The fourth wave of craft coffee is coming: are you ready for a revamped cup of jo?

The fourth wave of craft coffee is coming: are you ready for a revamped cup of jo?

By
Louise Burfitt
August 3, 2021

☕ What is it? 

  • Coffee powers the world, doesn’t it? It’s been traded across the globe for centuries, helps us to wake up for work and tastes pretty delicious in the process. 
  • Accordingly, for many of us, it’s far more than just a drink - it’s a ritual, an experience, a habit we just can’t kick. And the current wave of specialty coffee brands (leading on from where the ‘third wave’ of craft coffee left off) are recognising just that. These startups are capitalising on coffee’s popularity with new innovations and a renewed social conscience that means, if we wanted to, we just can’t quit our morning hit. 

🤔 Tell me more…

  • If the new raft of startups represent the fourth wave of coffee, what were the first and second and third? The initial ripple started way back as the 19th century ticked over into the 20th and Europeans discovered coffee, and coffeehouses, for the first time. Instant coffee followed as the 20th century got going, allowing people to drink their favourite brew at home. 
  • The second wave was all about Starbucks - and similar coffee conglomerates - who started charging more for their coffee in the 1990s, offering drinkers an array of options, and turning the coffee scene into a premium market. And the third wave upped the ante even more, honing consumer palates and increasing consumer awareness about what makes an excellent cup of coffee.
  • That means flat white fans are now primed for the latest round of innovation on the block: ready to try out new trends like frozen coffee and adaptogenic canned coffee and accept smart technology and algorithmic personalisation at a faster rate than they might have in the past. 

🤷‍♂️Why?

  • There’s a new iteration of coffee drinker on the scene. A mediocre cup of jo just doesn’t cut it for this educated, passionate, millennial coffee drinker who’s equally interested in sustainability, health and ethics. These consumers are willing to pay more for a delicious cup of coffee that doesn’t come with ambiguous morals.
  • Also helping? The wild amount of money flowing into the sector right now. The market for coffee is huge, given 2 billion cups of the stuff are lapped up daily, and investors are keen to have their chance to fund the next unicorn. 
  • The pandemic is also playing its part, boosting the fortunes of companies that deliver direct to consumers, while forcing indie coffee shops to pivot or develop new services, with some launching coffee bean roasting services to boost their income during COVID-19 shutdowns. All this is accelerating innovation in the sector. 

🔍 How is it shaping up?

  • The money streaming into the sector is big news right now. Personalised coffee startup Trade raised $9m last autumn, while Spinn secured $20m just last month to further develop its connected coffee machine that uses innovative tech to enhance the brew’s flavours. And the craft coffee sector as a whole is expected to reach $85m in just four years. 
  • Some companies are also striving for more transparency in the bean-to-cup process, starting from the very farm where the beans are grown, in an effort to attract socially conscious consumers. Onda Origins are tackling unfair working conditions and pay in the coffee bean farming industry, using blockchain to unlock the traceability of their roasts. Meanwhile, Shanghai’s Coffee Exchange is a green platform connecting roasteries directly to farmers. In traditionally tea-drinking China, this is a sign that coffee is a booming market in Asia
  • The pandemic has also brought home delivery coffee companies, many offering subscription services, into the limelight. With many blue-collar, coffee-loving workers stuck at home for the foreseeable, many with more disposable income thanks to a lack of commuting costs, companies that could bring coffee to their customers (rather than the other way round) have thrived. 
  • Pact Coffee is one of the UK’s leading coffee subscription services, while the USA has a wealth of options, including Bean Box, MistoBox, Equator Coffees and Blue Bottle. The most innovative companies in this niche are branching out with new technology - check out the case study of Bottomless below, who make the delivery process automated and smoothless using smart scales. 
  • Meanwhile, Cometeer are rebranding instant coffee with their high-quality coffee capsules frozen with liquid nitrogen immediately after brewing to seal in flavour and freshness. And they’re not the only ones: several companies are giving instant coffee a makeover.
  • Low-caffeine coffee is also a market that’s likely to grow, though it’s underrepresented at present. Buzz Lite, a startup based in LA, is leading the drive, spurred on by millennials interested in healthier beverages but lukewarm about going fully decaf. Decafino are also working on caffeine-free coffee pouches. The global decaf and low-caf market should grow to $2.8 billion by 2027.

