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German Coffee Shops
Gaining Ground

BY MANFRED KÖRNER

Germany is still a coffee roaster’s paradise. Germans together with their Swiss colleagues rank sixth after the Scandinavians and the Austrians in the coffee sipping league of nations. However, inspite of extremely low consumer prices, purchases do not go up. Per capita consumption of coffee in 2000 stagnated at 6.7 kgs. of green coffee, which was equal to that of the previous year. The 2001 sales data so far does not forecast a reversal of this situation. The highest per capita consumption of the last 10 years was in 1992 with 7.5 kgs. of green coffee per head. Luckily, consumption of soluble coffee and specialty coffee is on the rise.

According to the German Coffee Association 548,520 tons of green coffee were sold in Germany in 2000, some 1,000 tons less than in the year before. Sales of roasted coffee witnessed another slight decline from 432,000 to 430,000 tons, whereby non-household sales accounted for 55,000 tons, which represents an increase of 1,000 tons from 1999. No change took place in the different market segments of roasted coffee, i.e. 71% were untreated, 29% treated. The share between caffeine containing and decaf coffee did not change for 12.4% in the roasted coffee segment.

Solubles Are The Winner
Domestic consumption of soluble coffee drinks continued its year long with a 14.3% increase to 21,880 tons. Among the solubles, the Italian cappuccino classico has been the undisputed market leader. Growing by 19.1% since the previous year, it has reached an actual market share of 71% of the soluble market, or some 15,600 tons. Other specialties like flavored cappuccino, Viennese melange, ice-coffee or café au lait experienced a slight set-back. The actual market shares of these specialties are 12%, 6%, 6%, and 4% respectively. Export of soluble coffee drinks went up by 44.5% or 34,257 tons. Two thirds of exports were directed into EU member states, while the rest went into non-EU countries. Some 90% of those exports consisted of pure coffee products. Imports of soluble coffee mostly for use in mixtures for export products also increased amounting to some 16,954 tons.

Many Troubles About Prices
Due to heavy and partly unfair price competition by discounters and super markets, coffee roasters had to work hard to recover costs and a decent profit margin. The consumer prices continued their downward trend by 3.9%. The price for the normal household pack of 500 gms. was on average 6.70 Deutch Marks (DM)or slightly over $3.00 U.S. In consequence, the turnover of roasted coffee sales declined to reach some 6.6 DM bn or $3.00 U.S. bn, while the turnover in solubles could barely hold its previous level of 1.1 DM bn or $.50 U.S. bn in spite of its growth in sales.

The drastic fall in world market prices for green coffee of some 40% benefited the financial balance of the roasters against a 12% rise in the dollar’s exchange rate. However, the industry is far from being happy with the decline in earnings of the coffee producing countries. They came down from $12 billion in 1998/99 to only $8.6 billion in 1999/2000. Since December 1999 the International Coffee Organization (ICO) price for Arabica fell from 124.46¢/lb to 66.16¢/lb on a monthly average, and for Robustas from 66.79¢/lb to 30.38¢/lb. More and more growers in the producing countries have to give up their farms or to produce without paying due regard to agreed quality standards. In the long run this might endanger the supply of high quality coffees which are essential for the consuming countries. The reason for this dangerous development has been a worldwide overproduction in conjunction with a current under-consumption in most of the consuming countries. While some in the coffee industry think that a reanimation of the 1992 export quota system could at least theoretically provide some relief there are doubts that control over export quotas will work. These have been amply verified by past experience. In addition, new producers are willing to get their share of the world coffee market. Vietnam, once a newcomer to the club, has meanwhile reached the state of a mass exporter. Today the volume of their coffee production has already reached that of the world’s second largest producer, Colombia. And while today 95% of the Vietnam production accounts for the low paid Robustas, plans are to massively extend the growing areas for better paid Arabicas, thus adding to the current overproduction. There are possibilities, though, to develop new markets, especially in China, and to boost sales in the traditional consuming countries by new marketing strategies.

Need For Sustainable Industry
Annemieke Wijn, president of the German Coffee Association and director coffee public affairs of the Philip Morris owned Kraft Foods Deutschland GmbH in Bremen, says “The worldwide coffee industry stays healthy only as long as the people who live and work in it and the environment in which production takes place stay healthy. Together with the coffee producing countries and the growers we have to look for ways to enable a sustainable development for coffee while keeping the dialogue with non-governmental organizations." Wijn is placing much hope in the new International Coffee Agreement that took affect in the fall of 2000. This agreement combines the creative forces of the producing and consuming countries in a Private Sector Consultative Board. The first World Coffee Conference took place in London in May 2001; it documented the good will of both partners for co-operation. The main focus is placed on quality enrichment - from growing to roasting - as a successful way out of the price trap. In the past, coffee drinkers were ready to pay a relatively high price for the cup because they valued the product. The lower consumer price of today, in contrast, did not result in higher consumption. This means that the consumers in general value quality more than price, thus, making the concept of product enrichment a promising one.

Attracting Young Consumers
While the overall picture of coffee consumption in Germany is not very satisfying at the moment, there are promising new trends in consumption patterns which correspond to the sales increase of non-household packages. This sector grew by 1,000 tons to reach some 55,000 tons. One reason for its growth - if still only a minor one - is the upcoming of ever more coffee shops and espresso bars. They are especially focussed on younger consumers in the big cities or in cities with a university. It started in the early 1990s with the Italian roasters Lavazza and Segafredo, both of which operate today some 100 espresso bars. Coffee shops and other espresso bars followed, many of them were operated by small private roasters. Today there are some 215 of these outlets all over Germany. Experts believe that there is a potential of around 1,500 to 2,000 of these coffee places. The established roasters are still reluctant to engage themselves in this new field of business. There have been some experimental moves by Tchibo and re-launches of the few existent outlets. The reluctance of the roasting establishment might change soon with the appearance of U.S. retail giant Starbucks in Germany. A cooperation agreement with the renowned chain of department stores Karstadt-Quelle is in the making. After the successful opening of its first outlet in Zurich, Switzerland, Starbucks is set to expand onto the neighboring German market. In a keynote address at the first "Coffee Shops 2001" conference in November in Bad Homburg, c.e.o. and president EMEA Mark McKeon from Starbucks outlined future international strategies for his company. According to market research studies there has already been one favorable outcome of this new trend in outdoor consumption: more young people regard coffee drinking as trendy and not old fashioned. There is hope for consumption to rise again in the middle or long term.



Tea & Coffee - November/December 2001
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