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Coffee and Tea Reports
from the Front Lines

Ten Percent Increase in 1999 for Russia
ATHENS, GREECE - - The Russian coffee market increased over 10% in 1999, international analysts GFK said, as reported by Athens' New Europe. Interfax quoted the experts as saying the Russian coffee market amounted to 35,000 tons in 1999 compared with 31,500 tons, of which 38,000 tons was accounted for by instant coffee.

There is no reason to count on serious growth in the coffee market in 2000, or at least until the presidential elections, the specialists said. The experts noted that along with the shrinking of the coffee market, in fall 1998 demand for cheaper coffee drinks, in which the coffee is practically or totally replaced by barley, rye or chicory, soared. Due to this trend, Swiss Nestle launched two coffee drinks on the Russian market.

Demand for coffee drinks is currently greater than supply and demand will not be fully met before the end of 2000, stated experts. Only Russian companies supplied coffee drinks on the Russian market prior to August 1998. Supply of coffee in Russia currently exceeds demand. This is a direct result of the financial crisis and the subsequent reduction in solvent demand in the country, Golden Brazil representative Yury Gun said.

Gun noted that in the recent past consumers have crossed over to cheaper spray-dried coffee, which accounts for 25% of the Russian market. Granulated coffee accounts for 17% of the market and the most expensive of the instant coffees -- freeze dried -- account for only 8% Coffee beans and freshly ground coffee accounts for the remaining 50% of the market.

Gun praised plans by the International Coffee Organization to invest US$9,000,000 in the year 2000 to promote coffee consumption in Russia and China; the main suppliers of coffee to Russia are India, Brazil, Colombia, Germany, Holland, Finland, and France. Western coffee companies operating in the Russian coffee market include Swiss Nestle, German Tchibo, American Kraft Jacobs Suchard, international Elite, Golden Brazil (a M&M International Corp. subsidiary, and others.

Local players on the Russian coffee market include Mai, Moscow Joint Stock Coffee House, Montana Coffee, Amada-coffee, Blues, Kuppo, Russian Product, and others.

Forecasts for World Coffee and Tea Prices
LONDON, UK - Coffee crops as of early this year have been forecasted to be oversupplied, as provided by Economic Intelligence Unit (EIU) for London's The Financial Times. Prices for Arabica in the year 2000 are projected to experience a 7% annual decrease; the year 2001 is expected to yield a 19.9% annual decrease.

Tea, however, can expect temporary good gains in the first quarter when production will be at a seasonal low. This positive outlook for the crop may be short-lived, as the EIU expects prices to retreat again in 2001 and in 2002.

Canada Coffee Facing Possible Merger
SEATTLE, WASHINGTON - AFC Enterprises Inc., one of the world's largest private food services conglomerates based in Atlanta, Georgia, is considering a bid to purchase Toronto-based Second Cup Ltd. as part of a strategy to expand its operations worldwide. The Ontario-based National Post reported recently that sources close to AFC Enterprises confirmed the U.S. giant received a confidential bid book sent out by CIBC World Markets Inc. on behalf of the high-end Canadian coffee chain.

AFC Enterprises Inc., which operates Seattle Coffee Co., last year reported sales of $1.8-billion (U.S.). Seattle Coffee, which owns Seattle's Best Coffee. It operates more than 100 retail shops under the Seattle's Best Coffee and Torrefazione Italia banners and has more than 5,000 global wholesale distribution points in hotels, restaurants and grocery chains. AFC also operates more than 3,300 restaurants in 25 countries, including Church's Chicken, Cinnabon and Popeye Chicken & Biscuits.

Second Cup surprised investors when it announced in October it had hired the investment banking arm of Canadian Imperial Bank of Commerce to explore options to increase shareholder value. Second Cup has entrenched a good share of the Canadian specialty coffee market. And, to date, the Toronto-based company appears to have fended off an intrusion on its home turf by U.S.-based rival Starbucks Corp.; with a market capitalization of about $135-million, Second Cup has 380 outlets nationally, compared with 284 coffee bars bearing the Starbucks name.

In May, 1998, the company merged its U.S. operations - 272 Gloria Jean's Inc. outlets - with Coffee People Inc., a 45-store chain in Oregon. However, Second Cup's try at the U.S. has been less than successful; the U.S. business was lagging badly enough that Second Cup sold Coffee People this past summer.

