The Advent of a Coffee Boom: What’s the Attraction?

A third coffee boom occurred in 2013, due in large part to the huge success of convenience-store coffee. The boom is far from over, though, and in 2014 we are likely to see more intense competition among the coffee-related companies as they fight to build market share.

Cup of Coffee

Convenience-store coffee becoming a major boom                                   

chart

The summer of 2013 was marked by an unprecedented heat wave across the country, with the temperature reaching a record high of 41 degrees Celsius in Shimanto City, Kochi Prefecture. While sweltering heat continued day after day, sales of beverages skyrocketed at convenience stores and other retail outlets.

Last January, 7-Eleven launched  “7 Café,” which offers authentic drip coffee made from beans freshly ground for each cup via a self-serve grinding machine. The price for a regular-size coffee is competitively low at just 100 yen. It became very popular among men and women, triggering a major trend that has affected an entire industry. This is known as the third coffee boom.

Leading the market once dominated by Starbucks and Doutor Coffees   

With freshly brewed coffee readily available through self service at reasonable prices, even young generations have taken to drinking coffee away from homes. This so-called second coffee boom was ignited by Starbucks Coffee Japan (JASDAQ; hereinafter “Starbucks”), originally established in Seattle, the United States, which opened its first Japanese store in Tokyo’s Ginza district in August 1996.

In September last year, Starbucks opened its thousandth store in Japan. In February 2008, McDonald’s Japan (Shinjuku, Tokyo) started to provide “Premium Roast Coffee,” which opened up a competition in the low-price coffee market, thus helping to usher in the third coffee boom.

Boom of the Japanese coffee-shop culture arrived in the U.S.                

 The United States, which has the highest coffee-consumption rate in the world, is now headed away from mass consumption and production. More people now prefer to drink highly aromatic coffees, which are carefully prepared for each cup with self-roasted beans grown in particular regions. This is the so-called “third-wave coffee,” a trend that started on the West Coast in cities such as San Francisco and then spread across the nation toward New York.

The precursor of the third-wave coffee is a store called “Blue Bottle Coffee” established by Mr. James Freeman. In fact, this store is said to have been strongly influenced by Japan’s coffee-shop culture, in which each cup of coffee is prepared with great patience. Actually, some of the Japanese coffee shops for which Mr. Freeman has sincere respect have been featured in various publications.

Will coffee shops make a comeback?                                                                

In reality, coffee shops that retain the good-old coffee culture are dwindling in number under the domination of low-price brands marketed by major café chains and convenience stores. According to “Establishment and Enterprise Census (“2009 Economic Census” for 2009) published by the Statistics Bureau of the Ministry of Internal Affairs and Communications, the number of coffee shops peaked in 1981 at 154,630 and then declined steadily. In 2009 the number was down to 77,036, having been reduced by half (see the table).

Even so, as a long-standing characteristic, anything that has become popular in the United States will eventually become popular in Japan. Blue Bottle Coffee is expected to enter the Japanese market sometime this year, and it will be interesting to see whether or not this reverse-imported café with a twist of American style will catch on.  In the Japanese café industry, there has been a tendency to take a step beyond selling low-price coffee and seek a way to provide higher-quality services. Last year, Starbucks opened “Inspired by Starbucks”–one in April and another in November–in residential areas of Setagaya. The store provides a relaxing, comfortable café space where each cup of coffee is individually brewed with care for the customer by a barista who is conversant with coffee. Customers can select not just the types of coffee beans but also the methods of coffee preparation, such as the manual paper-drip method or the use of a special coffee machine available at only 12 stores in Japan. Additionally, Doutor Coffee plans to expand its full-service coffee shop “Hoshino Coffee,” in which wait staff takes orders at each table.

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