Profitability and Carbon Emissions in Japan’s Coffee and Matcha Markets: An Analysis of Consumer Behavior, Supply Chains, and Life Cycle Impacts

Abstract

Both coffee and matcha have an extensive history in Japan, but their presence in today’s markets differs greatly; while Japan’s coffee industry is valued at $35.43 billion, the matcha industry is valued at only $391 million, 100 times less than the coffee industry. This thesis answers the following questions: 1) What behavioral and cultural factors explain the dominance of coffee over matcha in contemporary Japan, and how do consumers perceive both beverages amid matcha's global surge in popularity? 2) How do environmental and supply chain constraints impact the cost structures and future of coffee and matcha in Japan? 3) What operational strategies can cafés implement to optimize profitability and reduce environmental impacts under emerging cost and sustainability constraints? The project combines consumer survey responses and procurement data from a partner coffee shop with optimization modeling and life cycle assessments to provide both behavioral and quantitative explanations. The results show that coffee dominates daily consumption in Japan due to contemporary integration into routine habits, while the strong cultural roots of matcha have become a point of friction in its modern adoption. Nevertheless, certain demographics, especially younger age groups, are showing greater interest in the Westernized adaptation of matcha - matcha lattes. More significantly, the optimization model showed that cafés can simultaneously increase their weekly profits and decrease their carbon footprint by promoting tea offerings and shifting coffee sourcing to geographically closer origins such as Indonesia. Additionally, the LCA indicated that pour over coffee was approximately 1.6 times more carbon intensive than matcha lattes. Ultimately, these results provide cafés in Japan with actionable insights for profitable and sustainable initiatives to best adapt to climate-driven supply disruptions that will affect both markets in the coming years.