Indonesian Millennials’ Coffee Craze May Spur Record Consumption

(Bloomberg) -- An irrepressible thirst for caffeine among Indonesia’s millennials is set to drive domestic coffee demand to historic highs, potentially tightening global supplies.

Demand may surge almost 36% from a year earlier to 5.3 million bags in 2019, said Moelyono Soesilo, head of specialty coffee and industry at the Association of Indonesian Coffee Exporters and Industries. That’s about half of the country’s estimated output of 11.5 million to 12 million bags.

Coffee consumption in Indonesia has more than doubled in the past decade as lifestyles in urban areas increasingly center around cafes, leading coffee outlets to sprout up in most shopping centers, transportation hubs and office complexes.

With more than 90% of the population Muslim, alcohol is discouraged, “so cafes are the go-to places for youngsters to hang out and socialize,” Moelyono said in a phone interview.

Demand for ready-to-drink and high-value beverages has also grown in recent years, leading Indonesia, which is the world’s third-largest grower of the robusta variety, to target boosting arabica production to 40% of its total crops from 15% now. The U.S. Department of Agriculture estimates Indonesia’s coffee demand at 4.9 million bags this year.

Changing Tastes

Moelyono says budget airlines have also helped widen tastes, with Indonesians traveling more and experiencing different varieties of coffees. Indonesia now grows 21 bean varieties such as Gayo, Mandheling and Toraja, according to the Indonesian Coffee Board.

The boom has prompted venture capitalists to take advantage of the growing trend. Kopi Kenangan, a non-franchise grab-and-go coffee chain startup, has secured $28 million from Sequoia India and Alpha JWC Ventures. The company plans to boost the number of its outlets to 2,000 by 2022 from 100, said Edward Tirtanata, Kopi Kenangan’s chief executive officer.

“The coffee chain industry is still lucrative in Indonesia and it will keep on expanding,” said Jefrey Joe, co-founder and managing partner of Alpha JWC.

To contact the reporters on this story: Yoga Rusmana in Jakarta at yrusmana@bloomberg.net;Fathiya Dahrul in Jakarta at fdahrul@bloomberg.net

To contact the editors responsible for this story: Anna Kitanaka at akitanaka@bloomberg.net, Atul Prakash

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