Written By Kevin Soewondo, Edited By Karrie Liang
Today, we are going to share about coffee shop industry waves in Indonesia. Not the ocean, but the changing landscapes of coffee in generations we call waves.
(so not this, although just as fascinating)
The coffee shop industry is usually divided into several waves. The first wave is RTD (ready to drink) coffee provided by traditional shops or warung (a kind of food stalls selling on the side of the streets). The second wave is when coffee consumption habit turns into a way of showing your social status - drinking Starbucks means that you are more sophisticated. These two are the waves that initially have brought coffee to the public eye in the past.
The Current Wave
The third wave is the artisan coffee wave or the specialty coffee wave. A lot of the shops have mostly the same menus yet different coffee. People start to focus more on the flavor of the coffee, its origin, brewing techniques, equipment, and the pursuit of getting the best flavor. In this third wave, people start to discover unique flavors that are not usually highlighted in traditional coffee - floral or fruity flavors. In addition, more people all around the world are trying to improve coffee quality.
(brewing methods can get very creative)
A lot of coffee shops have also opened in this third wave. As a result, a lot of people who were not interested in coffee before, are introduced to coffee by all of the third wave enthusiastic baristas, and they got hooked into drinking coffee. Baristas all around the world would also do deeper research into coffee, and in general, the world’s coffee quality has gone up because of it. The third wave has brought so much impact to the quality in the coffee world.
The fourth wave is not yet known. We do not know which way will the coffee world go as of now. Some people in some parts of the world have started to look into further differentiating coffee flavor according to the origin AND varietal of the coffee, but this has not taken off. In Indonesia, since 2016, some people say that the kopi susu wave - literally means coffee with milk - is the fourth wave. This is the rise of RTD coffee with coffee shop quality. This wave is characterized by a shop selling only coffee-to-go with budget pricing - imagine selling coffee in to-go boba cups. In terms of quality, it is usually below specialty coffee, yet above traditional coffee stalls. Though many are using cheaper equipment, a lot of the kopi susu shops even use high-end equipment such as Victoria Arduino’s Black Eagle (more than USD10,000).
There are several innovations characterizing this wave:
- Flavoring - lots of different flavors such as brown sugar, Nutella, charcoal, ovomaltine, or anything unique are added into coffee
- Tech-enabled payment - on-demand delivery apps or e-money platforms
- Innovative marketing strategy - social media is a huge part of this and many influencers
Two of the biggest kopi susu chain stores are Kopi Kenangan - which has been funded by several VCs for a total of $28M, and Fore Coffee - total funding at $39.5M. They have more than 1,000 shops combined in many different locations across Indonesia. Their shops are usually small around 200 - 500 sq ft, and at some locations, they can sell more than 1,000 cups per day.
Where Is Coffee Headed?
The fourth wave has brought a positive impact in the sense that a lot of non-coffee drinkers can now enjoy coffee because the most famous menu is usually coffee mixed with milk and palm sugar, which is not too bitter for the first-time coffee drinker. Kopi susu shops also sell their coffee much cheaper than specialty coffee shops - around $1.2 compared to around $3. This change in beverage flavor profile and pricing have brought a lot of people into drinking coffee.
Consequently, there is a danger in this fourth wave. A lot of people from the specialty coffee argue that, since sugar may cover the bitterness and lots of the coffee flavor, the quality of the coffee has become less important for the kopi susu shop owners. In fact, a lot of people have requested us as a roaster to roast darker coffee with lots of defects, and they will buy from us as long as it is cheap and tastes strong like coffee.
Some Tinkering Thoughts
What do you think about this fourth wave? The fourth wave has brought a lot of new coffee drinkers into the circle, but will it bring demise to the ideals brought by the specialty coffee wave? I guess we will find out in the coming years.
Where do we and Belift stand in this? I guess we are in the specialty coffee industry - striving for perfection in each cup and delivering the best experience out of the coffee we serve. We want to bring out the delicious flavors of Indonesian coffee and create social impact in the process - to help the farmers in Indonesia, and the homeless in SF.