Porter’s Five Forces Analysis of Coffee Industry 

Coffee is the world’s top popular drink produced from roasted coffee beans. Coffee industry deals with the business of farming, harvesting, selling, and purchase of coffee beans. Today, we’ll discuss Porter’s five forces analysis of Coffee industry; bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.

Coffee Beans Producing Countries

• Guatemala
• Mexico
• Honduras
• Peru
• Ethiopia
• India
• Arabia
• Colombia
• Indonesia
• Vietnam
• Brazil

Statistical facts and figures of Coffee Industry

• Market size – 132.13 billion USD (2024)
• Growth rate – 4.72%
• Forecasted Market Size – 166.39 billion USD (2029)
• Largest Market – Europe

Top Brands in the Coffee Industry

• Starbucks
• Costa Coffee
• Nestle
• McCafe
• Folgers
• Death Wish Coffee
• La Colombia Coffee
• Batch Coffee
• Dunkin
• Nescafe
• Lavazza

Porter’s five forces analysis of Coffee industry would analyze the bargaining power of suppliers and buyers; the threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management. Here’s Coffee industry Porter’s five forces analysis of coffee shop business as follows;

Porter’s Five Forces Analysis of Coffee Industry

Let’s discuss the Porter’s five forces analysis of Coffee Industry as competitive forces in strategic management and they’re as follows;

Bargaining Power of Suppliers in Coffee Industry

The bargaining of suppliers is lower in the Coffee Industry as competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Coffee Industry Porter’s 5 forces analysis of coffee shop business are as follows;

I-Multiple Coffee Beans Suppliers

Guatemala, Mexico, Honduras, Peru, Ethiopia, India, Arabia, Colombia, Indonesia, Vietnam, and Brazil are the top coffee bean farming countries. They have established a worldwide supply chain and distribution network. They offer almost similar types of coffee beans with the same taste at the market competitive price. The easy availability of suppliers in various markets decreases the bargaining power of suppliers.

II-Backward Integration

Some world’s leading coffee brands like Nestcafe and Starbucks have established their own coffee processing and roasting units; and very good relationships with farmers in Africa and America. Backward integration of the leading retail coffee brands ensures the smooth availability of raw green coffee beans.

Bargaining Power of Buyers in Coffee Industry

The bargaining of Buyers is Higher in the Coffee business as a competitive forces in strategic management. Some of the main factors impacting the bargaining power of suppliers in the Coffee Industry five forces analysis of coffee shop business are as follows;

I-Alternative Coffee Brands

While shopping coffee, a customer has multiple alternative options for coffee brands. They all offer similar types of coffee with almost the same taste at the market competitive pricing. It gives a significant bargaining power to the customers. The price-conscious customers would choose the low-cost coffee brand, rather than choosing the premium.

II-Quality Differentiating Factor

There is a small difference in the taste of coffee beans cultivated and harvested in different parts of the world due to the soil, water, air, and other natural environmental factors. It doesn’t mean that the coffee taste of one region is good or bad over the other region; they’re just different. They all have a similar quantity of caffeine and give an energy boost. It doesn’t upon the customers’ choices, trends, and preferences; sometimes they like African, and the other time they would choose Indian or Brazilian.

Threat of New Entrants in Coffee Industry

The threat of new entrants is Moderate in Coffee industry as competitive forces in strategic management. Some of the main factors impacting the threat of new entrants in the Coffee Industry Porter’s five forces analysis of coffee shop business are as follows;

I-Marketing & Branding Expense

There is no doubt that you can easily set up your own coffee roasting facility and launch the coffee brand. Starting the coffee brand is not difficult; rather the difficult part is marketing and branding. However, NestCafe and Starbucks invested millions and billions of dollars in marketing and branding, and it has allowed the establishment of a worldwide network of loyal customers.

II-Brand Loyalty

Already established coffee brands have developed a large database of loyal customers due to years of continuous quality service. It is highly difficult for the new brand to win the market share, rather they could only capture a small percentage of the share in the particular regional market.  

Threat of Substitutes to Coffee Industry

The threat of substitute products and brands is higher in Coffee industry as competitive forces in strategic management. Some of the main factors impacting the threat of new substitutes in coffee industry’s five forces analysis of coffee shop business are as follows;

I-Multiple Alternative Options

While shopping coffee, customers have multiple options of coffee brands. They could easily switch from one brand to another without incurring any cost. In fact, they could easily find multiple premium coffee brands, and also affordable low-cost brands. It amplifies the brand and product substitution rate to a great extent.

Competitive Rivalry in Coffee Industry

The competitive rivalry among Coffee brands is very high in the Coffee industry as a competitive forces in strategic management. Some of the main factors impacting competitive rivalry in the Coffee Industry Porter’s five forces analysis of coffee shop business are as follows;

I-Tough Competition

The retail coffee sale business has become highly competitive in the presence of multiple brands operating their business in the Coffee industry. It increases the competitive rivalry among coffee brands, and their focus is targeting various segments of the customer market.

Conclusion: Coffee Industry Porter’s Five Forces Analysis |5 Forces Analysis of Coffee Industry

After an in-depth study of the Porter’s five forces analysis of Coffee Industry; we have realized that coffee retail is the world’s leading business. If you are learning about the Coffee industry five forces analysis of coffee shop business; then you should keep in mind the abovementioned bargaining power of suppliers and buyers; threat of new entrants and substitutes; and intense rivalry as competitive forces in strategic management.