👀 Who? (26 companies in this space)

📈 The figures

  • The burgeoning craft coffee industry is expected to be worth $85 million by 2025.
  • Meanwhile, the global coffee market comes in at $465.9 billion - and it’s only growing.

🏠 Case study: Bottomless Coffee

  • Seattle-based startup Bottomless Coffee run a coffee subscription platform, built around smart scales 
  • The small business, run by a husband and wife team, uses machine learning alongside its internet-connected, battery-powered coffee scale so that its customers never wake up with the sinking realisation that they’ve run out of coffee that day. 
  • Customers are sent a small electric scale, allowing them to update Bottomless automatically when they’re soon to run out of beans. 
  • The machine learning component allows for increasing personalisation as a customer’s preferences and habits are recorded - over time, customers even receive tailored recommendations for new coffee beans. 
  • It hasn’t all been plain sailing: Bottomless initially hand-built their scales, which took a lot of time and skill, as you can imagine. 
  • Bottomless has already raised $6.55m, with $4.5m of that coming in a Series A funding round this spring.

🔬 Case study: Atomo Molecular Coffee

  • Atomo Coffee is also based in Seattle - the Pacific Northwest city that spawned Starbucks and is now the home of many third wave coffee startups. 
  • But Atomo is a brand with a difference: they’re brewing coffee - without the beans. 
  • The company, founded in 2019, is driven by concern for climate change - which is likely to affect the temperate regions where coffee is grown - and by a desire to provide customers with coffee that tastes better and is less bitter. 
  • In one blind taste test, 70% of testers preferred Atomo’s beanless coffee over their traditional cup of the brown stuff. 
  • Atomo reverse-engineered the humble coffee bean to remove bitterness without compromising on flavour at their roastery lab in Washington state. 
  • Last August the brand raised $9 million to launch their molecular coffee on the market. Investors include Horizons Ventures, who also back Impossible Foods. 
  • The plan is now to bring their product to market this year, with launches tailored by region and partnerships with specialty retailers in the pipeline. 

👍The good

  • The third wave of coffee prepared consumers for the current surge of startups - many younger coffee drinkers know their pour-over from their French press, and everything in between, and are now willing to engage with the world of coffee at an even deeper level and try out the latest fads.
  • The deep pockets of investors when it comes to craft coffee is great for new brands, presenting a golden opportunity to third wave startups. Increased funding allows new names to scale quickly, and introduce their products to a wider audience at an accelerated pace. 
  • Greater options in the coffee space is also a boon for consumers. Want delicious decaf? Tick. Love a morning caffeine hit, hate the bitter taste? Sorted. What customers want, customers will get - and the abundance of varied startups in the sector are making it happen. 
  • More sustainable, fair transactions between coffee bean farmers and the companies that sell their goods - driven by a consumer demand for more transparency - should benefit low-paid workers and attract socially and environmentally conscious consumers, who are happy to pay more to ease their conscience. 

👎 The bad

  • The massive amount of money in the sector means the pressure is on for many companies who have won the kind of investments more commonly seen in food tech. Startups may consequently feel pressured to grow more quickly than they otherwise would have. 
  • At present, the majority of the leading companies in the craft coffee field are based in the USA, particularly centred around the city of Seattle. 
  • Despite all the hype in this category, coffee is a hard bean to crack. Consumers are more connected to their morning coffee than, say, their juice or vegetable purchases. Companies have to get their marketing just right to convince shoppers to try something new. 
  • Coffee culture also differs widely throughout the world. An Italian might love a strong espresso, while a Brooklyn Gen Z-er might fancy a can of cold brew. This makes international expansion trickier - but by no means impossible - for growing companies. 
  • Despite moves towards more sustainable, fairer coffee, most coffee bean farmers are still drastically underpaid and open to exploitation. Startups truly serious about ethics and sustainability will have to address this gap to succeed. 

 💡The bottom line

  • While coffee-crazy, eco-conscious millennials have driven the craft coffee market to date, there are signs the trend is heading for the mainstream, with older consumers starting to take note. 
  • While the niche is still a premium one, with brands centred in coffee hubs like Seattle, the months and years to come will likely see ‘specialty’ coffee reaching a wider audience, branching out from its eco-conscious, young demographic to give a wider selection of shoppers their morning hit of java

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☕ What is it? 

