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How goes the world soluble market?

As a rough estimate, about half the world's consumption of coffee is in soluble form; that is probably above 350,000 tons. It looks as though the long-term trend is that soluble's market share is increasing and will continue to do so. There are, of course, exceptions, such as in England; its market is almost entirely soluble. Yet, as the country is experiencing a specialty coffee boom, this niche has declined marginally.

However, Fernando Rey, the commercial manager of Decafe S.A. of Colombia says, "It is difficult to find reliable statistics about instant coffee, because no single organization makes a thorough follow-up of installed capacities, or the trade and consumption per instant types such as powder, agglomerated, freeze dried and blends.

"In the last few years we have seen increased consumption of freeze-dried coffees in most European countries, including Russia, the U.S. and Japan, replacing agglomerated instant coffee because consumers have become more quality-conscious. Spray-dried powder has seen a recovery in activity, due basically to the instant cappuccino trend in countries like the U.S., Germany and other European countries.

"On the export side, many producing countries have increased their installed capacities. Colombia, for instance, has increased its capacity from 12,000 tons in 1990 to the present level of 20,000 tons or more. Ecuador and India have likewise increased their capacities."

Fernando Rey further speculates that trends regarding the soluble market will move in a few directions. First of all, he sees the U.S. leaning toward R-T-D coffees as well as granitas. Secondly, he feels that some countries in Europe are still developing their instant cappuccino sectors, and coffee-based beverages (soft drinks, milk-coffee) have had a hard time trying to start there. However, he envisions Japan to continue its strong interest in canned coffees. Also, he has witnessed an increase effort to introduce coffee extracts and better quality instant coffees to fast food restaurants and bars, which could mean significantly lucrative results for this market.

From her base in New Jersey, U.S., Grace Torbus, president of Tonex Inc., agrees that countries in the former Soviet block are drinking more instant coffee (although there is a present setback, due mainly to Russia's current financial problems). In these countries, where soluble was not obtainable a decade ago, the long-term market for this coffee will continue to grow.

Torbus explains, "In the U.S., I see an increase in the demand for soluble coffee - not only for drinking, but also as a flavoring in other products such as ice cream, baking and coffee beverages which are not considered coffee."

Looking to the future, Torbus also sees a growth trend in the consumption of 100% grain soluble coffee. "This product smells, tastes and looks like 100% instant coffee, but is made of grains. It's an alternative for people who are looking for a totally caffeine-free beverage. Since the grains used in the production are naturally free of caffeine, there's no need to extract the caffeine in an unnatural way.

"Also many people cannot take the acidity levels of coffees which may tend to cause stomach upsets. The grain coffee alternative is free of acids, and most people can tolerate this over regular coffee. Price is also much more competitive than coffee. Therefore it makes sense to buy a natural, less expensive and nonaddictive product. It is definitely an alternative to decaf."

Packaging from Tonex Inc. comes in 100 gm. or 200 gm. sizes, bulk, or however the customer wishes. The grain soluble product can be supplied under private label, or as a Tonex Inc. brand.

From their headquarters in Toronto, Canada, Christine Renken of Holliday & Scandrett International remarks on the world soluble market by stating, "we see an increase in demand, particularly as new products are launched on the market. These products are for coffee extracts and oil for the R-T-D market; spray-dried coffee from different origins mainly for the cappuccino industry; and freeze-dried coffee for the vending industry. Other growing trends that we see in the instant and specialty coffee markets are granitas, frappuccinos and iced cappuccinos.

"The soluble coffee market has a bright future, as busy life styles continue and more Europeans are accepting these products. Cappuccinos and other flavored soluble drinks are labeled as sophisticated and are targeted to the younger generation. It has also been said that the future looks at a 'heavily caffeinated society.' While some countries may judge that the soluble coffee industry is declining, others are accepting that the product is on a growing trend."

Holliday & Scandrett International finds that in their main market - the U.S. - demand popularity varies on a regional basis: cappuccino and vending machine use is high in the North and Mid-West while iced beverages such as frappuccinos and granitas are popular on the West Coast.

According to statistics for the first half of 1998, around 32% of Canada's instant coffee imports came from Brazil; 28% from the U.S.; 18% from India; and about the same from Colombia. The overall 6-months total of 1,240 metric tons actually represented a 12% drop from the same period of 1997. But instant decaf imports rose sharply from 139 tons to 303 tons during the same period.

Taking another global view of the soluble coffee market, we turned to Susan Korry of the Rothfos Corporation in New York. This company is part of the Neumann Kaffee Group, rated as one of the world's largest coffee exporter, trader and service group, operating in 26 countries with 52 companies which together represent over 15% of the coffee traded annually.

Susan Korry explained that "all of the main consuming countries - the U.S., Germany, the U.K. and Japan - have remained unchanged in terms of imports of bulk soluble coffee for traditional packaged purposes.

"However, for soluble coffee as an ingredient for hot and cold cappuccino, R-T-D coffees, and granita applications, we have noted a dramatic increase in soluble coffee imports globally. We estimate a 20-30% global increase in demand for soluble coffee for 1998, compared with what has been reported in 1997. This increase can be looked at as significant, in light of the economic turmoil of Russia and the subsequent dramatic decrease in packaged soluble coffee sold into that area during 1998.

"Hot and cold instant cappuccinos, granitas and R-T-D coffees continue to perform well as a product category on a global level. Specifically, vanilla- and mocha-flavored hot and cold instant cappuccinos, granitas, and R-T-D coffees remain the top sellers in this division.

