The market for coffee can be divided into numerous segments, each looking for something else in the coffee they buy and consume.
The key to the successful manufacturing and marketing of coffee products is understanding what’s unique about each segment and targeting them with the right products and messages.
One of the most popular methods for performing coffee market segmentation uses psychographic factors like likes/dislikes, personality and lifestyle.
Other methods use behavioral factors like spending habits, brand loyalty and benefits sought.
In this article, we will segment the market for coffee using the following 9 variables: type of beans, method of brewing, price ranges, roasts, flavor, package type, organic (or not), region of origin, and brand.
But first, let’s start by understanding why it is important to use market segmentation when growing, brewing or selling coffee.
The Importance of Segmentation of the Market for Coffee
The segmentation of the market for coffee is essential because it allows coffee growers, manufacturers and sellers to target specific groups of consumers with laser precision.
By understanding the needs and wants of different segments, businesses can create products that are more likely to appeal to them and retailers and coffee shops can stock coffee that their customers are most likely to buy.
The market for coffee ranges from those looking for a quick hot drink in the morning to someone searching for a specific brand of coffee from a specific part of the world.
But all types of coffee are not equally popular with all coffee drinkers. For instance, some people prefer large cups of filter coffee with milk while others prefer a quick shot of espresso that you can down in one gulp.
The segmentation of the market for coffee allows businesses to identify and target these different groups with products that are more likely to appeal to them.
Variables for Coffee Market Segmentation
Coffee market segmentation can be performed along the following 9 axes:
- Type of Beans
- Method of Brewing
- Price Range
- Roasts
- Flavor
- Package Type
- Organic (or not)
- Region of Origin
- Brand
Most coffee manufacturers choose not to cater to all types of coffee consumers, but rather focus on those segments that are most likely to buy their products.
This also has an impact on branding because different brands have different associations in the consumer’s mind and brands.
And so a brand that establishes itself as a premium coffee brand cannot easily switch to targeting the budget coffee market without damaging its reputation.
For example, a coffee drinker who is looking for a quick caffeine hit in the morning is unlikely to be willing to pay more than $2 to $3 for their coffee.
On the other hand, someone who is looking for a gourmet coffee experience is willing to pay $20 or more for a bag of beans.
That’s because many people equate price to quality. So coffee distributors and retailers perform price segmentation and divide the market based on a customer’s willingness to pay, which is greater for some types of coffee than others.
Let’s now look in detail at each of the 9 variables used in coffee market segmentation.
#1. Segmentation Based on Type of Coffee Beans
Coffee beans are coffee seeds that have been roasted and ground. They come in different varieties, which can be broadly classified into two types: Arabica and Robusta.
Arabica coffee beans are grown at high altitudes, have a milder flavor and are more expensive. Robusta coffee beans are grown at lower altitudes, have a stronger flavor and are less expensive.
The type of coffee bean used is an important factor in coffee market segmentation because it affects the taste of the coffee and also the price.
Coffee made with Arabica beans is generally considered to be of higher quality and thus commands a higher price.
On the other hand, coffee made with Robusta beans is usually cheaper. So coffee manufacturers target different segments of the market based on the type of bean used in their coffee.
#2. Segmentation Based on Method of Brewing
Brewing refers to the process of making coffee by extracting the flavor from coffee beans using water. And broadly speaking there are 4 ways to brew coffee:
- Boiling the beans in or with water
- Steeping (also called French press)
- Using Filters
- Using Pressure
Boiling the beans in water usually involves a coffee percolator or coffee maker where boiled water is added to the beans.
Steeping (French press) involves adding coarsely ground coffee beans to water and then allowing it to steep for several minutes before pressing a plunger to filter the coffee.
Filtered coffee is made by pouring hot water over coffee grounds that are contained in a filter.
And coffee made using pressure is espresso, which is coffee that has been brewed by forcing hot water under pressure through coffee grounds.
These are the four main categories of brewing coffee and then each has variations that people have invented.
Performing coffee market segmentation based on the brewing method is important because different coffee products will use or be made for being used with specific brewing methods. And each brewing method gives a different taste of coffee.
Therefore, the brewing method impacts taste which, in turn, impacts a consumer’s purchase decision of a coffee or coffee product.
#3. Segmentation Based on Price Ranges
Coffee in the form of beans, ground coffee or a finished coffee drink has a wide range of prices to satisfy a wide range of palates and wallets.
So coffee market segmentation based on price is an important strategy used by coffee manufacturers, retailers, coffee shops and bars.
Some people are looking for the cheapest possible coffee while others want the best-quality coffee regardless of price.