  • Coffee powers the world, doesn’t it? It’s been traded across the globe for centuries, helps us to wake up for work and tastes pretty delicious in the process. 
  • Accordingly, for many of us, it’s far more than just a drink - it’s a ritual, an experience, a habit we just can’t kick. And the current wave of specialty coffee brands (leading on from where the ‘third wave’ of craft coffee left off) are recognising just that. These startups are capitalising on coffee’s popularity with new innovations and a renewed social conscience that means, if we wanted to, we just can’t quit our morning hit. 

🤔 Tell me more…

  • If the new raft of startups represent the fourth wave of coffee, what were the first and second and third? The initial ripple started way back as the 19th century ticked over into the 20th and Europeans discovered coffee, and coffeehouses, for the first time. Instant coffee followed as the 20th century got going, allowing people to drink their favourite brew at home. 
  • The second wave was all about Starbucks - and similar coffee conglomerates - who started charging more for their coffee in the 1990s, offering drinkers an array of options, and turning the coffee scene into a premium market. And the third wave upped the ante even more, honing consumer palates and increasing consumer awareness about what makes an excellent cup of coffee.
  • That means flat white fans are now primed for the latest round of innovation on the block: ready to try out new trends like frozen coffee and adaptogenic canned coffee and accept smart technology and algorithmic personalisation at a faster rate than they might have in the past. 

🤷‍♂️Why?

  • There’s a new iteration of coffee drinker on the scene. A mediocre cup of jo just doesn’t cut it for this educated, passionate, millennial coffee drinker who’s equally interested in sustainability, health and ethics. These consumers are willing to pay more for a delicious cup of coffee that doesn’t come with ambiguous morals.
  • Also helping? The wild amount of money flowing into the sector right now. The market for coffee is huge, given 2 billion cups of the stuff are lapped up daily, and investors are keen to have their chance to fund the next unicorn. 
  • The pandemic is also playing its part, boosting the fortunes of companies that deliver direct to consumers, while forcing indie coffee shops to pivot or develop new services, with some launching coffee bean roasting services to boost their income during COVID-19 shutdowns. All this is accelerating innovation in the sector. 

🔍 How is it shaping up?

  • The money streaming into the sector is big news right now. Personalised coffee startup Trade raised $9m last autumn, while Spinn secured $20m just last month to further develop its connected coffee machine that uses innovative tech to enhance the brew’s flavours. And the craft coffee sector as a whole is expected to reach $85m in just four years. 
  • Some companies are also striving for more transparency in the bean-to-cup process, starting from the very farm where the beans are grown, in an effort to attract socially conscious consumers. Onda Origins are tackling unfair working conditions and pay in the coffee bean farming industry, using blockchain to unlock the traceability of their roasts. Meanwhile, Shanghai’s Coffee Exchange is a green platform connecting roasteries directly to farmers. In traditionally tea-drinking China, this is a sign that coffee is a booming market in Asia
  • The pandemic has also brought home delivery coffee companies, many offering subscription services, into the limelight. With many blue-collar, coffee-loving workers stuck at home for the foreseeable, many with more disposable income thanks to a lack of commuting costs, companies that could bring coffee to their customers (rather than the other way round) have thrived. 
  • Pact Coffee is one of the UK’s leading coffee subscription services, while the USA has a wealth of options, including Bean Box, MistoBox, Equator Coffees and Blue Bottle. The most innovative companies in this niche are branching out with new technology - check out the case study of Bottomless below, who make the delivery process automated and smoothless using smart scales. 
  • Meanwhile, Cometeer are rebranding instant coffee with their high-quality coffee capsules frozen with liquid nitrogen immediately after brewing to seal in flavour and freshness. And they’re not the only ones: several companies are giving instant coffee a makeover.
  • Low-caffeine coffee is also a market that’s likely to grow, though it’s underrepresented at present. Buzz Lite, a startup based in LA, is leading the drive, spurred on by millennials interested in healthier beverages but lukewarm about going fully decaf. Decafino are also working on caffeine-free coffee pouches. The global decaf and low-caf market should grow to $2.8 billion by 2027.

