April 11, 2013 in Uncategorized
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.
- 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.
- 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.
- 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.
- 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).
- 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.
- 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