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How Matcha Is Challenging the Coffee Market

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How Matcha Is Challenging the Coffee Market

Despite rising retail coffee prices, some people still won’t give up their daily trips to Dunkin’ (DNKN) – Get Dunkin’ Brands Group, Inc. Report or Starbucks (SBUX) – Get the Starbucks Corporation Report A cup of java.

While demand for this much-loved beverage is unlikely to drop anytime soon, a recent trend is that many people are leaning toward decaffeinated options.

The beverage of choice for many people over coffee is matcha, a pale green powdered tea that can be used to make everything from lattes to ice cream. It has a grassy and naturally sweet nutty flavor and is known as a potent source of antioxidants.

People who are health conscious, or who simply prefer low caffeine, are enjoying matcha tea more than ever. While it won’t completely replace coffee anytime soon, it’s making its mark on the coffee shop world.

Green tea latte

The Ancient History of Matcha

Matcha first originated in the Tang Dynasty in China in the 8th century, but it is also popular in other countries, especially Japan, where it is now the main grower. Matcha is made by treating tea leaves with steam, drying them, and turning them into powder.

Matcha has been acclaimed for its many health benefits, which scientists have confirmed may include promoting cardiovascular health, anti-cancer effects, weight loss and improving skin.

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Tea is also considered not only something to absorb, but also a way to meditate. Murata Jukō founded the Japanese tea ceremony, which includes an ode to the making and presentation of matcha.

Is matcha becoming a true coffee competitor?

Interest in matcha is definitely on the rise, with the market expected to reach $5.5 billion in revenue by 2027. The biggest importers of Japanese matcha tea include China, Sri Lanka, India and the United States. In fact, over the past 25 years, matcha tea sales have exceeded $10 billion in the United States. The growth was mainly attributable to increased demand for healthy products and new beverages, especially tea.

There are many matcha brands that cater to the market today, such as ITO EN (International TOEFL) , Jade Leaf Matcha and Aya. Even big companies like Starbucks and Dunkin sell several different matcha drinks.

Matcha fans can also be found on social media, who often publicly denounce coffee in favor of their beverage of choice.

At a Glance: Matcha Market vs. Coffee Market

So far, indications are yes. Globally, the matcha tea market is expected to grow at a CAGR of 9.44% between 2022 and 2027. The global coffee market is expected to grow at a CAGR of 4.28% during 2021-2026 compared to neighboring countries. The higher the CAGR, the higher the market value, and the estimated CAGR of matcha is 5.16% higher than that of coffee.

How is this going? Well, matcha consumption is on the rise due to an increase in chronic diseases, giving support to healthier alternatives like antioxidants in green beverages. However, the covid-19 pandemic did affect the growth of matcha, as its hand-cultivation process is difficult. Growth in trade between the EU, Japan, the US, China, Sri Lanka and India has led to an economic partnership. In addition, demand for matcha in dessert and coffee chain menus has also been attributed to its growth.

Don’t be fooled though, the coffee industry is doing well, worth $102.03 billion in 2020. The main reason for its lower CAGR than the matcha market has a lot to do with its importers and consumers, as they mainly include Europe, North America, and Asia, all of which are struggling with covid-19. A major influence on the coffee industry also includes home coffee preparation, which is preferred by about 70% of consumers.

Therefore, it is difficult to say whether matcha will completely dominate the coffee market. However, it is clear that it has become a competitor.

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