Bangladesh, with its huge population of 163 million people building a strong demand base and a robust economic growth prospects (above 7%), is an emerging market for businesses.
Coffee Industry of Bangladesh: A lucrative business opportunity
Bangladesh, with its huge population of 163 million people building a strong demand base and a robust economic growth prospects (above 7%), is an emerging market for businesses. The economy is already the second fastest growing economy in the world. Increased use of internet and high mobile penetration have made significant change in the lifestyle and food habit of people. Preference towards tea as hot drink during meeting and gossiping in leisure has gradually shifted to coffee. According to a survey conducted by a local newspaper, preference for coffee has overrun tea significantly in recent period (see chart). The youth of Bangladesh has become more inclined to global taste adoption and coffee consumption has become one of the major food habit adoption from globalization. Now a day’s coffee shop is not only a source of relaxation with hot drink rather has become a part of entertainment. Official meeting, place to go and study, celebration of friend’s first job or promotion, first date, or just a place to relax with friend has become common phenomenon of coffee shop.
However, demand of coffee shop is in its tremendous growth in this market where the suppliers for meeting this growing need is very few. There are around 50 premium coffee cafés only to serve around 160+ million consumers in this market. People are still striving to explore for new brand, new taste and new theme in coffee shop. Coffee shop industry in Bangladesh has thus become lucrative with a large gap between demand and supply.
Industry Prospect: A thriving growth sector
Bangladesh, the home of more than 163 million people, is now one of the fastest growing economies in the world with 7.3% annual GDP growth. The GDP of this country is USD 252 billion and the GDP is mainly driven by consumption. Currently the GDP of Bangladesh is growing at a rate of 7.3% which is much higher than that of India (6.7%), Pakistan (5.7%), Myanmar (6.8%) and Srilanka (3.3%). With a per capita income (GDP) of USD 1,545, Bangladesh is set to become a major center for business and economic activities in the imminent future. Current trend of disposable income is positive and has been forecasted to have 50.38% growth compared to the per capita disposable income of 2018. So increasing income will change the lifestyle of people and thus will attract people to spend more on consumption. Coffee is an indicator of high class life style and this change in life style of people in Bangladesh is showing a good opportunity for Coffee café industry.
Among the neighboring countries and emerging coffee markets, Bangladesh has the highest growth in both historical and expected disposable income level. Neighboring countries are already running in growth stage and will reach to their mature stage soon in near future where Bangladesh Coffee shop industry is just in the mode of entering the growth stage. So this is the right time to be the part of this high potential industry.
Bangladesh has highest growth in the consumption expenditure on foods and non-alcoholic beverages compared to India, Pakistan and Srilanka. Moreover it is expected that consumer spending growth is going to have a stable but high growth form in near future. High spending on food is the reflector of preference for expensive food habit like coffee.
All these factors provide strong outlook for the economy of Bangladesh which is a prerequisite for the development of the coffee market.
Growth prospect: Bangladesh is still in lowest position among the South Asian countries in ease of doing business ranking but has come one step up in global ranking (176). The country has not yet been the perfect in infrastructure but the Govt. has undertaken several projects indicating that the perfection is not far away. Global businesses in matured economy like USA, Japan, UK, France, China etc. have taken steps to expand their business in this promising economy of Bangladesh that will obviously strengthen the coffee culture by carrying out the habit and culture from those countries. So no doubt, this is the most right time to enter this high potential industry.
Market Size: The retail coffee market size of Bangladesh has grown from USD 46 million in 2004 to USD 64.3 million in 2018. This is further expected to grow to become a USD 69.4 million market by 2023. Contribution of brewed coffee is almost two-third of the market while the instant coffee market counts for the rest of the market.
Lucrative economic prospect and entrance of global culture through internet and social networking etc., there is high potentiality of increasing demand of coffee in near future.
Even in compared to other countries of South Asia, Bangladesh still have high growth prospect in hot drinks industry. Foreign investment in business has already taken places in other countries that have brought those industries in growth stage already. But in Bangladesh, all the foreign businesses are almost at the starting stage and many are just entering the industry. For example, Japan Tobacco Bangladesh Company Limited, Dominos etc. are just in initial stage of their business in Bangladesh. So Bangladesh Coffee industry is still at the eve of growing stage that has helped to forecast such stable growth in near future.
Market Players: Hot drink (both coffee and tea) are manufactured and marketed by a number of companies in Bangladesh. The nature of the market is oligopoly. The following chart shows the relative market shares of the major hot drink competitors over the last 6 years.
Market shares of coffee retail channels: In Bangladesh coffee retail participants take various distribution forms such as store based retailers, grocery retailers, convenience stores and so on.
Retail Brands and Chains: At present, there are more or less 50 premium coffee cafés in Bangladesh which happen to cater a mammoth market of almost 160 million consumers which clearly indicates that there is a huge untapped market. Among these 50 cafés, 4 international chain coffee shops (Gloria Jean’s, North End, Coffee World, and Barista Lavazza) are currently operating in Bangladesh.
Segmentation: The coffee market in Bangladesh can be segmented in various ways depending on a range of characteristics of the consumers such as Age, Income, Occupation, Value, Consumption, focus etc. The following table matches the various segments and aligns the segmentation bases.
Following is the current and growth forecast of per capita income of the Age Groups in the population.
The 3rd and 4th segment alignments are yet to be adequately served in Bangladesh where income condition will grow higher in these segment most. Again, university going students are also adopting the coffee culture highly. So these segments offer the lucrative opportunity for new entrants through which they can be the part of this high prospective country.
All these discussions clearly state the glowing prospect and future opportunity of Bangladesh Coffee industry. Rapid change in consumption and preference towards coffee as leisure drinks, increasing trend of purchasing power, existence of too few coffee shop brand to serve a vast consumer base etc. reflect why it is potential for global coffee shop brand to enter this market and make a good business. Moreover the industry is just on the eve of growing stage where the industry in neighboring countries are already in growth stage. It demonstrates that this is the most right time to enter the market and grab a good business opportunity.
The Content is prepared by the CREAVISION team.