Global Buzz: How caffeine is worth over $850bn

Caffeine – in one form or another – is one of the world's oldest commodities.

Tea - one of the main delivery systems for caffeine, if you can call it that - is thousands of years old. There are claims of it being made into a drink in China as far back as 2700 BC, while there are archaeological records of cups with tea residue from a few hundred years BC.

Matcha – which is essentially a type of green tea – has also been around for a long time. There are records of it being made during the Tang Dynasty, so mid-to-late 1st century.

In many ways coffee is the baby of the group – at least as a drink.

It would have been eaten in Ethiopia for centuries, while there are records of a drink being made from the root of a coffee plant in the 10th century. But the earliest known example of a drink being made from the beans was in Yemen in the 1400s.

(That lag maybe owing to the fact that preparing a nice-tasting coffee is a lot more work than is the case for tea - you need more coffee per drink, you need to roast the beans etc etc).

When coffee eventually took off, most of the initial supply came through the Yemeni port of Mokha. That's where we eventually got the name for the Moka pot, and the chocolate-coffee drink, the Mocha.

And how concentrated the coffee supply chain was - initially at least – points to an interesting point about caffeine.

Because there are many plants around the world that contain the chemical – coffee, tea, guarana, tonka, cacao, kola nuts - but none of them share a common origin. They all evolved and developed the chemical completely independently of each other.

It's thought that that happened because caffeine is a relatively simple molecule – it also acts as a natural pest repellent, so it’s advantageous for the plant to have some in there.

It turns out the energy boost we associated with caffeine isn’t confined to humans, either. Before coffee was even created, Yemeni farmers reported their goats become more energetic after eating the plant. Studies have even shown that bees get an energy boost and a kind of mini-reward from consuming it - which makes them work harder.

Another reason why plants benefitted from its development.

Coffee's in the house

Given its mood-enhancing qualities, it's probably no surprise that caffeinated beverages became a global phenomenon relatively quickly.

The tea market obviously grew out of China, while the coffee market would have largely originated in the Middle East - with Turkey as the original hub - before it began to spread across Europe.As Ireland was a British colony at the time, it was linked into the trade network of the British Empire - so the likes of tea and coffee got here a little after it got to England.

The first record of a coffee house in Ireland was in The Liberties in Dublin, roughly around 1660. At that stage there would have been hundreds of coffee houses in London, though the drink still would have been the preserve of the wealthy.

Despite it being older, tea would have hit these shores around the same time – or possibly even a little later than coffee.

From this point on, both tea and coffee moved relatively quickly from being the preserve of the elites, to being something for the upper classes, to being something that was within reach of everyone.

And that’s similar to the pattern that would have been seen in other countries - which is how we get to today, and the massive scale of the caffeine industry.

The coffee market is estimated to be worth as much as $500 billion at the moment – depending on what parts of the industry you include.

The tea market is much smaller – but still worth somewhere between $50 and $75 billion each year.

Meanwhile matcha which, despite being an old drink, has only become globally popular in the past 20 years or so, is thought to be worth around $5 billion.

Brewing up a storm

But while coffee is the main driver of the caffeine industry, it's had a rough couple of years. To understand that – it’s worth taking a step back.

Because there are essentially two types of coffee in the world;

Arabica, which is seen as a smoother, sweeter type of coffee – the type favoured by companies selling coffee beans or freshly ground coffee.Robusta, which is a stronger, more bitter type of bean – which tends to be used in instant coffee.

Arabica is the most valuable bean – but it’s also harder to grow, there are fewer places where it thrives, it’s more fragile, and more susceptible to bad weather.

Robusta, meanwhile, is cheaper to buy per kilo – it’s easier to grow in more parts of the world, and it’s hardier too.

Brazil is by far the biggest producer of coffee beans in the world – generally accounting for around 30% of the world’s supply. Of that, around 70% is arabica.

Vietnam is the world’s next biggest producer – accounting for about 18% of supply. Almost all of that is robusta.

There are lots of other countries producing coffee around the world – including China – but as things stand around half of the global market is in the hands of two countries.

And in the past few years, both have been struggling in the face of extreme weather events.

In Brazil heavy rains have delayed some harvests in recent years, while higher-than-normal temperatures have also impacted yields.

Drought in Vietnam has also had an impact on its production volumes in recent years.

And that’s part of the reason why we here in Ireland have seen the cost of coffee rise so dramatically in a short space of time.

