The Australian Coffee Market – Oversupply, Fragmentation, and Industry Challenges

Over the past 12 years, Australia has seen an explosion of new coffee brands—rising from around 350 to more than 2,000. While this growth highlights the popularity of coffee culture, it has also created negative pressures on the roasted coffee market.

Oversupply vs Demand

Coffee supply has grown faster than demand.
Demand for roasted coffee in Australia rises slowly, while capacity continues to expand.
Many roasters lament “drive‑by” damages when competitors aggressively steal customers.

Despite tough conditions, few coffee companies are going bust or being sold. In contrast, thousands of cafés are listed for sale at any given time, often struggling to survive.

Why Coffee Companies Rarely Sell

Unlike cafés, coffee roasting businesses rarely change ownership.

Fragmentation: The industry lacks consolidation compared to other sectors.
Emotional ownership: Many roasters are founder or family‑run, making sales less likely.
Valuation challenges: Goodwill, customer loyalty, and brand stickiness are hard to quantify.

Limited Consolidation in Australia

While industries typically consolidate, Australia’s coffee sector has seen few major deals:

Coffex (acquired by Segafredo)
Toby’s Estate (Mocopan/UCC)
Veneziano (The Coffee Club)
Di Bella (Retail Food Group)
Campos (JDE)
Padre (Liverpool Partners)
Gabriel (Supreme)

These are exceptions. Most roasters remain independent, unlike in the US where mergers and acquisitions (M&A) are more common due to easier access to capital and larger market size.

The “Dangerous Middle” – Small to Medium Roasters

This segment faces the fiercest competition:

Fighting to retain customers and market share.
Launching aggressive incentives to win over competitors’ clients.
Struggling to differentiate in a crowded market of microroasters and “me‑too” brands.

Demographics – Coffee Consumption in Australia

Growth in new coffee drinkers is only 2–4%, far slower than brand growth.
18–29 year olds are the smallest segment of coffee drinkers, despite being highly influential online.
Surprisingly, 14–17 year olds show higher coffee consumption than expected.

Capacity Expansion vs Market Reality

Some roasters are increasing capacity by 400%, hoping demand will follow.
Mid‑sized companies prefer gradual, organic growth.
Few expect mergers or acquisitions in the near term.

The Cost Squeeze

Rising costs of labour, real estate, and energy outpace retail coffee prices.
Margins are squeezed, forcing prices down faster than usual.
Without consolidation or smarter strategies, many roasters risk unsustainable operations.

Final Thoughts

Australia’s coffee industry is unique—fragmented, oversupplied, and resistant to consolidation. While cafés frequently change hands, roasters remain fiercely independent. For now, bold strategies, careful differentiation, and efficiency gains are the keys to survival in a market where margins are under constant pressure.