👀 Who? (26 companies in this space)

📈 The figures

  • The burgeoning craft coffee industry is expected to be worth $85 million by 2025.
  • Meanwhile, the global coffee market comes in at $465.9 billion - and it’s only growing.

🏠 Case study: Bottomless Coffee

  • Seattle-based startup Bottomless Coffee run a coffee subscription platform, built around smart scales 
  • The small business, run by a husband and wife team, uses machine learning alongside its internet-connected, battery-powered coffee scale so that its customers never wake up with the sinking realisation that they’ve run out of coffee that day. 
  • Customers are sent a small electric scale, allowing them to update Bottomless automatically when they’re soon to run out of beans. 
  • The machine learning component allows for increasing personalisation as a customer’s preferences and habits are recorded - over time, customers even receive tailored recommendations for new coffee beans. 
  • It hasn’t all been plain sailing: Bottomless initially hand-built their scales, which took a lot of time and skill, as you can imagine. 
  • Bottomless has already raised $6.55m, with $4.5m of that coming in a Series A funding round this spring.

🔬 Case study: Atomo Molecular Coffee

  • Atomo Coffee is also based in Seattle - the Pacific Northwest city that spawned Starbucks and is now the home of many third wave coffee startups. 
  • But Atomo is a brand with a difference: they’re brewing coffee - without the beans. 
  • The company, founded in 2019, is driven by concern for climate change - which is likely to affect the temperate regions where coffee is grown - and by a desire to provide customers with coffee that tastes better and is less bitter. 
  • In one blind taste test, 70% of testers preferred Atomo’s beanless coffee over their traditional cup of the brown stuff. 
  • Atomo reverse-engineered the humble coffee bean to remove bitterness without compromising on flavour at their roastery lab in Washington state. 
  • Last August the brand raised $9 million to launch their molecular coffee on the market. Investors include Horizons Ventures, who also back Impossible Foods. 
  • The plan is now to bring their product to market this year, with launches tailored by region and partnerships with specialty retailers in the pipeline. 

👍The good

  • The third wave of coffee prepared consumers for the current surge of startups - many younger coffee drinkers know their pour-over from their French press, and everything in between, and are now willing to engage with the world of coffee at an even deeper level and try out the latest fads.
  • The deep pockets of investors when it comes to craft coffee is great for new brands, presenting a golden opportunity to third wave startups. Increased funding allows new names to scale quickly, and introduce their products to a wider audience at an accelerated pace. 
  • Greater options in the coffee space is also a boon for consumers. Want delicious decaf? Tick. Love a morning caffeine hit, hate the bitter taste? Sorted. What customers want, customers will get - and the abundance of varied startups in the sector are making it happen. 
  • More sustainable, fair transactions between coffee bean farmers and the companies that sell their goods - driven by a consumer demand for more transparency - should benefit low-paid workers and attract socially and environmentally conscious consumers, who are happy to pay more to ease their conscience. 

👎 The bad

  • The massive amount of money in the sector means the pressure is on for many companies who have won the kind of investments more commonly seen in food tech. Startups may consequently feel pressured to grow more quickly than they otherwise would have. 
  • At present, the majority of the leading companies in the craft coffee field are based in the USA, particularly centred around the city of Seattle. 
  • Despite all the hype in this category, coffee is a hard bean to crack. Consumers are more connected to their morning coffee than, say, their juice or vegetable purchases. Companies have to get their marketing just right to convince shoppers to try something new. 
  • Coffee culture also differs widely throughout the world. An Italian might love a strong espresso, while a Brooklyn Gen Z-er might fancy a can of cold brew. This makes international expansion trickier - but by no means impossible - for growing companies. 
  • Despite moves towards more sustainable, fairer coffee, most coffee bean farmers are still drastically underpaid and open to exploitation. Startups truly serious about ethics and sustainability will have to address this gap to succeed. 

 💡The bottom line

  • While coffee-crazy, eco-conscious millennials have driven the craft coffee market to date, there are signs the trend is heading for the mainstream, with older consumers starting to take note. 
  • While the niche is still a premium one, with brands centred in coffee hubs like Seattle, the months and years to come will likely see ‘specialty’ coffee reaching a wider audience, branching out from its eco-conscious, young demographic to give a wider selection of shoppers their morning hit of java

How did you like today's Trends?