And so coffee manufacturers produce different types of coffee to meet the needs of these different segments of the market.
For example, coffee made with Robusta beans is usually cheaper than coffee made with Arabica beans.
And coffee that is pre-packaged and ready to drink is usually more expensive than coffee in bean form or ground coffee.
So by segmenting the market based on price, coffee manufacturers and retailers can target specific segments of the market with the right coffee product at the right price.
#4. Segmentation Based on Coffee Roasts
The roasting of coffee beans is what gives coffee its characteristic flavor. Coffee beans are roasted at different temperatures for different lengths of time to produce coffee with different flavors.
The four main types of coffee roasts are:
- Light roast
- Medium roast
- Dark roast
- Extra dark roast
Lightly roasted coffee beans have a light brown color and a milder flavor. Medium roasted coffee beans have a darker brown color and a stronger flavor.
Dark roasted coffee beans have an almost black color and a robust flavor. And extra dark roast coffee beans have an even darker color and a stronger flavor.
Coffee market segmentation based on coffee roasts is important because coffee drinkers have different preferences for the type of coffee flavor they want.
And so coffee manufacturers produce different types of coffee to meet the needs of these different segments of the market.
#5. Segmentation Based on Coffee Flavor
The downstream effect of all the points we’ve discussed so far – the type of beans, the methods of roasting, the methods of brewing – is the flavor of the coffee once it is ready to drink.
As you can imagine, with so many variables going into making a cup of coffee, there are numerous variations of coffee flavor that can be produced.
Therefore, coffee market segmentation based on coffee flavor is an important strategy used by coffee manufacturers and retailers.
After all, whether a consumer returns to buy coffee again or not often hinges on whether they liked the flavor of the coffee.
And so coffee manufacturers produce different types of coffee to meet the needs of coffee drinkers with different flavor preferences.
Likewise, baristas are trained to be able to identify the flavors in coffee and make recommendations to coffee drinkers based on their flavor preferences.
#6. Coffee Market Segmentation Based on Package Type
Packaging is an important part of coffee market segmentation because the type of package can impact a coffee drinker’s purchase decision.
For example, coffee in a can is usually cheaper than coffee in a glass jar. And coffee in a single-serve pod is more expensive than ground coffee in a bag.
So by segmenting the market based on package type, coffee manufacturers and retailers can target specific segments of the market with the right coffee product at the right price.
#7. Coffee Market Segmentation: Organic or not
Organic coffee is coffee that is grown following organic farming techniques and without the use of pesticides or other chemicals.
The growing trend of consumers switching to organic food whenever they can has not left the coffee industry out.
By growing coffee organically, coffee farmers can appeal to the segment of coffee drinkers who prefer organic coffee.
Organic coffee usually costs more than non-organic coffee because it is more labor-intensive to grow coffee organically.
#8. Segmentation Based on Region of Origin
Like wine, coffee beans grown in different regions have different flavor profiles.
So coffee market segmentation based on the region of origin is important for coffee drinkers who want to enjoy the unique flavors of coffee from different regions.
Coffee beans grown in Ethiopia, for example, are known to have a fruity flavor while coffee beans grown in Brazil tend to have a nutty flavor. Likewise, coffee beans grown in Indonesia have a smoky flavor while those from India can be strong and bitter.
With coffee market segmentation based on the region of origin, coffee retailers can target coffee drinkers who are looking for a specific type of flavor profile and those who appreciate coffees from different parts of the world.
#9. Coffee Market Segmentation Based on Brand
Finally, no coffee market segmentation would be complete without categorizing coffees based on brand.
After all, the brand is such a powerful factor in the purchase decision process of any consumer and especially someone looking for an important drink that they will consume daily if not several times a day.
Coffee brands can be classified as either premium or mass market. Premium coffee brands are those that command a higher price because they are perceived to be of higher quality.
These coffee brands usually have a more sophisticated branding and marketing strategy aimed at coffee drinkers who are willing to pay more for a better quality coffee.
On the other hand, mass-market coffee brands are those that are more affordable and appeal to coffee drinkers who are price-sensitive or those who don’t care how they get their daily caffeine shot as long as they get it.
Conclusion
As you can see, the market for coffee can be segmented using many variables and can be analyzed from different angles.
In this article, we performed coffee market segmentation following these 9 factors: type of beans, method of brewing, price ranges, roasts, flavor, package type, organic (or not), region of origin, and brand.
By segmenting the market, coffee growers and manufacturers are able to create new coffee products to better suit the needs and tastes of consumers. Similarly, coffee shops and bars are able to carry the brands and types of coffee that are likely to be most attractive to their client base.