Coffee’s proactive solutions to environmental challenges offer valuable insights for FMCG companies navigating similar risks and supply chain pressures. By Sergio Fregoni and Ed White
If you’re sitting with a cup of coffee reading this, take a moment to savour it because,
according to some experts, the humble brown bean might be heading for extinction. Research from 2019, carried out by Kew Gardens, found that 60 percent of all wild coffee species are under threat of extinction.
The coffee you’re drinking will be Arabica, or perhaps Robusto, which make up 99 percent of the industry. In 2023, this represented a harvest of 170.2 million 60kg bags, roasted, and poured into 2.25 billion cups, every day.
However, the runaway success of these two varieties is part of the problem. Arabica is a delicate plant, sensitive to weather, meaning climate change is a huge threat to the crop – as it is to biodiversity globally.
Indeed, Kew’s research classified Arabica as an endangered species largely because of future weather projections.
Moreover, coffee plants are highly susceptible to disease, particularly rust, which can decimate crops. Coffee is by no means alone: the issue of delicate monocrops is problematic for a number of FMCG businesses, such as chocolate companies, who are facing cocoa shortages due to dry weather in the Ivory Coast.
Coffee companies take this very seriously, and are taking proactive steps: The World Coffee Research program is creating new strains of coffee while Nestlé is distributing hundreds of millions of plantlets, including rust-resistant ones, to farmers across the world. Starbucks’ Coffee and Farmer Equity (CAFE) practices are encouraging shade management and biodiversity, to name but a few.
However, significant challenges remain as the coffee industry seeks to increase its resilience.
Firstly, there is a ‘say-do’ gap regarding consumer concerns about sustainability. It is
well-documented that consumers expect companies to be more sustainable, but are unwilling to pay a price premium for more environmentally friendly products across sectors. Research published in January found that all consumer groups surveyed ranked sustainability lower than economic concerns such as the cost-of-living or their personal financial security, for both products and services. Moreover, beyond cost, people aren’t willing to change behaviour – such as recycling – despite the efforts of many coffee companies to promote them. And culture can play a part: some European markets are more conservative when it comes to adopting new coffees, additions, or formats.
Those are challenges of desirability: deeply understanding the people you’re designing for; and creativity – coming up with ingenious new ways to satisfy their customers’ unmet needs within the constraints of what is technologically feasible and financially viable. To do that in a world of rapid change will require coffee companies to become more customer-centred, adaptable, and experimental.
For coffee, and other FMCG companies, to rethink what type of businesses they must become, they must ask themselves some fundamental questions:
‘How might we expand our supply chain to include nature?’
FMCG organisations must understand that investing in regeneration is a matter of survival. Biodiversity loss and land degradation are a fundamental problem for these businesses.
How might Diageo brew Guinness in water stressed areas? How could Nestlé make cereal amid wheat shortages? Companies need to think about nature as a part of their operations, not a CSR initiative.
Nature’s resilience and health should be as important as staff, machinery and production sites. illy is pioneering this approach through its Regenerative Society Foundation. The society seeks to tackle biodiversity loss in Brazil by restoring soil fertility and through other agroforestry projects. Its accompanying Università del Caffè, or “Coffee University”, was created to train illy’s entire supply chain, from farmer to barista, on sustainable practices.
Developing new business models and new product lines that are regenerative and nature-conscious by design and permeate throughout the supply chain is increasingly non-negotiable for the FMCG sector.
In 2021, Nestlé committed to investing CHF1.2 billion to spark regenerative farming practices across its supply chain, by 2025, while Patagonia’s Provisions regenerative food brand, with products including tinned sardines, and bison jerky, is arguably the highest profile example in market today.
‘How might we become a platform for emerging producers?’
With changing climates, new geographies will be able to grow coffee beans in the future. New locations, such as Nepal and California, could enter the supply chain. Alongside this, new technologies could open opportunities for urban coffee farms and help develop vertical and hydroponic farming to create local producers. Learning from the beer industry, we know that consumers like to drink local and support smaller neighbourhood breweries.
The coffee industry could follow this local and micro model, which urban consumers respond particularly well to. Established coffee companies could therefore do more to empower niche new suppliers. Could suppliers become platforms to invest in, champion, and distribute coffee from these micro producers?
‘How might we expand consumer tastes and gastronomic adventurousness?’
The prevalence of Arabica and Robusta coffee beans means consumer tastes are
shaped towards those specific flavours. But there are 124 different species of coffee, and while many of these aren’t suitable, some like West African stenophylla, Liberian plants liberica and excelsa are already used today. And with emerging gene-editing technologies it will become easier for companies to design and grow new species. The global coffee industry has been disrupted time and time again. The second wave of coffee, pioneered by brands such as Starbucks, broadened the variety of coffee experiences available to the consumer, by focusing more on coffee bean quality and sourcing transparency.
This also saw the emergence of creative coffee drinks, made with flavours and syrups. The third wave of coffee, which developed in the late 1990s, focused more on the flavour profile of the coffee bean, exploring new roasting techniques and brewing methods, introducing lighter roasts, cold brew, nitro and latterly canned and ready-to-drink formats, to widespread audiences. If coffee companies diversified further into different and new species and blends, this could open up a host of new coffee drinking experiences, flavour profiles and brewing techniques. Companies should move from a strategy which serves existing tastes, to differentiate by developing and diversifying consumer palates. It is these small niches that can offer new opportunities.
For instance, at IDEO, we’ve partnered with companies like Folgers and Nespresso to understand their customers’ emerging tastes and design new products and experiences – from blends, to in-store tasting rituals, to exploring new style and taste profiles. We have also worked with SIGMA, a meat company, to develop new plant-based proteins and make them appealing to consumers.
How might necessity drive real innovation?
The coffee industry and many of the food organisations we partner face similar existential turmoil and a real risk of extinction of critical parts of their supply chain. But coffee companies are shedding a light, pioneering solutions that the wider food industry can learn from, including opportunities to redesign and transform to thrive in its new ecosystem.
And it’s nothing new, of course. The food industry has a long and storied history of creative, human-centred innovation in times of crisis. Nutella manufacturer Ferrero began using hazelnuts because of a post-war shortage of chocolate, it is now a greatly loved pantry staple. The best innovations aren’t born from comfort; true breakthroughs flourish when urgency meets imagination – just as coffee reminds us every day.
Sergio Fregoni is Executive Director and Ed White, Design Director, at IDEO
