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Discover how alternative coffee can address supply concerns and offer growth opportunities for investors.
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Coffee, the drink that brings people together—whether in homes, cafés, or offices—is woven into the fabric of daily life worldwide. It is the flavor people wake up to, a ritual that fuels connection. Yet, the future of this beloved beverage is at risk as climate change, rising costs, and labor challenges threaten its supply. Businesses may struggle to sustain supply and control rising costs, which could lead to shortages of consumers' daily cup. This article explores how innovative alternative coffee technologies can not only preserve the availability of coffee but also offer businesses and investors critical opportunities to navigate these disruptions and secure sustainable growth.
Coffee has been consumed for centuries, not only as a beloved beverage but also as a ritual stimulant and a vital social lubricant. Historically, during periods when coffee was scarce or too expensive, people turned to various alternatives. These alternatives, often devoid of caffeine, served as makeshift replacements during economic downturns or supply shortages. For example, during World War II and its aftermath, when coffee supplies were limited, products like Caro in Germany and Postum in the United States gained popularity. These beverages, made from ingredients like chicory, barley, and other grains, offered a comforting semblance of coffee's warmth and aroma without the caffeine.
The tradition of brewing coffee-like drinks from other plants dates back even further. In the Middle East, date seeds have been used for centuries to create a rich, dark brew. Similarly, in pre-Columbian Central America, the Mayans utilized ramón tree seeds for their ritualistic beverages. Across Europe and Western Asia, a variety of plants such as dandelion root, chickpeas, and figs have been employed to produce coffee substitutes, often also touted for their health benefits.
These creative solutions were not merely byproducts of necessity but reflected a deep-rooted adaptation to coffee's intermittent availability. By the mid-19th century, as coffee became more widely consumed, the development of these substitutes mirrored the burgeoning coffee culture, providing alternatives that prioritized flavor over caffeine content, and marking an enduring legacy of resourcefulness in human dietary history.
The cultivation of Arabica and Robusta, the primary species grown for the coffee consumed worldwide, faces challenges due to its delicate nature and specific environmental requirements. Thriving in the rare stable, moderate climates of highland tropical regions such as Brazil, Ethiopia, and Indonesia, coffee requires shaded conditions, consistent rainfall, and temperatures close to 20°C (70°F). However, the escalating impact of climate change is threatening these ideal growing conditions. Rising global temperatures, erratic weather patterns including severe droughts and floods, and the increasing prevalence of pests and diseases such as coffee rust are reducing yields, and pushing cultivation into new areas, leading to further deforestation and biodiversity loss. This is even further exacerbated by the rising global demand for coffee, especially in developing countries.
Recent extreme weather events in major coffee-producing countries like Brazil have already driven Arabica coffee prices to a 13-year high and Robusta to a 45-year high, illustrating the volatility of the market and underscoring the urgent need for sustainable alternatives. In fact, Lavazza, one of Italy’s largest coffee roasters, has warned that coffee prices are unlikely to decrease anytime soon, signaling long-term financial instability for producers. This financial strain is compounded by fluctuating market prices and the increasing costs of combating climate-related challenges, making the coffee industry economically unsustainable for many farmers as well.
The environmental impact of coffee cultivation extends beyond deforestation. Coffee is also one of the most carbon intensive agricultural products. According to Our World in Data the carbon opportunity cost (carbon lost from native vegetation and soils in favor of agriculture) of coffee beans is only superseded by ruminant meats and cocoa beans. This environmental toll necessitates the exploration and adoption of coffee alternatives that require less resource-intensive farming practices and offer greater resilience to climate impacts.
Moreover, the coffee industry also faces labor exploitation, with many workers receiving inadequate compensation. These issues further emphasize the need for more sustainable and equitable practices.
While the major coffee issues are supply-related, it is important to also consider the evolving consumer preferences as more people align their choices with health, sustainability, and ethics.
Health-conscious consumers are driving the demand for products that go beyond just delivering a caffeine boost. Options like protein-infused "proffee" and functional coffees with added antioxidants, vitamins, or adaptogens are growing in popularity. These offer added benefits, such as improved focus, energy regulation, and stress relief, catering to those seeking nutrient-rich, wellness-oriented alternatives.
