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Finland: coffee fights for its market share.

As in Sweden and Norway, the Finns drink coffee not only as a pleasant hot drink but it forms a vital part of the daily liquid intake. At a stead level of 10 kg per annum per capita consumption level, the popularity of coffee in Finland is certainly indisputably the highest in the world.

The industry does have some problems similar to Sweden. The consumer expects the highest qualities but also expects coffee to be reasonably priced. The roasters have been able to to meet these conflicting demands by controlling costs. The recent low cost of raw materials, trimming personnel, and restricting the level of promotions have all helped to maintain the profit margins of the industry.

Like every other country, alternative beverages have made attacks into Finnish coffee consumption. Until 1985-86, coffee consumption was 11 kg per capita per annum In the last five to six years, soft drinks and juices eroded the market via the aggressive marketing of fast-food outlets and the fact that soft drinks were priced lower than even milk products. Now soft drink sales have stagnated and coffee companies are taking advantage to maintain share though aggressive promotions of various kinds.

During the 1970's and 80's, coffee was considered a strategic retail item, as until 1986, consumption increased to the 11 kg level. It was used as a loss leader as retailers sold it at 2-4% less than the normal. margin. Even though coffee had the highest import value of any consumer food product, it sold at the lowest sales value. The retail loss was regained by increased margins on other products. In the mid-70's the emergence of discount stores which discounted the large margin items in traditional outlets further complicated the situation of the advent of the fast-food outlet phenomenon for the roasters. Coffee was discounted in another style of retail outlet without the compensation of high margins on other items. The quality of the raw material saved the roaster from declining sales from a loss of image of the value of coffee as a high quality beverage.

The market is dominated by two companies--Paulig with around 40% market share and Meira with 31%. In fact the only real movement has been a recent increase in the sale of imported ground roast coffee. Sweden and Germany are the sources for this movement and reflect perhaps an increase in the desirability of a slightly darker roast in the Finnish market. Naturally the Finnish roasters are introducing new brands to combat this erosion of their home market.

Another development is the merger of Luxus Kaffee and Rich Coffee to form Viking Coffee. All the roasting for the two companies will be done in Helsinki. The idea is sound but the venture is really too new to know if the market place will respond in the expected manner.

Not surprisingly is the success of the exports of coffee. Meira has had recent success in the neighboring Baltic states and expects to expand that activity constantly. Paulig for several years has successfully exported to the U.S. and constantly increases the tonnage shipped.

The basic reason that Finnish coffee is successful is that the raw materials are the best and they are handled in the most modem facilities in the world. When the consumer opens the package, the coffee is fresh. The sources are: Colombia-40%, 20-25% Costa Rica, Guatemala, Nicaragua, and Mexico, 20% high grade Brazil, 10-15% Kenya, 5-10% others. This is a 100% Arabica market.

Virtually 100% of the retailing is in 500 gram vacuum brick packs. Some are in an outer box and some of these have a tear tape to separate the package in the middle.

The Finnish market is currently stable, largely because the roasters are maintaining the quality of the blends. The exports of ground coffee from the area should, however, increase as the taste and acidity of the blends appeals to the high end consumer in places like the U.S. and Canada.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Lockwood, George
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1992
Words:661
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