Superior Solubles

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Instant coffee is produced at industrial scale. Millions of pounds of green coffee are continuously loaded into massive tangential roasters with a capacity of 11,000 pounds per hour. The coffee is then brewed in vats holding thousands of gallons and dehydrated. Since its invention in 1890 ever-more-sophisticated technology is applied to reduce energy and expand production capacity with occasional breakthroughs that improve taste.

The basic business model depends on capital-intensive production that requires large quantities to keep prices low so that volume sales stimulate demand. Everything is predicated on a shared goal: a $0.10 to $0.25 dose (sold in multi-dose packets, often with creamer and sugar).

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Those little doses add up. The global market for instant coffee is approaching $30 billion.

Convenience points the way

A few years ago some convenience-obsessed premium coffee roasters proposed an alternative and somewhat audacious business objective: the $4 to $6 dose. Mixing soluble coffee, typically freeze-dried crystals, with roasted arabica that is micro-ground to speed infusion, reversed a long downward trend.

Starbucks VIA Ready Brew awakened consumer interest, reaching $100 million in sales in 2010 within 10 months of its launch. VIA quickly achieved 30% share of the US market and remains a top seller, now available in seven varieties (including three flavored coffees). It is priced $1.20 to $1.25 for a 3.3-gram dose ($7 to $7.50 per box). Last year Nescafé Malaysia 3-in-1 instant coffee sticks were the best-selling instant coffee on Amazon.

But Nestlé and Starbucks enjoy tremendous advantages. Starbucks serves 100 million coffee drinkers a week, generated a record $6.3 billion in revenue in the latest quarter, and operates 28,000 outlets. It was nonetheless hesitant to introduce VIA precisely because it tasted very much like its barista prepared brew. The concern was that VIA, on sale at the front counter, would cannibalize sales of brewed coffee.

A year later, after surveying its customers, Starbucks found that 55% purchased VIA Ready Brew to drink at home; 25% bought it to drink at work and 20% on the go. Nearly 40% of those surveyed said VIA was added to the beverages they are currently drinking, rather than a replacement to existing products. This discovery led a number of roasters to exploit a specialty coffee niche previously ignored – specialty, single-origin and even farm-level direct trade drinkers with no interest in caramel, peppermint, or similarly flavored coffee used in the past to conceal flaws. Brands including Intelligensia Coffee & Tea, Sudden Coffee, Stoked Coffee, Alpine Start, Joe Coffee Co., Swift Cup Coffee, and Viola believed that once reconstituted their 8 oz. instants will stand their ground against a comparably sourced ground roast.

Batch quality at scale

Proprietary freeze-drying at scale is costly. Drying times run to 30 hours. Sourcing superior beans is incremental and custom roasts are labor-intensive but retaining the great taste of freshly roasted coffee requires a bit of magic. The key is to keep temperatures low (in a near vacuum) and devise methods to capture aromatic compounds that are later reintroduced during final processing. Sublimation requires temperatures as low as minus 80 degrees Fahrenheit (-620C). San Francisco-based Sudden Coffee packages its crystals in easily recycled three-inch glass tubes. Intelligensia relies on Sudden’s skills which offers the advantage of selling Intelligensia’s signature coffee to those who prefer instant. A four-pack sells for $13.

Viola Coffee was funded on Kickstarter, receiving $27,000 from donors. Founder Kent Sheridan describes the coffee as pre-extracted in soluble form. The recommended temp is 155ºF/68ºC but these coffees brew equally well in hot, warm, or cold water. Like Sudden, Viola currently partners with 11 roasters and is aggressively seeking more. The company minimizes waste by purchasing coffee that roasters can’t process through their cafes, says Sheridan.

Athletes and adventure travelers love the stuff. Stoked was founded by Jax Mariash, an extreme distance runner and former Starbucks barista who learned to roast at Jackson Hole Roasters.

Alpine Start is a Boulder, Colo.-based instant coffee founded in 2016. It is the inspiration of Matt Segal, a mountain climber and natural foodie Alex Hanifin who is c.e.o. They named the original blend: Coffee that Actually Tastes Good. A three pack of five-dose boxes sells for $24.27 online. A single box priced at $8.99. The coffee is sourced in Colombia and energized with 120mg caffeine.

Global growth

Transparency Market Research (TMR), based in New York, predicts a compound annual growth rate of 4.8% for instant coffee through 2025 when it will total $42.5 billion. The market has grown significantly since 2016 when soluble coffee sales were estimated at $28.1 billion. Russia remains the world’s largest importer of instant coffee but Asia has now surpassed Europe as the fastest growing instant coffee market with a global share of 35.7% in 2016 according to TMR.

German market researcher Statista reports that Japan is Asia’s largest instant coffee market at $7.26 billion. In contrast sales of instant coffee in China, a much larger country, were estimated at $2.075 billion in 2018. Per capita revenue averages only $1.49 in China but Statista predicts $3 billion in sales by 2021.

Globally Nestlé has lost market share in each of the past four years and is now down to 15%. In China Nestlé retains 72% market share, a number expected to climb as the Swiss-based food giant begins marketing Starbucks VIA. In August Nestlé concluded a $7.1 billion licensing deal to market and manufacture Starbucks VIA outside the US in supermarkets, restaurants, convenience, and to catering operations.

Competitive challenge

Format may prove the most challenging competitor.

Dripkit is one of a growing number of single-use, pour over packets that also features single origin, family farmed coffee. Individually wrapped pour over is finely ground roast and does not require expensive dehydration.

Another option: Forto Espresso Shots, a 2 oz. liquid concentrate packaged in small rigid plastic containers with a peel-off lid. The single-use shots sell for $2 each in packs of six.