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Hot coffee: the favorite drink in the land of ice.

Iceland is an island in the middle of the North-Atlantic ocean encompassing 103,000 square kilometers with a population of 260,000. Iceland is highly industrialized and the standard of living is among the highest in the world. Summers are cold, the average temperature is 11 degrees C and the winters are mild, the average temperature 0 degrees C. Because of the chilly weather in Iceland, Icelanders stay inside most of the time. What else could they be doing except reading books, talking to friends, and drinking coffee, often a lot of coffee. Iceland has the dream climate for coffee roasters. They never complain that the weather is "too good" for their business.

The coffee culture

In 1991, coffee consumption was 8.5 kilos per capita. I realize that we don't hold the record and that amazes me because in my mind, it seems impossible to drink more coffee than Icelanders do. Overall, people of all ages drink much coffee. This is especially true for some professions. For instance, I cannot believe that anyone drinks more coffee than Icelandic fishermen, including professional coffee tasters. Perhaps the only group that outweighs Icelandic fisherman in this matter is Norwegian fishermen. Many fishing boats have big automatic espresso machines, of a size of a refrigerator. This shows how important coffee is to these men.

It can hardly be claimed that Icelanders are knowledgeable about coffee even though coffee consumption is high. Most people can not distinguish between coffee of different lands of origin. Icelanders buy their coffee in grocery stores, ground and vacuum packed or degassed. Most Icelanders buy their coffee in 250 gr., 500 gr., or four times the 250 gr. packaging size. Grocery stores do not have grinders and they don't sell whole beans by bulk. Therefore, the specific characteristic of the coffee never becomes an issue, and they grade coffee as either good or bad. Several coffees are sold by origin; Colombia, Costa Rica, Mexico, and Santos. The demand for decaffeinated, flavored, and soluble coffee is small, although flavored coffee is growing.

The market

In 1991, Icelanders roasters held 47% of the market and foreign producers who roast, grind, and pack their coffee abroad held 53% of the market. The largest portion of the coffee processed abroad comes from firms located in the other Nordic countries, in particular, Denmark and Sweden. The best know names are Merrild and Gevalia. The newcomers are El Marino from Mexico and Maxwell House from the U.S.

In 1991, 46% of green coffee imported came from Brazil, 29% from Central America, and 25% from Colombia. In a few years, their combination of imported green coffee has changed dramatically. Twenty years earlier, 93% of the imported coffee originated in Brazil, 2% in Central America, 5% in Asia and Africa, and nothing at all was imported from Colombia.

These remarkable facts demonstrate the drastic change that the coffee market has gone through in recent years. Not only are Icelanders drinking different kinds of coffee, they are consuming less and they are no longer buying their coffee only from local producers as they used to. In these two ways, this development harmed Icelandic roasters.


In a 20 year period, coffee consumption has decreased almost by 2 kilos per capita. In the early 1970's, per capita consumption exceeded 10 kilos, but now the consumption is between 8 and 8.5 kilos. In this period, the annual import of 2,200 tons or 32,000 bags of coffee has remained the same, but the Icelandic population has increased by 25%. In addition, the older cohorts are larger now than two decades ago, which means that a larger proportion of the population is older than 20 years of age. If this would be taken into account, the reduction in coffee consumption is even greater than the figures show.

There are many reasons for this reduction. Perhaps the most important one is more variety of other drinks on the market at an affordable price, for example soda drinks. Numerous reports claiming that coffee is bad for the health also influences some, perhaps mostly those who used to drink 10 to 20 cups per day. Judging from the graph, it appears that the main decline has been in the past few years or since 1987.

The most noticeable change in the Icelandic coffee market and the change most threatening to Icelandic roasters is the invasion of coffee processed abroad. Twenty years ago, local roasters dominated the market. Their market share was almost 100%, but the monopoly they held disappeared in a short period. Since 1976, foreign producers have made remarkable gains and now their market share is 53%. It appears that they are still increasing their market share and local producers have not been able to stop this evolution.

There are many explanations for this unfortunate development. Some years ago, import restrictions prevented competition from abroad. When the restrictions were dropped in the early 1970's as the EFTA treaty demanded, Icelandic producers were not ready for vigorous competition. To date, it is evident, as the figures show, that Icelandic producers made serious strategic mistakes in the battle.

The key to the foreign produc| er's success was higher quality coffee and an aggressive marketing strategy. Icelandic producers responded by spending more money on advertising, emphasizing the quality of their coffee and lowering prices, yet they continued to loose market share. Later, they improved the quality of their coffee, but the poor image they had created continued to haunt them. Generally speaking, consumers perceive now that coffee produced abroad is better than Icelandic coffee, although often no foundation is found for this claim. The lesson to be learned from this is that consumers are willing to pay higher prices for better coffee or coffee that they perceive is of higher quality. Unless Icelandic producers are able to meet this demand, they will continue to lose ground.

The future

In the coming years, the coffee market in Iceland will continue to change at a fast pace. Icelanders will buy better, more expensive coffee than they are now buying. This development will be linked to somewhat less consumption.

Icelanders are learning about different varieties of specialty coffee, and I predict that the consumers will become more knowledgeable about coffee in the future. They will not only be interested in coffee with certain characteristics, but also coffee drinks and flavored coffee. Many are already going to a great length to get the coffee they appreciate. As the consumers become more fussy about the coffee they drink, restaurants will have to pay more attention to this important part of their service. Only three specialty coffee stores are in the country, but coffee houses are popular. Most of these coffee houses have espresso machines, but the staff is often not well trained and sometimes don't know enough about the commodity they are selling. Despite that, times are changing and signs of a new coffee culture are already evident.
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Title Annotation:Adalheidur Hedinsdottir addresses Sintercafe
Publication:Tea & Coffee Trade Journal
Article Type:Transcript
Date:Mar 1, 1993
Previous Article:Pinhalense presents new preparation process.
Next Article:The 1992 Nielsen tea report.

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