By Maria Fernanda Brando and Carlos H. J. Brando

The International Coffee Organization (ICO) has recently held a seminar on trends in new coffee consuming markets. The event identified relevant issues that will definitely shape the future of coffee consumption and possibly affect supply.

Please find below many surprising and interesting facts about fast expanding markets such as Korea, Russia, Vietnam, China and Colombia shared by professionals* directly involved with the coffee business, and Brazil, added by us, which provide a background for important discussions about the types and qualities of coffees to be demanded in the near future.

Korea
- The Korean coffee market, a US$ 3.7 billion business, is driven by three main trends: instant coffee (39% share), coffee shops (37%) and ready-to-drink coffee preparations (24%).
- Roasted coffee which used to represent only 5% of the total consumption in 2007 already represents 15%.
- Coffee culture is rapidly expanding among youngsters; there are already 16,000 coffee shops in the country, the vast majority owned by local brands and not part of chains or franchises.

Russia
- Coffee consumption in Russia grew 11% in the last 8 years.
- Consumption totals 3.6 million bags; per capita consumption is estimated to be 800 grams per year, with a lot of growth potential.
- Soluble coffee corresponds to 70% of the market, with massive preference for freeze dried products and “3 in 1” coffee mixes.
- Roast & ground coffee is still perceived as a gourmet product, and expensive for the majority of the Russian population.

China
- Consumption grows fast driven by soluble coffee and coffee shops.
- Soluble coffee responds for almost all coffee consumption at home.
- In 2000 there were roughly 2,000 coffee outlets in China; today there are approximately 15,000 shops, between domestic and international chains.

Vietnam
- Economic development, an expanding middle class and a young population contribute to coffee consumption growth, specially of “3 in 1” instant coffee mixes.
- Although established local coffee chains like Trung Nguyen have strong presence, international chains opened many stores in Vietnam in recent years, including Coffee Bean & Tea Leaf, Gloria Jean’s and Starbucks (the latter opened its very first outlet in Ho Chi Minh City in February).

Colombia
- Domestic coffee consumption, which declined since 2000, resumed growth since 2010 greatly due to the efforts of Toma Café, a promotional program being implemented by a coalition of companies (based on strategic guidelines designed with the assistance of P&A).
- Consumption is consistently growing 1% per year.
- Although R&G is the choice for the majority of Colombians, soluble coffee continues to gain share.

Brazil
- Today the world’s second largest consuming country (over 20 million bags) and not a new market but consumption expands at emerging market rates of 3% per year.
- The market is vastly dominated by R&G and there is rapid growth of out-of-home consumption.
- Espresso is the fastest growing beverage due to its ubiquitous presence in neighborhood bakeries, coffee shops and offices.
- Single dose machines are aggressively entering the market and being adopted by the middle and upper classes.

The trends above – greater consumption of Robustas in soluble than Arabicas in coffee shops – show that there are fertile grounds for the expansion of the Robusta supply in the near future. However, a word of caution, these emerging markets still respond for a relatively small portion of global coffee demand and soluble coffee accounts for less than one sixth of world consumption. Nevertheless the tendency to consume more Robusta is compounded by its increasing participation in R&G blends in order to not increase coffee prices, especially in countries still affected by the economic crisis like the traditional markets of the US, EU and Japan. The growth of Brazilian consumption, today equally divided between Arabica and Robusta, also contributes to push the demand for Robusta coffee up.

A bright prospect for Robustas does not necessarily mean a bleak prospect for Arabicas. World consumption is expected to continue to grow at a solid rate of 2% per year or more and although Robusta demand may grow faster, the smaller growth of Arabicas will be on a larger base. Since Robustas replace primarily lower quality Arabicas, the supply scenario is set for now and the immediate future: a permanent search for quality in Arabicas and Robustas, in the former to guarantee its space and to conquer new consumers and in the latter to ensure that substitution can continue even after soluble consumers eventually migrate to R&G.

