Despite the fact that retail coffee prices keep on rising, some people still won't forego their daily trip to Dunkin' (DNKN) - Get Dunkin' Brands Group, Inc. Report or Starbucks (SBUX) - Get Starbucks Corporation Report for a cup of java.
While there's not likely to be any drop in demand for the beloved beverage anytime soon, one recent trend has many leaning towards a lower-caffeine option.
The drink many are opting for over coffee is matcha, a light green powdered tea that can be used to make everything from lattes to ice cream. It has a grassy flavor with a natural sweet nuttiness and is known for being a potent source of antioxidants.
Health-conscious folks, or those who simply prefer the lower caffeine hit, are opting for matcha more than ever these days. And while it won't fully dethrone coffee anytime soon, it's making its mark in the coffeehouse world.
Matcha originated first in 8th century China from the Tang Dynasty but has grown popular in other countries, especially Japan, which is now the primary grower. Matcha is created by treating tea leaves with steam, drying them, and turning them into a powder.
Matcha is praised for its many health benefits, which scientists confirm may include a boost to cardiovascular health, cancer-fighting effects, weight loss, and better skin.
The tea is also considered to be not just something to imbibe, but a way of meditating as well. Murata Jukō founded the Japanese tea ceremony which includes an ode to the making and presenting of matcha.
Matcha interest is certainly on the rise, with an expected market revenue of $5.5 billion by 2027. The biggest importers of matcha from Japan include China, Sri Lanka, India, and the U.S. In fact, for the past 25 years, matcha sales in the U.S. have reached more than $10 billion. This rise is mainly attributed to the increasing demand for healthy products and new drinks, especially tea.
Today there are multitudes of matcha brands catering to the market, such as ITO EN (ITOEF) , Jade Leaf Matcha, and Aiya. Even big corporations like Starbucks and Dunkin' sell several different drinks made with matcha.
Matcha fans can also be found on social media, often openly denouncing coffee in favor of their drink of choice.
So far, signs point to yes. Globally, the matcha market is forecasted to grow at a compound annual growth rate of 9.44% between 2022-2027. Compared to its neighbor, the global coffee market is forecasted to arrive at a CAGR of 4.28% between 2021-2026. The higher the CAGR, the more value of the market, and matcha's projected CAGR is higher than coffee's by 5.16%.
How is this so? Well, matcha consumption is on the rise due to an increase in chronic diseases which thus provides backing for healthier alternatives, such as the antioxidants found in the green drink. However, the covid-19 pandemic did affect matcha growth because of its difficult hands-on cultivation processes. An increase in trade between the European Union, Japan, the U.S., China, Sri Lanka, and India has resulted in an economic partnership. Additionally, the demand for matcha in desserts and on cafe chains' menus has attributed to its growth.
Don't be fooled though, the coffee industry is doing well, and was valued at $102.03 billion in 2020. A main reason for its CAGR being lower than the matcha markets has much to do with its importers and consumers, as they mainly consist of Europe, North America, and Asia, all of which are combating covid-19. A big impact to the coffee industry also includes at-home coffee preparations, which about 70% of consumers prefer.
Thus, it's hard to tell if matcha will completely take over the coffee market. However, it is clear that it has become a competitor.