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Colombians see soluble growth for Eastern Block countries.

Colombians see soluble growth for Eastern Block countries

When the East Germans poured through the Wall into West Berlin last year, they went on a giant shopping spree and, among the luxury items they snapped up was coffee, often in short supply in the Communist nations.

Colombians, following the Perestroika process, have watched such developments with interest because it has not been lost on them that Eastern Europe today could present new and promising market possibilities for their exports of both green and soluble coffee. The hope is that as Gorbachev pushes through his reforms behind the wall, or what is left of it, living standards will rise in Communist Europe. And so too, runs the argument in Bogota, should the demand there be for consumer items such as coffee.

The Growers' Federation now sees Eastern Europe as a high-potential zone in its long-term efforts to augment Colombia's foreign trade in instant coffee. Another region on the Federation's target list is the Far East - and in particular Japan which, in recent years, has augmented its imports of both solubles and coffee extract.

By contrast, the prospects for increasing Colombia's instant coffee sales in North America and now a few Western European nations remain limited because of inter alia production over-capacity, fierce competition, price factors, and traditional customer preferences.

Similarly the growth potential for instant coffee at home in Colombia is restricted by the modest dimensions of the soluble domestic market. A Federation study reveals that the average Colombian household consumes a mean of nearly 16 kilos a year of ground coffee against only 0.6 kilos of soluble. Put another way, millions of Colombians never in fact drink instant coffee - and some might even recoil in horror at the prospect.

The reason is simple. With some of the world's finest coffee available to them in traditional form and at rock-bottom prices, Colombians have little reason to opt for far more expensive instant brands. The price differential is such that instant coffee in Bogota can cost six or seven times more than the ground, traditional variety.

In view of this, as a rule only the upper and middle classes in Colombia purchase instant coffee - and in no more than relatively small volumes. Low-income groups rarely, if ever, drink it - a situation which may appear paradoxical to consumers in some European countries where instant coffee is often associated with the working class.

Consumer prejudices also have to be taken into account. Economic considerations aside, many Colombians take the view that only lazy housewives serve instant coffee. A senora who pulls her weight, it is felt, will go to the trouble of preparing coffee in the customary manner, both out of respect for her family and because it simply tastes better. In Colombia at least, there is still the widespread idea that solubles are an ersatz innovation best reserved for undiscerning foreigners.

Given this background, it is scarcely surprising that in a nation of 30 million inhabitants there are, as yet, only three instant coffee plants in Colombia. Colcafe, in Medellin, produces roughly 3,000 tons of solubles a year and, of this total, it exports some 2,600 tons.

The Nestle company, INPA, by comparison, produces instant coffee basically for the home market, on which it annually sells something like 2,400 tons, while its exports are in the region of 600 tons. Its production plant is in the western Cauca Valley.

The country's third soluble coffee installation is operated by the Grower's Federation at Chinchina, in the heart of the plantation zone. Its yearly freeze-dried coffee output is around 4,500 tons which are exported in their entirety. In addition, the factory manufactures 1,500 tons of coffee extract a year - primarily for the Japanese market.

Overall, Colombia's exports of instant coffee do not exceed 8,000 tons yearly. In the mid-80's, shipments most years brought in less than $40 million annually - diminutive amounts compared to average earnings of at least $1,500 million a year from green coffee exports.

On the world scale, Colombia's instant coffee sub-sector is dwarfed by its Brazilian counterpart. Colombian exports of solubles have averaged a seventh or less of the volumes shipped out each year by Brazil, which dominates the Third World export trade in the product. Colombia's other Third World competitors for instant coffee markets include: the Ivory Coast, Ecuador, Nicaragua, India and El Salvador, in that order of importance.

Over the years, Colombia's soluble exports have remained reasonably stable. In the 1976-77 season, for example, shipments were equivalent to 214,000 bags of green coffee. The comparative figure for 1986 was 270,000 bags.

There are numerous reasons why the sub-sector's export growth has been steady rather than substantial. First, in terms of quantity, Colombia cannot compete with either Brazil or the mammoth trading corporations that dictate the soluble market in the industrialized nations.

As with its green coffee, Colombia's one competitive card is its choice quality. But against this, many consumers overseas, accustomed to coarse African and Brazilian solubles, tend to reject instant Andean Milos as too bland. Sales advances have therefore been slow in some regions. Notwithstanding, notable market inroads have been made in a number of countries, among them Britain and West Germany.

Another negative factor has been declining or stagnant coffee consumption in some First World nations. In addition, the exorbitant cost of foreign promotion campaigns in ever-increasingly competitive conditions limits expansion possibilities - so do import taxes.

Nonetheless, Dr. Eduardo Libreros, the head of the Growers' Federation Commercial Information Department, is confident that long-term, foreign demand for Colombian solubles should augment. He would, for instance, dearly love to penetrate not only Gorbachev's newly liberalized Eastern Europe but also mainland China.

Meanwhile, he reports that the Japanese demand for Colombian coffee extract is booming. The extract is utilized in canned coffee, soft drinks and in a growing range of food products.

In the view of Libreros, the Colombian instant coffee sub-sector complements rather than competes with the country's mainstream green coffee sphere. The instant coffee industry, he points out, has enabled Colombia to keep abreast of technological innovations. The Federation's Chinchina plant, for example, is one of the most modern installations of its kind in Latin America.

The industry also provides much-needed employment opportunities, even if only on a limited scale because of the highly automatized nature of the sub-sector. Then, too, there are the economic advantages of shipping out an industrialized, value-added product as opposed to a rudimentary Third-World commodity.

One last consideration: the soluble sub-sector enables Colombia to utilize certain coffee grades which, for technical reasons, might otherwise not find a ready export market. Hence in conclusion, Colombia's instant coffee trade, though not a major dollar-earner, nevertheless fills a useful industrial niche and moreover it has considerable expansion potential.
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Title Annotation:increased instant coffee trade with Eastern Europe
Author:Nares, Peter
Publication:Tea & Coffee Trade Journal
Date:Feb 1, 1990
Previous Article:The Coffee Consumers Caucus.
Next Article:All specialty is gourmet but not all gourmet is specialty.

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