Opinion: Free Market Minute

War of the Coffee Worlds

Roasted, frothed, grilled, or carbonated?

There’s a war brewing in the world of coffee. For some, the flavor’s the thing. For others, it’s the kick. How do you like your caffeine? If you answer ‘as coffee,’ you are not alone. Whether you indulge in dressed-up versions or drink it black, coffee in all of its beverage forms has experienced a popularity boom in recent years, fueling the demand for coffee and its caffeine component. As crazes go, though, coffee may not be such a bad one. Studies show that, at least in moderation, the caffeine in coffee can deliver some significant health benefits.

No matter how you take your wake-up dose—for that’s what it is for a lot of folks—it’s likely that you still haven’t tried most of the variants that the market is prepared to deliver. Like exotic coffee flavors? Besides exotic beans, bean blends, and roasts, added flavors and ingredients are barely the tip of the brewed coffee world. The market for coffee-as-a-beverage has become so diverse and nuanced for some, apparently, that it’s not always clear where the lines between coffee purists, coffee traditionalists, coffee afficianados, and coffee freaks are drawn.

But to truly experience the breadth of the market for coffee, one must think outside the bun: coffee is literally “not just for breakfast any more.” New products are putting familiar and well-liked separate tastes together, often in unexpected combinations. These combination products, no matter how much they fuel the market demand for coffee, are almost certainly horror stories to coffee purists.

Suppose, for example, that you enjoy steak. Are you also a coffee lover? How about a coffee-flavored steak? Or a steak accompanied by a coffee brew? Not brewed coffee, this is the fermented stuff, available as porter, stout, ale or regular beer. Prefer a wine with your meal? Yes, you can sip coffee wine instead. And for the after-dinner smoker, a coffee-flavored cigarette paper, if you are willing to roll your own.

Income and age probably limits the appeal of coffee steak, coffee brews, and coffee wine to some consumers. The under-age, lower-income student crowd, known for late nights and junk food, gets its own caffeine-enhanced and coffee flavored products. Soft drink manufacturer Coca Cola has introduced Coke Blak, a carbonated beverage that melds its familiar cola flavor with coffee. Hard to find in regular grocery stores, Coke Blak is appearing prominently in student bookstores and university markets precisely as final exams approach. No longer will students have to choose between the two, or treat them as substitutes, if Coke’s marketing strategy is successful. And to cover the three staples of a typical student’s gastronomic life (according to its inventor): thick-soup filled coffee-flavored tacos; these are more of a thought experiment than an actual product at present.

Even vegetarians are getting a market nod, with coffee-flavored Ramen noodles, and coffee cheese. Haven’t got time to eat or drink your coffee products? Concentrated espresso capsules provide the illusion of coffee with the reality of caffeine.

To some, these combination products will seem bizarre. They come from the sound economic idea that if products are complementary, consumers will often or always use them together as a pair. Even more importantly, the price of one component in the pair will affect the demand for the complementary good. Skis and ski boots together are a classic example of strong product complementarity. Coffee and coffee creamer are a much more discretionary, and weaker, pair.

Once two goods are merged into a single combination good, though, the uniquely new product must rely on the appeal of its combined characteristics. There is no guarantee that even goods as popular in their own right as Coca Cola and coffee will create a successful combination (think: Q-tips and meatballs, as one comedian suggested). Luckily, markets sort out misfits and lose them quickly, while they propel good ideas in new directions. Thus skis and ski boots—classic complementary goods—morph into snowboards.

Will the demand for coffee-infused products—whether for the caffeine or for the taste—ever be sated? As long as coffee lovers do not mind trying new and sometime weird combinations of their favorite product with other tastes, coffee-melding experiments will probably continue. Coffee purists may shudder, but so long as the market is free to float all kinds of coffee experiments, nobody loses. Except sleep, perhaps.