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Hungary - surely this is not a former Eastern Bloc country.

Continuing on my journey through Eastern Europe, after stopping in Warsaw and Prague: my next stop was Budapest. Enroute to Hilton on the Hill, I was entranced at the glittering hotels, glamorous shops, activity, people bustling about and the current fashionable clothes people wore. I remarked to my fellow car passengers that this surely was not a former Eastern Bloc country, but the Hungarians proudly told me that Hungary was the strongest nation economically among the Eastern Bloc countries. Casinos were countless, though not like Las Vegas or Atlantic City Hotels were glamorous and sights were beautiful to behold. Happily, this country is well on its way to economic reform.

|In the past' (again that expression comes up all the time all over the former Eastern Bloc), Hungary had a monopoly for its purchasing and roasting. Monimpex handled all the green coffee purchases for the country's roasting companies--Compact and Quinttie. Green coffee is now traded in a free market and anyone can import coffee and cocoa.

In 1990, Douwe Egberts purchased 51% of Compact, and now the company handles its own green purchases. Quintte has now been renamed Sweet and purchases 50-60% of its green coffee through Monimpex. Eduscho has now established itself in the Hungarian market with Monimpex as its partner. Monimpex holds 50% of the shares of the company. This new venture started up in July 1990 and now has 15% of the domestic roasted market. The new venture allows Monimpex to handle all the green coffee. The roasting facility is still under construction as new machinery is being installed. Machinery expected will include vacuum packing machines.

According to Jeno Budavari, deputy general manager, "Monimpex had to get into the roasting business if it wished to remain in coffee. Since the privatization of companies, it lost Compact and some of the Sweet green coffee business."

The latest situation on green coffee imports is hard to say", says Budavari, "raw coffee imports are now free for all to do, and roasted coffee is subject to license by the government."

There is a huge market for roasted coffee on the black market, especially Austrian coffee. The amount is estimated to be anywhere from 8-10,000 tons of roasted coffee.

Hungarian people can buy Austrian coffee much cheaper now as the Austrian have less tax and duty on coffee and can offer it much cheaper than their own manufacturers. The Hungarians are driving to Austrian roasters, packing up their vans and boots (truck of cars) and smuggling coffee back into Hungary. The customs control is imperfect, says Budavari, there is easy access to smuggle. One is allowed to bring in two kilos, but people are carting the coffee away in trucks, he added. So, basically, raw green imports are lower than before.

Consumption has not diminished, so the Hungarian green and roast suppliers are losing some of their share. It is estimated that the Hungarians consume 32,000 tons of green coffee. Subtract 10,000 for smuggled coffee and that leaves Hungary only importing 22,000 tons. Of these 22,000 tons, soluble coffee accounts for 10% or 2,200 tons.

As of September 1990, Monimpex is made up of state-owned shareholders. New shares are now being offered to foreigners. Tea had become a free commodity 6-7 years ago so Monimpex stopped trading, and now Compact is the only one that does it. It is said that Lyons Tetley and Eduscho are talking about a joint venture but these talks are in the early stages. Hungary is more of a coffee consuming nation than tea. Espresso is the preferred drink, but more tea is consumed in the winter.

Hungary is the most economically developed country in the former Eastern Bloc, says Budavari, but the entire country needs to be transformed.

Monimpex imports from countries of origin and often involves some European traders in coffee acquisitions. It's safer to invoice the European traders such as Rothfos, Mann and Volcafe as they can supply from other origins if Monimpex can't get the preferred origin. Hungarians prefer a 60% Robusta blend, of which 90% are comprised of Indonesia, Thailand and Africa (Cameroon and Uganda). Of the blend, 35% account for Arabicas from Central America, i.e., Honduras, Costa Rica, Mexico, Brazil and Colombia.

There have been changes in importation. About 90% of the soluble coffee were packed by Compact, but now Nestle will pack elsewhere: it recently purchased a chocolate factory in Hungary and intends to install soluble equipment. Jacobs Suchard now packs soluble in Budapest which Brazilian suppliers sell in bulk. Sweet Industries will also pack soluble. Very little soluble is imported from India. Jacobs and Nestle are the largest brands here; they don't pack here, though, just import.