Another reasons for the rising price of a cup is the rising price of energy. Coffee production is very energy intensive, especially when you’re talking about roasting beans. Meanwhile shipping costs are far higher now than they were pre-covid, and of course there’s not much that can be done about the fact that coffee has a long way to go to get here.

There is maybe a tiny bit of light at the end of the tunnel on this – because both coffee farmers in both Brazil and Vietnam have bounced back this year and are expecting bumper harvests. But how and when that might benefit the consumer is anyone’s guess.

According to Rob Horgan of Cork’s Velo Coffee, the market price of coffee has started to fall, but not dramatically. That’s in part because farmers aren’t in a rush to sell their stock. There’s also currency movements at play – the euro has weakened against the dollar, which doesn’t help Irish buyers.

Meanwhile demand is increasing constantly – China is not only a growing producer, it's also a growing consumer of coffee – meaning they’re much bigger buyers than they were a few years ago.

But even all of that aside, there’s also a massive time delay. For Velo Coffee, for example, there tends to be a seven-month lag between buying green beans on the market and getting the roasted end-product on the shelves.

That means it’ll be the end of the year, or even next year, before any market price improvement might wash through to us.

Meet your Matcha

Whatever chance there is of coffee getting cheaper, that's not likely to happen in the matcha market.

It’s kind of going through something of a second boom – having burst onto the European and North American market around 20 years ago, before enjoying a second phase of growth in recent years.

That's putting huge pressure on Japan's matcha industry – and the global supply chain it feeds – which is putting upwards pressure on prices.

Part of the reason for the renewed interest in matcha are the health connotations – it's high in antioxidants, while there are claims it helps with your blood pressure and cholesterol (all while delivering a caffeine boost which some say is calmer than the alternatives).

Matcha is also extremely eye-catching – which hasn't harmed its growth in any way.

Something that can photography well is going to be of benefit to those who show how health-conscious they are on their Insta grid.

Some harsh market realities are likely at play, too.

The rising price of coffee means consumers are having to pay more, but it's also put pressure on the margins of cafés and restaurants.

Matcha is actually more expensive to buy on the market than coffee, at least on a per kilo basis. But you need a lot less of it in each serving, meaning a matcha-based drink is considerably cheaper to make than a coffee-based one.

And that makes it a very attractive trend for cafés – because they can potentially sell matcha drinks for a lower price and still make more money from them. Even better if they can sell them at the same inflated price as a cappuccino or iced coffee, because then they’ll walk away with extremely strong margins.

Just Add...

But while coffee is still the king of caffeine, the popularity of the chemical in its purest form is growing every year.

People will be familiar with caffeinated drinks – from colas all the way through to energy drinks – which contain added caffeine.

The caffeinated soda market is thought to be worth upwards of $280 billion at the moment. That makes it far, far bigger than tea and matcha - and rapidly closing the gap on coffee itself.

Aside from that, though, there's strong demand for pure caffeine coming from the supplement market today.

It pops up in everything from pre-workout to energy gels to pure caffeine tablets.

Even some medicines now come with added caffeine as a way of making the user feel a little less sluggish while they fight of their cold or flu.

Caffeine is also popping up as an additive in a number of foods – like chocolate bars – while it's even a common ingredient in cosmetics and skincare products today.

Energy, in powered form

This added caffeine comes from one of two sources – one natural, one less so.

Natural caffeine comes from the likes of coffee or tea – it can be stripped away from everything else so nothing but the pure chemical is left behind.

That's sometimes as a by-product of decaf tea and coffee production, with the caffeine taken out and sold on for other uses. Though natural caffeine is so in-demand as an additive now that it's increasingly the other way around – with the decaf coffee the by-product of the caffeine industry instead.

If it's not taken from natural sources like this, though, the caffeine in your drink or pre-workout will have come from a lab – almost certainly in China.

Caffeine can be created by mixing urea with chloracetic acid which, after a series of steps, ends up as synthetic caffeine.

Chemically it looks almost identical to natural caffeine – and the effect on the body is much the same, though there are claims it's absorbed faster, and giving a bigger spike and crash from it.

The vast majority of synthetic caffeine made in the world today originates in China – it exports hundreds of millions of dollars worth of the powder each year.

That beings aid, Germany is also one of the bigger producers in the world today.

All of of those things together, though, mean the global caffeine market is currently worth an estimated $850 billion - with that figure likely to rise close to the $1 trillion market in the coming years.