Love it 😁 Meh 😐 Hate it 🙁

☕ What is it? 

  • Coffee powers the world, doesn’t it? It’s been traded across the globe for centuries, helps us to wake up for work and tastes pretty delicious in the process. 
  • Accordingly, for many of us, it’s far more than just a drink - it’s a ritual, an experience, a habit we just can’t kick. And the current wave of specialty coffee brands (leading on from where the ‘third wave’ of craft coffee left off) are recognising just that. These startups are capitalising on coffee’s popularity with new innovations and a renewed social conscience that means, if we wanted to, we just can’t quit our morning hit. 

🤔 Tell me more…

  • If the new raft of startups represent the fourth wave of coffee, what were the first and second and third? The initial ripple started way back as the 19th century ticked over into the 20th and Europeans discovered coffee, and coffeehouses, for the first time. Instant coffee followed as the 20th century got going, allowing people to drink their favourite brew at home. 
  • The second wave was all about Starbucks - and similar coffee conglomerates - who started charging more for their coffee in the 1990s, offering drinkers an array of options, and turning the coffee scene into a premium market. And the third wave upped the ante even more, honing consumer palates and increasing consumer awareness about what makes an excellent cup of coffee.
  • That means flat white fans are now primed for the latest round of innovation on the block: ready to try out new trends like frozen coffee and adaptogenic canned coffee and accept smart technology and algorithmic personalisation at a faster rate than they might have in the past. 

🤷‍♂️Why?

  • There’s a new iteration of coffee drinker on the scene. A mediocre cup of jo just doesn’t cut it for this educated, passionate, millennial coffee drinker who’s equally interested in sustainability, health and ethics. These consumers are willing to pay more for a delicious cup of coffee that doesn’t come with ambiguous morals.
  • Also helping? The wild amount of money flowing into the sector right now. The market for coffee is huge, given 2 billion cups of the stuff are lapped up daily, and investors are keen to have their chance to fund the next unicorn. 
  • The pandemic is also playing its part, boosting the fortunes of companies that deliver direct to consumers, while forcing indie coffee shops to pivot or develop new services, with some launching coffee bean roasting services to boost their income during COVID-19 shutdowns. All this is accelerating innovation in the sector. 

🔍 How is it shaping up?

  • The money streaming into the sector is big news right now. Personalised coffee startup Trade raised $9m last autumn, while Spinn secured $20m just last month to further develop its connected coffee machine that uses innovative tech to enhance the brew’s flavours. And the craft coffee sector as a whole is expected to reach $85m in just four years. 
  • Some companies are also striving for more transparency in the bean-to-cup process, starting from the very farm where the beans are grown, in an effort to attract socially conscious consumers. Onda Origins are tackling unfair working conditions and pay in the coffee bean farming industry, using blockchain to unlock the traceability of their roasts. Meanwhile, Shanghai’s Coffee Exchange is a green platform connecting roasteries directly to farmers. In traditionally tea-drinking China, this is a sign that coffee is a booming market in Asia
  • The pandemic has also brought home delivery coffee companies, many offering subscription services, into the limelight. With many blue-collar, coffee-loving workers stuck at home for the foreseeable, many with more disposable income thanks to a lack of commuting costs, companies that could bring coffee to their customers (rather than the other way round) have thrived. 
  • Pact Coffee is one of the UK’s leading coffee subscription services, while the USA has a wealth of options, including Bean Box, MistoBox, Equator Coffees and Blue Bottle. The most innovative companies in this niche are branching out with new technology - check out the case study of Bottomless below, who make the delivery process automated and smoothless using smart scales. 
  • Meanwhile, Cometeer are rebranding instant coffee with their high-quality coffee capsules frozen with liquid nitrogen immediately after brewing to seal in flavour and freshness. And they’re not the only ones: several companies are giving instant coffee a makeover.
  • Low-caffeine coffee is also a market that’s likely to grow, though it’s underrepresented at present. Buzz Lite, a startup based in LA, is leading the drive, spurred on by millennials interested in healthier beverages but lukewarm about going fully decaf. Decafino are also working on caffeine-free coffee pouches. The global decaf and low-caf market should grow to $2.8 billion by 2027.