Alongside health trends, there’s a growing interest in exploration and variety. Many consumers are experimenting with different global coffee origins, alternative brewing methods, and varying caffeine levels, including caffeine-free options that still offer the coffee experience. This desire for exploration stems from curiosity and a demand for personalized experiences tailored to individual tastes and dietary needs, which also includes non-coffee drinks such as matcha.
Consumers are also becoming increasingly mindful of the environmental and social impact of their coffee purchases, favoring brands that adopt sustainable farming methods, reduce carbon footprints, and engage in fair trade practices. This sentiment is also reflected in a statement from Suntory, following an investment in alt coffee maker Atomo: “As consumer awareness of environmental considerations increases worldwide, demand for more ethical products is expected to increase in the field of beverages as well.”
In a broader sense of coffee alternatives, we have two types: replacers and non-replacers. The replacers, which are the focus of this article, look and taste like coffee, while the non-replacers such as chai or matcha offer a similar drink experience but do not taste like coffee.
These replacer alternatives are designed to reduce the environmental impact of traditional coffee cultivation and provide new options for consumers. Here’s a look at the three key technologies: molecular coffee, cellular coffee, and climate resistant coffee.
Molecular coffee could be seen as the continuation of the centuries old practice of using different agricultural products that recreate the primary flavor profile of coffee. The difference is the use of modern approaches such as fermentation that achieve a level of precision previously unattainable. One of the leading companies in this space is Atomo Coffee, who has innovated by converting compounds from plant waste, such as date seed extracts, chicory root, and grape skins, into flavors typical of green coffee. This method results in a dramatic reduction in environmental impacts, boasting 83% lower carbon emissions and 70% less farmland usage than conventional coffee production, along with eliminating the need for deforestation. Atomo Coffee's product represents a significant step forward in sustainable coffee production.
Another biotech method, cellular coffee uses real coffee cells cultivated in reactor. This method is similar to techniques used in lab-grown meat and involves growing coffee cells in a nutrient-rich medium, which are then processed into a powder form that can be brewed like traditional coffee. Unlike cultivated meat, plant-based cultivated products like cellular coffee and cocoa are less complex. This means the cell culture medium is also less expensive, which is one of cultivated meat’s biggest challenges. The Finish institute VTT, a leader in this technology, grows its coffee by floating cell cultures in bioreactors. This process is pesticide-free, has a significantly lower water footprint, and reduces transport emissions by allowing coffee to be produced in local markets. VTT is currently working on a life cycle analysis to quantify the environmental benefits of its method, promising a much lower impact compared to conventional coffee cultivation.
Out of the 100+ known coffee species, nearly all global consumption comes from just two: Arabica and Robusta, which account for 56% and 43% of worldwide production, respectively. A promising alternative approach is the use of climate-resistant species such as the recently rediscovered Coffea stenophylla. This species can tolerate temperatures 6°C higher than Arabica coffee, making it highly resilient to climate change. Coffea stenophylla also boasts a flavor profile comparable to high-quality Arabica, making it a strong candidate for future coffee production in warmer climates. Another approach being pursued by Starbucks and Nestle is the development of different Arabica varieties, better resistant to heat and diseases. However, the issues with environmental and ethical impact associated with traditional Arabica and Robusta coffee farming are still applicable.
The disruption of the traditional coffee value chain is imminent, driven by climate change, environmental degradation, and shifting consumer expectations. As demand for coffee surges, it is clear that traditional cultivation practices are unsustainable. For corporates in the food and beverage sector, the rise of alternative coffee technologies presents both challenges and opportunities. Embracing innovations like molecular and cellular coffee, or even investing in climate-resilient coffee species, could position companies as leaders in the future of sustainable coffee. On the other hand, failure to adapt may result in lost market share and reputational risks as consumers increasingly prioritize ethical and environmentally friendly options. The future of coffee is evolving rapidly, and forward-thinking corporates must act now to stay ahead of these transformations.
Corporates in the food and beverage sector must adapt by embracing alternative coffee technologies, or they risk losing market share and facing reputational challenges as consumers prioritize ethical and sustainable choices.
Bright Green Partners is here to help. Whether you need strategic insights, due diligence on emerging technologies, or support in navigating the complexities of the alternative coffee market, our team of experts can guide your organization through the transformation. With deep expertise in sustainable food innovations, we will ensure your business is well-positioned to capitalize on the opportunities in this rapidly evolving landscape. Schedule a call with our Managing Partner, Floor Buitelaar, to discuss how we can assist.
