A PESTLE analysis is a framework that helps companies identify external factors that may impact a new business or industry. PESTLE stands for political, economic, social, technological, legal, and environmental factors.
PESTLE Analysis of the Coffee Industry
Coffee is an age-old drink that is popular across the world. Originally made from a mixture of coffee beans and hot water, the beverage can now be found in many forms. It has almost become an integral part of human society, and there are various political, economic, sociocultural, technological, legal, and environmental factors that ensure this billion-dollar industry thrives.
In this article, we will discuss major factors in pestle analysis of the coffee industry.
While the primary production of coffee beans is centered in Africa, South America, and Asia, the biggest consumer base for this product is located in North America and Europe. As a result, the coffee industry is highly dependent on international trade in order to operate. The trade agreements between the manufacturing and consuming geographies are what enable this industry to thrive. If there is any mishap within these industries, it will severely affect the coffee industry and increase production costs.
The growth of consumer income across the world has allowed beverages to take on premium roles, which have largely increased profit margins. Populations in growing economies are now able to view coffee as a luxury item that they can afford, thus enabling the sale of premium-grade coffee. And even in countries where premium-grade coffee sales are low, the low-grade coffee industry still thrives. But the growing consumer expenditure index is directly related to the increased demand for premium-grade coffee beans.
While there has also been a strong surge towards tea as an alternative to coffee in recent times, the effects of the latter are much stronger, and thus the customer base is most likely to remain loyal.
The current trend in society towards foods and beverages is health consciousness. Since coffee contains high amounts of caffeine, many people consider it an unhealthy drink. This has led to reduced demand for coffee in recent times. At the same time, this trend has also given rise to decaffeinated products that contain coffee seeds but have a lower caffeine quantity.
On the other hand, the demand for coffee-based beverages such as cold beverages, ice creams, etc. has seen a steep rise in recent times. This is primarily due to the current socio-cultural choices of consumers in Europe and North America.
Recent developments in technology have been a huge boom for the coffee industry. Genetically engineered coffee seeds have succeeded in serving coffee drinkers around the world with some of the finest coffee ever. Additionally, these products have a higher shelf life than regular coffee and are also easier to yield. As further developments occur in the genetic engineering industry, it is expected that premium-grade coffee will become a more viable product.
Multipurpose coffee machines are another great tool that has helped keep the coffee culture in place. These can now be found in almost any office space or entertainment center. Consumers are now also buying coffee machines for their homes that allow them to brew coffee with the most ease possible. However, this has resulted in a dip in the number of consumers who would have otherwise purchased their coffee from a ready-made vendor. Vendors are now attempting to innovate new recipes that will help maintain the demand for ready-made coffee-based beverages.
Many countries are placing strict regulations on the amount of caffeine that beverages can contain, and this has sharply hit the coffee industry. People who want high amounts of caffeine in their drinks can no longer avail themselves of it from ready-made vendors. But these laws have not yet been implemented globally, so the demand for coffee remains high in most parts of the world.
Sustainable farming methods have been a major boon to the coffee industry. Over-irrigation of lands for coffee led to various hazardous situations and damage to the environment in general. With the help of modern farming practices, these problems have been averted, and coffee agriculture can now be practiced with no or minimal threats to the environment.
Wrap-Up Pestle Analysis of the Coffee Industry
The coffee industry overall is one of the strongest industries that thrives in the current market, with its only competitor being the tea industry. There are, of course, factors that can negatively affect the popularity of the drink; however, its current customer base is strong enough to contain any major market mishap. With fair trade agreements showing the path to the future of the coffee industry and the social status of consumers moving towards luxury items, the coffee industry is mostly likely to thrive and grow for a long time to come.