Compact

There are now four roasters serving Hungary: Compact and Sweet Industries, the former monopolies; and two new companies--Eduscho here in a joint venture, and Jacobs also a joint venture who now has a former Compact leader. Tchibo is showing interests as well as many other companies. The Austrian company, Julius Meinl, is now importing its products into Hungary (Julius Meinl originally started here).

Dr. Laszlo Varga, head of the technical dept., and Komaromi Miklos, deputy general manager, met with me. The biggest competitor to the Hungarian roasters is the smuggled coffee as Compact told me there is a 40% luxury tax on coffee and then an added 35% vat added to consumer's coffee prices. As the Hungarians' living expenses grow, more Hungarians are purchasing their coffee on the streets where the black market is prevalent.

For the 10 million inhabitants in Hungary, per capita consumption is estimated at 3.7 kg coffee, approximating for 40,000 tons.

Compact's privatization package includes 49% shares owned by the State and 51% owned by DE-Sara Lee which has an option to purchase the rest. Tea is a branch activity in which the company invested much money. Compact's coffee is purchased through Decotrade, the green trading division of DE-Sara Lee in Zug, Switzerland. Compact uses Decotrade's financial power to get the best on the market. Decotrade also purchases the company's tea for the time being but Compact packs it themselves. Approximately 1,200 tons of Black tea from China, India, Sri Lanka and Vietnam are packed at the facility. Black tea is preferred and holds 95% of the consumer market. Herb teas are increasing their share as they have become more fashionable.

Through privatization, DE-Compact has been able to produce an entire range of coffee and tea products with competitive prices. The company imports soluble in bulk from Nestle and Cacique and packs it.

The Hungarians prefer whole bean coffee. It is hoped that through time, people will like roast and ground and will be attracted to the vacuum packed coffees.

Smuggled coffee accounts for 30-35% of the market. Not counting the black market, Compact is the market leader with 60%, Sweet (Jacobs) has about 25% of the market, with Eduscho accounting for 15%.

Before WWII, DE-Compact was the factory of Julius Meinl. The company later built a coffee factory in the Budapest suburbs which is now 10 years old. Ten Probat roasters are in the facility whose capacity is estimated to be 40,000 tons/year. The Probat roasters are divided into two types - one roasting 1,500 kilos per hour and the other 3,000 kilos per hour. They also have SIG vacuum packaging for R&G, and Hesser/Bosch vacuum packs the whole beans.

The company has four facilities. The largest is situated in Budapest.

Jacobs Suchard

Jacobs Suchard was established in Budapest in January 1990. It was originally an industrial candy factory. It now roasts and packs coffee here. The company purchases green coffee through Taloca, the green coffee purchasing arm of Jacobs Suchard located in Zug, Switzerland, or through Quintte(Sweet). They are open for all sources, says Gyongyi Hosszu, finance & administration manager. Soon to be installed is a vacuum packing line from Switzerland. Half of the roasting machinery in the facility is from Switzerland, the remainder are Probat roasters from previous Hungarian roasting facilities.

Market share is developing, Hosszo happily told me, as the future is expected to be good. The Hungarians like Jacobs coffee whose product line includes Monarch (100% Arabica Colombia, Brazil, and Honduras blend). The Meriso Mocca line is aimed at the lower end of the spectrum for consumers and is available in one-kilo packs.

The Hungarians feel comfortable with R&G. Sales are showing vacuum packs to be a most popular item. Jacobs heavily invests in consumer advertising as it is a new brand on the market. Advertisements appear in newspapers, television and posters; they are very expensive, but necessary.

Quintte (Sweet) and Compact are the two largest roasters in Hungary. Instant coffee in the domestic market is popular; Jacobs imports soluble in jars and intends to produce it here shortly in 100 and 200 gram jars.

Sepp Plecher is the general manager of Jacobs Suchard in Hungary.

Decaf products are not of much interest here, though there is a very small market. However, Jacobs sees a future for more decaf products.

Jacobs has a major ownership in the company and is partners with Quintte(Sweet). Quintte has four factories --one for coffee, and the others are in biscuit manufacturing. Zomart is the name of the coffee factory.

Jacobs' best selling products are Monarch and Merido and vacuum packs. Their cheapest and most expensive products have some volume sales.
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Title Annotation:focus on coffee roasting industry
Author:McCabe, Jane
Publication:Tea & Coffee Trade Journal
Date:May 1, 1992
Words:1572
Previous Article:OTG: a name that goes by Milford but is much more.
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