👀 Who? (26 companies in this space)

📈 The figures

  • The burgeoning craft coffee industry is expected to be worth $85 million by 2025.
  • Meanwhile, the global coffee market comes in at $465.9 billion - and it’s only growing.

🏠 Case study: Bottomless Coffee

  • Seattle-based startup Bottomless Coffee run a coffee subscription platform, built around smart scales 
  • The small business, run by a husband and wife team, uses machine learning alongside its internet-connected, battery-powered coffee scale so that its customers never wake up with the sinking realisation that they’ve run out of coffee that day. 
  • Customers are sent a small electric scale, allowing them to update Bottomless automatically when they’re soon to run out of beans. 
  • The machine learning component allows for increasing personalisation as a customer’s preferences and habits are recorded - over time, customers even receive tailored recommendations for new coffee beans. 
  • It hasn’t all been plain sailing: Bottomless initially hand-built their scales, which took a lot of time and skill, as you can imagine. 
  • Bottomless has already raised $6.55m, with $4.5m of that coming in a Series A funding round this spring.

🔬 Case study: Atomo Molecular Coffee

  • Atomo Coffee is also based in Seattle - the Pacific Northwest city that spawned Starbucks and is now the home of many third wave coffee startups. 
  • But Atomo is a brand with a difference: they’re brewing coffee - without the beans. 
  • The company, founded in 2019, is driven by concern for climate change - which is likely to affect the temperate regions where coffee is grown - and by a desire to provide customers with coffee that tastes better and is less bitter. 
  • In one blind taste test, 70% of testers preferred Atomo’s beanless coffee over their traditional cup of the brown stuff. 
  • Atomo reverse-engineered the humble coffee bean to remove bitterness without compromising on flavour at their roastery lab in Washington state. 
  • Last August the brand raised $9 million to launch their molecular coffee on the market. Investors include Horizons Ventures, who also back Impossible Foods. 
  • The plan is now to bring their product to market this year, with launches tailored by region and partnerships with specialty retailers in the pipeline. 

👍The good

  • The third wave of coffee prepared consumers for the current surge of startups - many younger coffee drinkers know their pour-over from their French press, and everything in between, and are now willing to engage with the world of coffee at an even deeper level and try out the latest fads.
  • The deep pockets of investors when it comes to craft coffee is great for new brands, presenting a golden opportunity to third wave startups. Increased funding allows new names to scale quickly, and introduce their products to a wider audience at an accelerated pace. 
  • Greater options in the coffee space is also a boon for consumers. Want delicious decaf? Tick. Love a morning caffeine hit, hate the bitter taste? Sorted. What customers want, customers will get - and the abundance of varied startups in the sector are making it happen. 
  • More sustainable, fair transactions between coffee bean farmers and the companies that sell their goods - driven by a consumer demand for more transparency - should benefit low-paid workers and attract socially and environmentally conscious consumers, who are happy to pay more to ease their conscience. 

👎 The bad

  • The massive amount of money in the sector means the pressure is on for many companies who have won the kind of investments more commonly seen in food tech. Startups may consequently feel pressured to grow more quickly than they otherwise would have. 
  • At present, the majority of the leading companies in the craft coffee field are based in the USA, particularly centred around the city of Seattle. 
  • Despite all the hype in this category, coffee is a hard bean to crack. Consumers are more connected to their morning coffee than, say, their juice or vegetable purchases. Companies have to get their marketing just right to convince shoppers to try something new. 
  • Coffee culture also differs widely throughout the world. An Italian might love a strong espresso, while a Brooklyn Gen Z-er might fancy a can of cold brew. This makes international expansion trickier - but by no means impossible - for growing companies. 
  • Despite moves towards more sustainable, fairer coffee, most coffee bean farmers are still drastically underpaid and open to exploitation. Startups truly serious about ethics and sustainability will have to address this gap to succeed. 

 💡The bottom line

  • While coffee-crazy, eco-conscious millennials have driven the craft coffee market to date, there are signs the trend is heading for the mainstream, with older consumers starting to take note. 
  • While the niche is still a premium one, with brands centred in coffee hubs like Seattle, the months and years to come will likely see ‘specialty’ coffee reaching a wider audience, branching out from its eco-conscious, young demographic to give a wider selection of shoppers their morning hit of java

How did you like today's Trends?

