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Soluble Holds Extreme Niches Within Market

By Timothy J. Castle

Soluble coffee has the unique position of occupying two distinct and seemingly dissimilar niches, and at the extremities of those niches, at that.

The first is what might be called the netherworld niche of coffee, the dark fringes of coffee drinking where the word “quality” has never even been whispered, and where the only laughter heard is when someone asks for a latté or an espresso. The only thing more moribund than this business sector is the dynamics of the beverage itself, or the dynamics of people drinking it.

The second region is not dark exactly, but lit up with clownish, artificial colors. This is a corner of the “specialty” business, where products that were originally inspired by desire for better quality on the part of the consumer are actually increasing the demand for what many consider to be the lowest “quality” coffee product available. Before anyone starts writing letters or pulling ads, though, it should also be noted that there are many instant products that are well made, given the limitations of the processing technology that is extant and the price for which these products sell. The extract-based bottled and many other coffee products are dependent on the flavor reinforcement that soluble coffee can provide. And even though these drinks are the inevitable and far-gone dumbing down of specialty coffee, they can be profitable little products, at least for a time. It is because of these products that soluble coffee producers, a few of them at least, are now benefiting from the specialty coffee trend, and not minding the irony one bit. (There is a little secret to the ready-to-drink coffee beverage business: most of these products have some soluble coffee in them in order to boost the aromatics to a reasonable level. Since the volatile aromatics won’t stay put, the TDS or Total Dissolved Solids get ratcheted up in an effort to rely on a more concentrated base for the aromatics that are still there).

Soluble coffees come from many different parts of the world and the number of producers is increasing. So is the range of quality. Originally produced only in consuming countries, soluble coffees were then produced at origin, most notably in Brazil and Colombia, but also in smaller producing countries such as Nicaragua and El Salvador. As far as the U.S. was concerned, the next biggest entry was Mexico, and the freight advantage made it tough to compete for a time. But now soluble coffee producers in Asia are giving everyone in the business some stiff competition. Some observers question, though not for attribution, whether some of the concerns that have put up instant plants recently really did any research to see if another instant plant was needed. There is no other sector of the coffee business, it seems, that is operating at a lower percentage of full capacity.

Robert Briante, of Paragon Coffee Trading Co., in White Plains, New York, speaks to the first half of the solubles coffee business. To hear him tell it, “moribund” overstates the case. He noted that, “There must be something that keeps them going-[but] it’s more like just fighting for survival. There are a few guys that have specialty applications but in general it is a dying industry. The volume in those deals is not enough to constitute a turnaround. Working with our folks at source, we were always a little higher than the cheapest ones. But then a whole new group started offering solubles and these guys had invested in newer technology and they just wanted to do some business. I believe they decided to do it even if it meant selling below cost.”

Briante pointed out that it is not only the new plants like the two in Mexico, and the ones in Venezuela and India, among others, that are keeping the solubles market depressed but old line suppliers like the Brazilians as well, “The Brazilians keep funneling coffee into existing plants down there, especially in a down market in general, when it’s harder to get rid of the lowest quality coffees. They’ll start putting them in instant and selling it for whatever they can get.”

However, other things can happen in a rising market, as Briante pointed out somewhat obliquely. “We were the guys with an Ecuadorian instant and I always took note that in a rising market there was always a lot of interest in Ecuadorian coffees. Where were these coffees going? Where was the market before prices went up?”

Before elaborating on the current state of affairs in the instant market, he attempted to characterize the market in general: “It’s a type of a business that was going downhill anyway. With the emergence of specialty, instant was going down on a regular basis, and you’ve ended up with a few companies who are occupying a very specialized niche.”

Some historical notes were also in order, according to Briante. He noted that immediately after the Second World War was the golden age for soluble coffee. “People were looking for what they believed was modern and convenient. At the time, they loved the idea of instant-there was rapidly growing demand and business was booming. A bunch of large, independent coffee companies got together and formed Tenco, which in turn built a single instant facility that was built to serve the soluble coffee needs of all ten companies. As the years went by, though, people became more interested in quality, and slowly the business dwindled. Now, each of the major roasters makes their own instant coffee. Remember that Nestle’s was originally all instant before their acquisitions (their now shuttered plant in Freehold, New Jersey, was the largest in the country at the time it was built). General Foods has their own soluble facility and Superior has the old Tenco plant. What’s more, just to keep their plants up and running, each of these roasters will do private label packing, making it that much harder for everyone else. Unlike in other sectors of the industry, the big roasters are always looking for little jobs, and this makes it very difficult for everyone else.”

Briante reminded this writer that soluble and freeze dried are considered two very different products. “Freeze dried is the closest thing to regular coffee that the soluble industry has ever developed. They were always looking for a better way-the trouble is that the better way they found is also a dollar more a pound. Freeze dried lacks the caramel notes of soluble coffee, but, like any other instant, never tastes as clear and as fresh as regular coffee. The problem with freeze dried is that each additional process beyond spray dried is an extra and more costly step.” And if people drinking instant cared about a better coffee, it would seem they wouldn’t be drinking instant (soluble) to begin with. The industry has never collectively believed that the consumer would be interested in a “premium instant.” The phrase itself has the ring of the quintessential oxymoron. Never mind that Europe and Japan have much healthier markets for freeze-dried coffee.

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