U.S. dollar and the relative strength of the country’s economy, said Ric Rhinehart, president of the Specialty Coffee Association of America. The drink has also benefited from promotion as a healthy beverage, at the expense of sugary drinks, he said.

“Coffee has emerged as the winning beverage as [the] U.S. has turned away from soft drinks,” Mr. Rhinehart said.

World-wide, the global demand for coffee is expected to slow owing to sluggish economic growth in Europe and Brazil, which together account for about half of global demand, the ICO said. The forecast is a downward revision from the ICO’s prediction earlier this year that global consumption growth would stay at 2.5% annually.

“At the time, economies around the world were rebounding from the economic crisis, and coffee consumption was growing steadily,” Mr. Partida said.

Consumption has also slowed in coffee-producing regions where the local supply of beans was hit by disease, he added.

The U.S., Brazil and Europe have seen their economic fortunes further diverge this year. Europe continues to grapple with tepid growth and an extension of a bond-buying stimulus program, while in the U.S. investors increasingly predict the Federal Reserve will raise interest rates in December on the back of strong economic figures. Brazil, meanwhile, has been immersed in a political and economic crisis.

Globally, market research firm Euromonitor estimates that conventional coffee is relatively insensitive to economic slumps. For every 1% drop in global gross domestic profit, demand for coffee falls 0.3%, about the same as another daily beverage: green tea.

Instant coffee, which is more popular in emerging markets, is more susceptible to falling incomes, while coffee demand in mature coffee markets is less vulnerable, said Matthew Barry, a beverage analyst at Euromonitor in Chicago.

“Americans are not giving up their cup of coffee just because they got a pay cut,” Mr. Barry said.

Meanwhile, the popularity of coffee will push the industry to source an ever growing supply of beans, even as producers have struggled in recent seasons with coffee diseases, rising temperatures, and drought. By 2020, the ICO estimates global demand will reach 160 million bags of beans.

In the 2015-16 season, global coffee production hit roughly 148 million bags, compared with 146.6 million bags in the previous season, according to the ICO. Each bag holds 60 kilograms of coffee beans.

 

Corrections & Amplifications:
In the 2015-16 season, global coffee production hit roughly 148 million bags, compared with 146.6 million bags in the previous season, according to the ICO. An earlier version of the story misstated the amount of coffee production, used from an older ICO report. (Oct. 26, 2016)

 

Source: http://www.wsj.com/articles/u-s-demand-for-coffee-is-expected-to-grow-1477331665

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