Printer Friendly

Deciphering the Brazilian coffee market.

Brazil is the second largest roasted coffee market in the world and probably, one of the least understood. It is a market of 150 million people from every imaginable background, consuming approximately 9 million bags (60 kilo) of coffee per year. The 14 Brazilian states range from the geographically small and remote, to some larger than most European countries. The economies of the states vary from primitive to developed, with one of the Southern states, Sao Paulo, having a G.N.P. comparable to Spain's.

Annual consumption in the Brazilian roasted coffee market has been stable for a decade at 9 million bags, while per capita consumption has declined from 4.5 to 2.8 kilos. The local roasters' association, ABIC (which has 500 members accounting for 80% of the market), commissioned a study in 1987 to find the reason for the 38% fall in per capita consumption.

The ABIC study showed that the Brazilian coffee consumer had two basic assumptions, both negative. He had serious doubts regarding the purity of the product and he assumed that the best qualities were exported. Unfortunately, those assumptions were, for the most part, true. Even today, non-participants in the very successful program described below are degrading their blend with non-coffee products (usually corn, wheat, or soy) by up to 10.5%.

After the results of the 1987 study were known, ABIC decided to confront the purity problem first. It instituted the "Cafe Puro Seal" program and backed it up with massive media exposure which explains the program and encourages consumers to patronize brands that have the "Cafe Puro" seal.

To display the seal, a brand must be 100% coffee, and participating brands are checked regularly by accounting firms, Arthur Anderson or Peat Marwick. Those firms buy participating brands at retail outlets and submit blind samples to government approved testing laboratories, which chemically test for impurities. If any are found, the roaster may appeal. Once the appeal is resolved (few are successful because the accused roasters are usually quite guilty), the name of that brand and its parent roaster are printed in the local newspaper, much to the competition's delight.

The "Cafe Puro" campaign has been highly successful in changing the Brazilian public's assumption that coffee is largely mixed with low cost impurities. Roughly 80% of brands now display the "Cafe Puro" seal.

ABIC is currently launching another campaign which explains that all the best quality coffee is not being exported and that all coffee brands are not the same. It is building on the earlier, and ongoing, success of the "Cafe Puro" program and uses the tag line "Purity you must demand. Quality you should choose." Ads currently running in the consumer media show that, just as faces behind identical masks are different, so are different coffees in the cup. Individual roasters must explain to the public how their brands are unique. Some roasters have launched single origin brands, such as "Cafe Brazilian Santos" (all from Sao Paulo State) of Cafe do Ponto.

The latest ABIC campaign is aimed at consumers 25 years and older who are existing coffee drinkers. Key components of the program presently are: distribution of recipe cards and flyers at supermarkets, four-color dessert recipe ads in women's magazines, and local seminars for roasters on how to regain the confidence of their customers and how to promote increased local consumption. The next step will be to target consumers under 25 years, a group who has been effectively targeted by the local soft drink industry.

ABIC had to reinvent the marketing wheel because the Brazilian coffee market was distorted by government policy since 1958 when the IBC was founded and price controls were imposed. One of the many things the IBC did was to sell all Brazilian roasters highly subsidized low quality green coffee at uniform prices. Since all roasters received the same quality coffee at the same price, there was little differentiation between brands. This program disappeared along with the IBC in 1975, but price controls remained. It wasn't until 1991 that prices were freed (costs were freed in 1975).

During the above 33 year period (1958 to 1991), roasters were free to buy any quality green coffee they wanted at international prices if they thought the prestige of a special blend or brand was worth the price. Few roasters exercised that option and a generation of roasters practiced their trade under highly restrictive circumstances. Since 1991, many companies have been caught off guard because their industry is now market driven, which is a new and increasingly widespread phenomenon in Latin America.

Another recent change in Latin America is the return of civilian rule. When that happened in Brazil in 1985, the new government lifted the ban on new roasteries. The result was a rapid growth of very small roasters who quickly captured roughly 30% of the market. Unfortunately the new roasters often avoided paying the 22% sales tax, and often did not pay the various social taxes that industrial companies are obligated to pay Avoiding those social taxes can give a company a 40 to 50% price advantage. Those price advantages forced many of the established small roasters to cheat a little to keep in business. Quality, never a big concern since the inception of the IBC green coffee system, quickly surrendered to price. Other effects were bankruptcies and decreased per capita consumption.

Since ABIC instituted its programs in 1989, consumption is up 5% (population grew 2.5%), and new products (for Brazil) have been successfully launched. Espresso, never widespread in Brazil, is now 1% of the national market, and rapidly growing. In the larger cities such as Sao Paulo and Rio de Janeiro, espresso consumption is already up to 3%. Some companies have successfully launched single origin coffees, as well as whole bean programs. In fact, the ABIC programs are so successful that the average consumer is now concerned with choosing quality rather than with avoiding impurities.

The goal of the current programs is to increase consumption by 20% to 11 million bags over the next two years, which will bring per capita consumption back to the level of 10 years ago when the decline set in. This is the point that must be reached before real growth will happen in the Brazilian Roast & Ground coffee market.

"Today Brazilian consumers are looking for quality and ABIC's job is to give all possible support and incentive for the roasters to produce what the consumer is requesting," said Americo Sato, ABIC presidente
COPYRIGHT 1993 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Lockwood, Frederick A.
Publication:Tea & Coffee Trade Journal
Date:May 1, 1993
Previous Article:Two approaches to a difficult Brazilian industry.
Next Article:Aroma cognition.

Related Articles
Azevedo reports on the Brazilian coffee scene.
New Brazilian coffee company formed.
Brazil emerges into the specialty market.
Brazilian specialty coffee earmarks 10% for U.S. market.
The Brazilian bean in Japan.
Original Brazilian Coffee at 99[cent] A Bag.
Diedrich Coffee Obtains Top Pick Brazilian Coffee in Internet Auction.
Mexico Frys Origin Marketing.
Second Annual Brazil Coffee Internet Auction Held.
Coffee Quality week in Brazil. (Coffee and Tea Reports from the Front Line).

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters