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East European markets are undergoing structural changes.

According to the Hamburg-based Kaffee Verbund, the annual consumption of coffee by the consumers in Eastern Europe and the former Soviet Union averaged 72. cups against the average of 640 cups by EC citizens during 1990. In effect, each EC citizen, from the infant to the oldest person, consumed two cups of coffee only once in five days. This is, naturally, statistically speaking!

Eastern Europe's low coffee consumption in the post-war era is attributed to a number of reasons, including the rigidly controlled commando economy, shortage foreign exchange and the comparatively low income, coupled with the high consumer prices.

In terms of raw coffee consumption, the 407 consumers in Albania, Bulgaria, Czechoslovakia, Yugoslavia, Poland, Romania, the CIS (Commonwealth of Independent States of former Soviet Union) and Hungary consumed around 407 million sacks of raw coffee during 1990. In comparison, the 12 member countries of the EC consumed during the same period a total of around 30 million sacks of raw coffee. The per capita consumption of raw coffee in the East European states, trailing far behind that of the EC member states, ranged from 0.2 kg in the CIS to 2.6 kg in Yugoslavia and Hungary.

Because of historical reasons in East European states, coffee drinking enjoyed a completely different social significance than in the Western industrial countries. It was always regarded as a luxury item in Eastern Europe and, accordingly, expensive. As a rule, coffee consumption was restricted to the urban regions and, again, limited to the better earning consumer groups. But countries like Czechoslovakia, Hungary and Yugoslavia were an exception to this rule, considering that there had already been a certain coffee consumption even during the pre-war period. Coffee was also not unknown in the Baltics, Armenia and Georgia.

The liberalization of the economic scenario constitutes a decisive change of the economic scenario. Hungary, Czechoslovakia and Poland, backed by massive Western assistance, will be able to adapt themselves more quickly to the changes than the other states in Eastern Europe.

Should "coffee drinking culture" be successfully established in these countries, a professional marketing and an efficiently-run advertising system introduced and the quality of the coffee products improved, the markets in these countries could be developed very positively in the future, the Kaffee Verbund maintains.

Per capita raw coffee imports for 1990 were: Bulgaria (1.2 kg); Czechoslovakia (1.6 kg); Yugoslavia (2.6 kg); Poland (0.6 kg); Romania (1.0 kg); CIS (0.2 kg); and Hungary (2.6 kg)

Logistic Concepts for Coffee Shipments

There is an increasing trend to ship coffee in containers, although shipments are presently effected mainly in sacks. But this is going to change in course of time, says Gunter Brockhaus, member of the board of directors of the Hamburg based coffee trading house of Berhard Rothfos GmbH.

Brockhaus tries to explain his view. The attempts currently made to ship coffee in containers had produced "surprising results." "There have been no damages so far ... the tests carried out on the coffee shipped in containers, as a matter of fact, showed better results than in sacks," he maintains.

But there are also problems connected with the switchover from sacks to containers. A large number of jobs in the producing countries depended on the sack-producing industry and also on the loading and shipment of coffee by containers. This problem was further compounded by the lack of infrastructural facilities, implicit in the absence of equipment for loading and weighing of the loose commodity. Another problem facing the buyer in the importing country was the fact that warehouses and roasters in Europe, for instance, had not been adequately prepared to have loose coffee. "New warehouse technologies and facilities for loose coffee are necessary," Brockhaus says.

The most crucial factor is, of course, the pricing. "all the parties concerned assume that substantial savings could be effected." The enormous costs for packing the commodity in sacks would be eliminated; containers would be better utilized in terms of capacity and loading would be simplified with suitable facilities. "However, one has to invest first ... then you talk of advantages."

Brockhaus will provide an extensive offer to his customers, the roasters, in future. "The service starts with the professional advice given to the customer in effecting purchases and encompasses quality control, financing, transport insurance, shipment, checks at the port of arrival, storage, the preparation of the desired mixtures and delivery to the roaster." Most of the roasters presently buy on fob basis and, in effect, undertake all these functions on their own. This is also because, apart from Rothfos, there is no other trading house which provides such an offer.

The Rothfos concept of including logistics in the marketing strategy will mean that the company will have to enter into contracts with shipping companies. The shipping companies' cartel, the so-called conferences, dominated the South American traffic. Brockhaus feels that in an era of containers it was incomprehensible to place such heavy reliance on conferences whose services are not customer-oriented. Brockhaus is going to try to produce a complete logistical chain ranging from the producers to the roasters.

"As a worldwide operating trading house, we want to place our customers in a position to the wholesale and retail trade. All the other functions such as procurement, buffer stock, mixture, distribution and interlated services will be provided to the customer by us as part of or complete offer." says the company.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
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Article Details
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Author:Mehta, Manik
Publication:Tea & Coffee Trade Journal
Date:Mar 1, 1992
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