* ICO Seminar speakers: Ross Colbert, Rabobank Intl / Lee Yunson, Terarosa Coffee / Ramaz Chanturiya, “Rusteacoffee” Association / Marcela Jaramillo, FNC

Published: 30 Mar 13 17:19 CET | Print version

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Gevalia is marketed by Kraft Foods in the US and the firm forwards the claim in its new advertising campaign that a blind third party test showed that almost 60 percent of coffee drinkers prefer their brew over Starbucks House Blend.

Kraft Foods further claim that the survey indicated that only 34 percent favoured the latter, according to the brandchannel.com website.

The claims are made in a television advert featuring a Swede named Johan, played by an American actor with a curiously Germanic/Dutch accent.

The advert features a lanky-haired Johan on one knee in the aisle of a supermarket, casually informing a customer that Gevalia is the preferred choice of coffee drinkers.

Having tasted a steaming cup of Gevalia House Blend, the customer is persuaded to discard the Starbucks House Blend that she was set to buy.

“That makes me very happy,” Johan responds.

Kraft Foods was once a staunch ally of Starbucks in the US, helping the firm to build a $500 million per annum retail business.

The advert, released last Monday, is the first time the firms’ advertising goes head to head in what US media are calling the coffee wars.

Starbucks has hitherto declined to comment on the campaign or the taste survey.

Peter Vinthagen Simpson
Follow Peter on Twitter here. 

March 31, 2013 | 5:53 pm |

Above: a coffee farm in Haiti

By the Caribbean Journal staff

It’s not easy to find Haitian coffee on the shelves of stores in the United States — but Fabien Dodard is trying to change that.

Through his new company, Kafe Pa Nou, Dodard is looking to tap into a million-strong market of Diaspora Haitians in the US — and help introduce one of Haiti’s proudest products to the larger American market.

“There are more than a million Haitians living in the United States today, and many of them are consuming coffee that is not their native coffee,” said Dodard, CEO and Co-Founder of Kafe Pa Nou, in a release. “Haitians have an appreciation for high-quality coffee and we want to bring that quality of coffee to people everywhere, no matter their location. Kafe Pa Nou allows people to do this, without having to buy a plane ticket to Haiti.”

The company, an online retailer and wholesale distributor, will ship its first orders by April 12.

The ultimate goal is to increase demand for Haitian coffee and, subsequently, increase local production in Haiti to meet that demand.

Right now, the Kafe Pa Nou is shipping Haiti’s Rebo and Cafe Selecto.

“By drinking this coffee, people are contributing to a stronger Haitian economy, one cup at a time,” said Dodard, who founded the company with Jean-René Faustin and Jean-Sebastien Dodard.

Pa Nou is the latest of a wave of companies and organizations working to bring Haitian coffee to a wider global market.

Last year, Whole Foods Market began distributing Haitian coffee at its stores in Florida.

And Saint Thomas University’s Centre for Peace and Justice has, for several years, been helping to import coffee from Haiti’s Cafeiere et Cacouyere du Nord’Ouest Coffee Cooperative.

Source: http://www.caribjournal.com/2013/03/31/new-retailer-looks-to-bring-haitis-coffee-to-the-us-market/

Sarah McFarlane & Lewa Pardomuan | March 04, 2013

London/Singapore. Asia’s thirst for coffee is changing the shape of the market as demand for cheaper robusta beans dramatically outpaces that of arabica, tightening the price difference between the two varieties.

Arabica coffee beans, which dominate gourmet blends, have long traded at substantial premiums to the hardier, more caffeine-rich robusta varieties, which are widely used in soluble or instant coffee.

But surging coffee demand from Asia, the region where most of the world’s robusta is grown, is narrowing this premium. Most arabica coffee is grown in South America.

“In traditional markets consumption is flat, but in emerging markets and exporting countries it’s growing fast,” said Roberio Silva, executive director of the International Coffee Organization (ICO).

“These trends suggest that future demand will generally be stronger for robusta coffee as emerging markets and exporting countries tend to prefer soluble coffee.”

Top robusta producer Vietnam is also one of the world leaders in growth of coffee consumption, which was up 22 percent in 2011 to 1.58 million bags, ICO data showed.

Other Asian countries that also showed strong rates of growth in 2011 included the Philippines, up 9 percent at 2.15 million bags; South Korea up 8 percent to 1.8 million bags; and India up 6 percent to 1.83 million bags.

Traders say robusta demand received an additional boost in 2011/12, when a historically high premium on arabicas drove roasters to switch to using more robustas in their blends.

“Robusta demand growth was already higher than arabica, because a lot of it is coming from places like South East Asia and other developing countries that are mostly robusta consumers, but over the last 18 months this was accelerated, with some extra demand coming into robusta from arabica as a result of the wide price difference between the two markets,” a trader at an international roaster said.

While the trend for roasters to switch into robusta has run its course, the trader said demand growth for robusta would continue to outstrip that for arabica due to rising coffee consumption in Southeast Asia, where he estimated rates of growth were in high single figures.

“Coffee consumption growth is related to economic growth, and as long as the economies of these countries continue to grow, then we don’t necessarily see a slowdown in this demand,” the trader said.

“It’s basically soluble products — either single-serve sticks of instant coffee or sachets with combinations of coffee and milk, or coffee, milk and sugar, which are mostly robusta-based.”

Acquiring a taste

Asian consumption trends have already had a dramatic impact on other commodity markets. In the cocoa market, the most valuable bean product has switched from butter to powder in recent years due to Asian demand for powder-based products.

Dealers estimated that coffee demand would grow by around 1 percent in mature markets including Europe and North America in 2012/13, versus 5 to 10 percent in Asia.

“The demand for robusta at the moment remains strong because of higher consumption in several countries in Asia such as China, South Korea, Indonesia and India and some countries in the Middle East,” said Moelyono Soesilo, purchasing and marketing manager at Taman Delta Indonesia, a Java-based exporting firm.

People like their “kopi tubruk” and Kopiko, a dealer in Singapore said, referring to the Indonesian style of drinking coffee and popular coffee-flavored sweets.

Kopi tubruk literally means “collision coffee.” To make a cup, you add a few teaspoons of ground coffee and sugar, then pour in boiling water. You wait for the grounds to settle at the bottom of the cup before you drink it.

“It’s all robusta-based products,” said the dealer.

Coffee roasters, typically secretive about their blends, stepped up substitution of robustas for arabicas after ICE benchmark arabica coffee futures rose to a 34-year high in May 2011 and the arabica premium over robusta to around $1.90 a lb.

The premium has since narrowed to around 40 cents, its lowest level in four years. While dealers said it could tighten further yet, there may come a point at which some roaster demand switches back into arabicas.

“You tighten more from here and you should start to see switchback,” James Hearn, joint head of agriculture at Marex Spectron said.

The degree of switchback may be limited by Asian tastes, however.

“Asia is still a robusta consumption area. No matter how cheap arabica is, Asians still like robustas,” a Singapore-based dealer said.

— Additional reporting by Marcy Nicholson in New York

Reuters

Brazilian coffee growing has always been associated with biennial cycles −“on year” of large production followed by
“off year” of low production – which greatly affected market prices, but recently these large fluctuations have almost
disappeared. The phenomenon, explained by P&A over an interview, has been happening for some years and is a
result of several factors such as the increasing adoption of irrigation by growers, better fertilization, more use of
mechanized harvesting apart from better agricultural practices like pruning of the trees and higher density
planting. The adoption of technologies has led to growing output and higher yields which in turn contribute to reduce
the variation between crop cycles. Brazil’s current crop is expected to reach between 47 and 50 million bags.

Source: Financial Times

http://www.peamarketing.com.br/coffidential/coffidential-068.pdf