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Germany: Eduscho and Tchibo approach vacuum-packs.

The Bremen-based Eduscho GmbH & Co KG will stick to its main business of supplying roasted whole coffee beans. Unlike its competitor Tchibo, Eduscho does not contemplate to force the sale of its vacuum-packed coffee which, since years, has accounted for around 10% of the Eduscho coffee sales. "In the long run, we see in Germany a market for roasted whole beans," says Wolf Rudiger Struck, chairman of the board of management.

With a market share of 15%, the country' s third largest German coffee roaster is represented in Germany with over 20,000 depots and 550 sales branch offices. Of these, 3,600 depots, 10 sales branch offices and 8 franchise sales offices are located in East Germany. The coffee roaster is eyeing the markets of the East European region where it would like to make inroads. After the creation of a joint venture in Budapest in May 1990, Eduscho is engaged in setting up a production plant each in Czechoslovakia and Poland.

During the first four months of this year, Eduscho has increased its coffee sales by 5-7% and achieved a two-figure turnover growth in all the areas of its business. Its specialization in premium quality coffee paid rich dividends last year itself. Despite fierce competition and stagnating sales of roasted coffee in the German household market, Eduscho succeeded to increase its coffee sales by 2% and stabilized the value of its market share at 17% in Western Germany. The group's turnover, for instance, rose to nearly 2.4 billion DM (previous year: 2.2 billion) of which roasted coffee accounted, again, for 1.2 billion DM. This is a remarkable achievement considering that the retail prices of coffee the average market price was around 7.12 DM (Eduscho 7.70)--had declined further.

Eduscho's "second leg"--its business in consumer and gift articles-accounted for more than 900 million DM (1990: almost 800 million). Tea, confectionery and coffee-related drinks accounted for nearly 250 million DM [(210) million DM of the overall turnover. In terms of geographical regions, some 540(520) million DM were accounted by the Eduscho associate companies in Austria and Switzerland].

Tchibo: Expansion in Eastern Germany "furrows" into profits

The Hamburg based coffee roaster Tchibo FrischRost-Kaffee GmbH has started supplying vacuumpacked ground coffee in addition to whole coffee beans sold in its sales offices and depots in food stores, retail shops and bakeries. But the Tchibo management has categorically denied that there were any plans to extend the distribution through its own system into the coffee shelves of the retail food trade, the company's managing directors Hasso Kaempfe and Rainer Karrenberg said.

The aim of this strategy was to serve those coffee drinkers who preferred the traditional vacuum-packed coffee--64% of German coffee market is accounted by vacuum-packed coffee. In order to meet the high quality demands, the company has developed a special "aroma protection system." The coffee is ground and packed without getting into contact with oxygen and is supplied in a double package (two packets each of 250 g).

Tchibo succeeded last year to slightly increase its share of the market quantity turnover from 21.2-21.5%; this was a remarkable achievement in view of the fact that the overall west German market had actually declined by 3%. In eastern Germany, the company incurred considerable overheads as new distribution systems had to be set up. Preferring a "long-term strategy", Tchibo had to forego short-term success in the low-priced category of products, Kaempfe said. He explained that this had been necessary to present the necessary uniform operations in both eastern and western Germany so, as not to jeopardize the "high market image" which the company had created for itself in the West. The company has already created a chain of 2,900 depots in the food retail trade and in bakeries, besides opening 44 of its own branch offices.

Tchibo has also been expanding its operations in England, France and, particularly, in Czechoslovakia. Tchibo will be holding the majority stakes in the largest roaster company of Czechoslovakia, Balinry Tchibo AG, in Jihlava (Mahren).

However, all these factors have "furrowed" in the company's profitability, to quote Karrenberg. The 8% rise in the gross turnover earnings to 2.38 billion DM was attributed to the very successful business in consumer articles, which rose by more than 30% to 863 million DM. Nonetheless, the net profits in this particular area of Tchibo's business could not offset the declining profits in the roast coffee business--a result of the continuing low sales prices. Higher overheads and depreciations of 70.3 million DM (previous year: 51.8 million) led to a decline in the earnings to 52.9 million DM (138.4 million). After taxation, a sum of 36.3 million DM (previous year: 120.7 million) was transferred to the parent company, and Tchibo Holding AG, Hamburg. A significantly improved result is expected in the current year.
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Title Annotation:Tchibo Frisch-Rost-Kaffee GmbH; marketing of vacuum-packed ground coffee to increase sales
Author:Mehta, Manik
Publication:Tea & Coffee Trade Journal
Article Type:Company Profile
Date:Sep 1, 1992
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