Officials at Second Cup confirmed that bid books were distributed to a few interested parties, but declined to say if any serious buyers have emerged. Industry analysts predict the coffee retailer could fetch between $16 and $18 a share.

Cafe Business Booms in Hong Kong
HONG KONG, CHINA - Coffee drinking is catching on in a big way in Hong Kong, with an explosion of coffee shops, Internet cafes and takeaway outlets. Two major chains, the Pacific Coffee Co. and Delifrance, now have outlets spread throughout the HKSAR, with scores of smaller concerns selling high-quality coffee blends imported from Colombia, Brazil, Jamaica, and Indonesia, reports Hong Kong Trader.

"There are a lot of people who lived abroad and developed a love of coffee like me," said Phillip Yip, deputy general manager of Hiang Kie, a Singapore company which runs Coffee Club, Coffee Club Xpress, and Kalid's Kafe.

"In North America there is a whole coffee culture. I drink five cups a day and I like to drink it black. It is my hobby as well as my job: just like piano, which has 52 keys and many different sounds, coffee has many different blends and tastes."

"People in Hong Kong like their coffee to be strong but not bitter or acidic. It is becoming more popular and more and more people are beginning to appreciate coffee. Our next target is to move into China, we see Hong Kong as a springboard."

Such is the keen interest in coffee drinking that a guide to the best outlets in Hong Kong has been product by two Hong Kong-based Australian women, Geri Clisby and Sheryl Coughlin. The first edition was a virtual sell-out, so they produced a new, expanded guide that also includes information on Taiwan and parts of the Chinese mainland.

"We did it all ourselves," said Ms Clisby. "Hong Kong is the kind of place where you can have an idea and just go for it. We learned a lot about coffee - and publishing - along the way."

The guide, "The Coffee Lovers Guide to Hong Kong and Beyond," now in its second edition, gives star ratings to the various hotel coffee shops and cafes in the HKSAR. It also offers a quick overview of each outlet. Some of the places where fine coffees can be enjoyed range from the big five-star hotels to small coffee carts.

The coffee boom the area is experiencing has also opened opportunities for importers of specialist equipment. More and more office managers are installing coffee machines in their offices due to their beneficial effects - so staff members can perk up or relax with an espresso, a cappuccino, a latte, or a tea.

India-born Joshua Soares, operations director of Caffe Perla More, spends his days demonstrating the latest electronic inventions capable of turning roasted beans into enticing cups of steaming liquid in seconds.

"The demand has come about because people are becoming more affluent and regard coffee as something associated with affluent tastes, like wine," said Mr Soares. "The reverse migrants...are also looking for more than just a cup of coffee. Asians like coffee to be full-bodied but with none of the bitterness."

Tea Brews Up Healthier Hearts
WASHINGTON, D.C. - Several studies have indicated that alcoholic drinks, especially wine and beer, can reduce a person's risk of heart disease. Researchers suspect that some of these heart benefits trace to a retarding of atherosclerosis, the accumulation of artery-clogging plaque. A Dutch study, reported Science Times recently, now finds that women can benefit in the same manner from tea.

Johanna M. Geleijnse of Wageningen University in The Netherlands and her colleagues recruited nearly 3,500 residents of Rotterdam to their study. Most were in their mid-60s or older, and all we were free of cardiovascular disease. The researchers took X-rays of one of the heart's arteries in each man or woman, allowed for the quantification of atherosclerotic plaque.

Diet can play a significant role in the buildup of plaque, a risk factor for heart attacks. Because tea-rich in plaque-retarding antioxidants-has been linked to a reduced risk of fatal heart attacks, Geleijnse's team collected detailed data on the tea drinking habits of each participant. Gelejinse and her colleagues had reported the findings of an earlier study that revealed, after accounting for other predisposing factors, the prevalence and extent of plaque was greatest in those who drank the least black tea. Those who drank a cup or two per day had roughly half the incidence of severe atherosclerosis seen in people who drank no tea. Four or more cups per day reduced the incidence of severe atherosclerosis to less than one-third than seen in tea abstainers.

The researchers point out that this trend observed in the combined group did not prove statically significant among just the men. However, the incidence of severe plaque among women drinking four or more cups of tea daily was only one-quarter as high as in women who eschewed the brew.



Tea & Coffee - February/March 2000
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