Love it 😁 Meh 😐 Hate it 🙁

☕ What is it? 

  • Coffee powers the world, doesn’t it? It’s been traded across the globe for centuries, helps us to wake up for work and tastes pretty delicious in the process. 
  • Accordingly, for many of us, it’s far more than just a drink - it’s a ritual, an experience, a habit we just can’t kick. And the current wave of specialty coffee brands (leading on from where the ‘third wave’ of craft coffee left off) are recognising just that. These startups are capitalising on coffee’s popularity with new innovations and a renewed social conscience that means, if we wanted to, we just can’t quit our morning hit. 

🤔 Tell me more…

  • If the new raft of startups represent the fourth wave of coffee, what were the first and second and third? The initial ripple started way back as the 19th century ticked over into the 20th and Europeans discovered coffee, and coffeehouses, for the first time. Instant coffee followed as the 20th century got going, allowing people to drink their favourite brew at home. 
  • The second wave was all about Starbucks - and similar coffee conglomerates - who started charging more for their coffee in the 1990s, offering drinkers an array of options, and turning the coffee scene into a premium market. And the third wave upped the ante even more, honing consumer palates and increasing consumer awareness about what makes an excellent cup of coffee.
  • That means flat white fans are now primed for the latest round of innovation on the block: ready to try out new trends like frozen coffee and adaptogenic canned coffee and accept smart technology and algorithmic personalisation at a faster rate than they might have in the past. 

🤷‍♂️Why?

  • There’s a new iteration of coffee drinker on the scene. A mediocre cup of jo just doesn’t cut it for this educated, passionate, millennial coffee drinker who’s equally interested in sustainability, health and ethics. These consumers are willing to pay more for a delicious cup of coffee that doesn’t come with ambiguous morals.
  • Also helping? The wild amount of money flowing into the sector right now. The market for coffee is huge, given 2 billion cups of the stuff are lapped up daily, and investors are keen to have their chance to fund the next unicorn. 
  • The pandemic is also playing its part, boosting the fortunes of companies that deliver direct to consumers, while forcing indie coffee shops to pivot or develop new services, with some launching coffee bean roasting services to boost their income during COVID-19 shutdowns. All this is accelerating innovation in the sector. 

🔍 How is it shaping up?

  • The money streaming into the sector is big news right now. Personalised coffee startup Trade raised $9m last autumn, while Spinn secured $20m just last month to further develop its connected coffee machine that uses innovative tech to enhance the brew’s flavours. And the craft coffee sector as a whole is expected to reach $85m in just four years. 
  • Some companies are also striving for more transparency in the bean-to-cup process, starting from the very farm where the beans are grown, in an effort to attract socially conscious consumers. Onda Origins are tackling unfair working conditions and pay in the coffee bean farming industry, using blockchain to unlock the traceability of their roasts. Meanwhile, Shanghai’s Coffee Exchange is a green platform connecting roasteries directly to farmers. In traditionally tea-drinking China, this is a sign that coffee is a booming market in Asia
  • The pandemic has also brought home delivery coffee companies, many offering subscription services, into the limelight. With many blue-collar, coffee-loving workers stuck at home for the foreseeable, many with more disposable income thanks to a lack of commuting costs, companies that could bring coffee to their customers (rather than the other way round) have thrived. 
  • Pact Coffee is one of the UK’s leading coffee subscription services, while the USA has a wealth of options, including Bean Box, MistoBox, Equator Coffees and Blue Bottle. The most innovative companies in this niche are branching out with new technology - check out the case study of Bottomless below, who make the delivery process automated and smoothless using smart scales. 
  • Meanwhile, Cometeer are rebranding instant coffee with their high-quality coffee capsules frozen with liquid nitrogen immediately after brewing to seal in flavour and freshness. And they’re not the only ones: several companies are giving instant coffee a makeover.
  • Low-caffeine coffee is also a market that’s likely to grow, though it’s underrepresented at present. Buzz Lite, a startup based in LA, is leading the drive, spurred on by millennials interested in healthier beverages but lukewarm about going fully decaf. Decafino are also working on caffeine-free coffee pouches. The global decaf and low-caf market should grow to $2.8 billion by 2027.