"Globally, soluble coffee buyers continue to purchase on a short-term basis due to advantageous pricing from source manufacturers. It is estimated that soluble coffee pricing from source has not been so competitive since the early 1990s."

Finally, it is important to take a closer look at some of the principal countries involved in the export and import of soluble coffees. Exports of soluble from Brazil have been particularly hit by the fall-out from the economic crisis in Asian and former Soviet countries. Although these countries are great prospects for ultimate growth, the difficulties during 1998 have led to an overall decrease by 15 20% in Brazil's soluble shipments compared with the same period of 1997.

The problem would worsen as high local prices for Arabica led Brazilian roasters to switch to using more Robusta in their blends. In turn, the higher prices for Robusta resulted in a corresponding increase in production costs for the export soluble industry. However, the forecast rise of 50% in Brazil's 1998/99 coffee production because of improved weather conditions, should help to restore Brazil's competitiveness in international markets; the forecast output for Robusta is 5 million bags.
World Production of Instant Coffees

Country of origin Metric tons 60-kg bags

Brazil 65,000 2,800,000
Mexico 22,000 950.000
Colombia 15,000 670,000
Cote D'Ivoire 9,000 390,000
Others 22,000 950,000

Sub-Total 133,000 5,760,000

European Community 100,000 4,300,000
USA 48,000 2,080,000
Japan 45,000 1,950,000
Switzerland 5,000 220,000
Australia 13,000 560,000
South Korea 6,000 260,000
Others 10,000 430,000

Subtotal 227,000 9,800,000
Global Total 360,000 15,560,000

These figures are based on statistics from AFCASOLE, Landell Milles
Commodities and estimates made by Ultramares Corporation C.A.

According to figures available up to May 1998, Brazil's exports of soluble coffee were principally to Russia (3,226 metric tons); Germany (1,062 tons); Japan (1,000 tons); Bulgaria (636 tons); and the U.S. (580 tons).

A typical soluble coffee factory such as Cafe Soluvel Brasilia is currently producing 8,000 tons of coffee powder and 2,500 tons of agglomerate annually - all for export to over 45 international markets. Looking at the January through April 1998 imports of soluble coffee into Japan, the five leading suppliers during this period were Brazil (704 metric tons); Colombia (477 tons); Ecuador (398 tons); Germany (377 tons); and Malaysia (73 tons).

There is more international soluble interest. In an effort to add value to its coffee exports, Uganda has developed a project to establish a factory to process soluble coffee. This is planned as a joint venture between the Spanish company, Eurocafe, and a Ugandan state company.

In the U.K., soluble continues to dominate the market, accounting for a 90% share - though roast and ground is making some headway through the gradual spread of gourmet coffee shops. These figures are a mirror image of the U.S. situation, where regular coffee accounts for 87% of all coffee consumed, leaving 13% for soluble; and where there has been a longterm decline in soluble consumption from a daily average of 0.67 cups per head in 1962, compared with the present average of 0.18 cups.

The remarkable growth in U.K. coffee sales - in a country that was mainly tea-drinking - dates from the 1950s, with the marketing of soluble coffee by Nestle and Maxwell House. Skillful marketing doubled overall coffee consumption within a 30-year period.

More recently, the traditional tea-drinking Australian market has followed a similar pattern, with Nestle taking 74% of the soluble coffee sector, with the rest shared by the former Unilever and Cadbury Schweppes brands.

In the former Eastern European block, the retail business in Hungary and the Czech Republic is now dominated by international groups, shared between Douwe Egberts, Tchibo/Eduscho, and Kraft Jacobs Suchard. The mass market, driven by severe price competition, is taken mainly by soluble brands. Among the Central European countries, coffee consumption at 2.0 kilos per capita per annum is less than one-half of Western European in general. Although at the beginning of the decade there was much expectation of dramatic growth, the increase in consumption has been relatively modest. For what is essentially a luxury product, the gradual removal of subsidies on basic food, rents and energy has imposed a tight rein on domestic budgets.

Joseph Massoud of Ultramares Corporation C.A. remarked that, "in the consumption side for soluble coffee, it seems that overall tonnage is fairly stable in markets like Europe and the U.S. But we see a definite increase in demand for soluble products, mostly from the Eastern Europe, Asia, and Latin America markets. This growth is estimated at 4% per annum until the year 2005. However, that growth will depend on the social, political, and economical situation in these emerging markets.

"On the production side, Colombia and Ecuador have been investing in processing infrastructure. As a result, today's estimate of capacity in these two countries has reached approximately 27,000 metric tons. On the other hand, Singapore and Germany are consolidating their position as main processors of instant coffee."

"In the mature markets like the U.S. and many Western European countries, we see an increasing demand for the various instant specialty coffees, such as cappuccino-style and flavored. Young coffee consumers are especially willing to try something different. Consumers' tastes are changing; they now have more knowledge about flavors and want to experiment."

"Asia has developed sophisticated equipment for flavoring, expecting that the Asian consumption of flavored coffee will rise. In the meantime, it appears that they are exporting most of their production to China and Russia."

"Considering the fact that specialty coffees contain very small percentages of instant coffee and that the growth in consumption of specialty coffees does not necessarily represent a significant increase in coffee consumption, we estimate their growth at 1% of the above mentioned, 4% per annum."
COPYRIGHT 1999 Lockwood Trade Journal Co., Inc.
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Article Details
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Author:Butler, Reg
Publication:Tea & Coffee Trade Journal
Date:Jan 1, 1999
Previous Article:The health message goes to Spain.
Next Article:An interview with the European Decaffeinators Association.

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