👀 Who? (26 companies in this space)

📈 The figures

  • The burgeoning craft coffee industry is expected to be worth $85 million by 2025.
  • Meanwhile, the global coffee market comes in at $465.9 billion - and it’s only growing.

🏠 Case study: Bottomless Coffee

  • Seattle-based startup Bottomless Coffee run a coffee subscription platform, built around smart scales 
  • The small business, run by a husband and wife team, uses machine learning alongside its internet-connected, battery-powered coffee scale so that its customers never wake up with the sinking realisation that they’ve run out of coffee that day. 
  • Customers are sent a small electric scale, allowing them to update Bottomless automatically when they’re soon to run out of beans. 
  • The machine learning component allows for increasing personalisation as a customer’s preferences and habits are recorded - over time, customers even receive tailored recommendations for new coffee beans. 
  • It hasn’t all been plain sailing: Bottomless initially hand-built their scales, which took a lot of time and skill, as you can imagine. 
  • Bottomless has already raised $6.55m, with $4.5m of that coming in a Series A funding round this spring.

🔬 Case study: Atomo Molecular Coffee

  • Atomo Coffee is also based in Seattle - the Pacific Northwest city that spawned Starbucks and is now the home of many third wave coffee startups. 
  • But Atomo is a brand with a difference: they’re brewing coffee - without the beans. 
  • The company, founded in 2019, is driven by concern for climate change - which is likely to affect the temperate regions where coffee is grown - and by a desire to provide customers with coffee that tastes better and is less bitter. 
  • In one blind taste test, 70% of testers preferred Atomo’s beanless coffee over their traditional cup of the brown stuff. 
  • Atomo reverse-engineered the humble coffee bean to remove bitterness without compromising on flavour at their roastery lab in Washington state. 
  • Last August the brand raised $9 million to launch their molecular coffee on the market. Investors include Horizons Ventures, who also back Impossible Foods. 
  • The plan is now to bring their product to market this year, with launches tailored by region and partnerships with specialty retailers in the pipeline. 

👍The good

  • The third wave of coffee prepared consumers for the current surge of startups - many younger coffee drinkers know their pour-over from their French press, and everything in between, and are now willing to engage with the world of coffee at an even deeper level and try out the latest fads.
  • The deep pockets of investors when it comes to craft coffee is great for new brands, presenting a golden opportunity to third wave startups. Increased funding allows new names to scale quickly, and introduce their products to a wider audience at an accelerated pace. 
  • Greater options in the coffee space is also a boon for consumers. Want delicious decaf? Tick. Love a morning caffeine hit, hate the bitter taste? Sorted. What customers want, customers will get - and the abundance of varied startups in the sector are making it happen. 
  • More sustainable, fair transactions between coffee bean farmers and the companies that sell their goods - driven by a consumer demand for more transparency - should benefit low-paid workers and attract socially and environmentally conscious consumers, who are happy to pay more to ease their conscience. 

👎 The bad

  • The massive amount of money in the sector means the pressure is on for many companies who have won the kind of investments more commonly seen in food tech. Startups may consequently feel pressured to grow more quickly than they otherwise would have. 
  • At present, the majority of the leading companies in the craft coffee field are based in the USA, particularly centred around the city of Seattle. 
  • Despite all the hype in this category, coffee is a hard bean to crack. Consumers are more connected to their morning coffee than, say, their juice or vegetable purchases. Companies have to get their marketing just right to convince shoppers to try something new. 
  • Coffee culture also differs widely throughout the world. An Italian might love a strong espresso, while a Brooklyn Gen Z-er might fancy a can of cold brew. This makes international expansion trickier - but by no means impossible - for growing companies. 
  • Despite moves towards more sustainable, fairer coffee, most coffee bean farmers are still drastically underpaid and open to exploitation. Startups truly serious about ethics and sustainability will have to address this gap to succeed. 

 💡The bottom line

  • While coffee-crazy, eco-conscious millennials have driven the craft coffee market to date, there are signs the trend is heading for the mainstream, with older consumers starting to take note. 
  • While the niche is still a premium one, with brands centred in coffee hubs like Seattle, the months and years to come will likely see ‘specialty’ coffee reaching a wider audience, branching out from its eco-conscious, young demographic to give a wider selection of shoppers their morning hit of java

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