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Japan's coffee market knows no limit.

Japan's coffee market knows no limit

Some have said that the Japanese embrace of coffee was a passing fancy. Of course, it was said for only a short time. We have all watched the metoric rise of coffee consumption in Japan which is now tied with France as the #3 consumer of coffee in the world.

Japan's consumption increase began with soluble coffee immediately after WWII. Soluble now accounts for 50 percent of the coffee market with regular coffee holding the remaining and equal share. Soluble coffee is mainly manufacturered by Nestle and Ajinomoto GF, with Ueshima Coffee Co., Key Coffee and Art Coffee holding the top positions in the regular coffee manufacturers category.

Tokyo's green trade is well represented with Mitsubishi, C. Itoh, Marubeni, Mitsui, and Sumitoma. They, in turn, sell to the major roasters as well as to wholesalers who in turn sell to the small and medium-sized roasters. Wholesalers include: Wataru, Ishimitsu, Sumida and Nikon coffee. These "Middle Men" service the 350 small roasters who find the importation process cumbersome and confusing.

Wataru Nishibayashi is the 77-year-old president of Wataru & Co., Inc. who was working in Shanghai at a coffee company there, before WWII. He was importing Brazilian coffee, processing it and selling it to China. To his dismay, he found only the Japanese workers living in China liked the beverage and not the Chinese. Wataru Nishibayashi started up his own wholesaling firm in 1947 and distributed various kinds of foods as well as importing roasting equipment. They are the agents for Ditting grinders and Probat roasting equipment.

Wataru has recently entered the Jamaican coffee industry with the company Dyoll in Kingston. As well as their plantation, Dyoll purchases coffee through the Coffee Industry Board of Jamaica and exports it to Japan. Japan's other main presence on that island is UCC. 95 percent of Jamaican green coffee is imported by the Japanese but Jamaican coffee only accounts for one percent of Japan's total green coffee imports.

Maseo Arai, Wataru's coffee buyer, regularly travels to Jamaica. He confirmed that Hurricane Gilbert limited last year's crop in Jamaica. While this year, Jamaica may have nothing to show for coffee, next year's crop is expected to be almost back to normal.

Typica trees in Jamaica are slow growers but they are recovering quicker than expected.

Wataru also has a sister roasting company outside Tokyo which has several shareholders. The head offices are in Tokyo with branches in Osaka and Nagoya and employees total 76. The company is also involved in packing tea. Wataru Nishibayashi visited several tea countries early in the company's history and found that teas produced in cool tropical areas are often the best quality. Wataru heavily imports Brazils, Ethiopians, Kenyas, Tanzanias and Guatemalas and buys Yemen coffee through France.

Ueshima Coffee Corp is Japan's largest coffee company--a complete coffee company as UCC calls itself--they import and export coffee and food products, roast coffee and run a chain of coffee shops (cafes). Through their subsidiary company, Lucky Coffee Machine Co. Ltd., they manufacture and offer coffee roasting equipment. Ueshima recently opened a New York-New Jersey office and their canned iced coffee is starting to sell in several New York City delis. The company operates 150,000 vending machines in Japan, only to be surpassed by Coca Cola, who has more than 700,000 vending machines. In fact, Coca Cola's canned coffee outsells Coca Cola.

Coke immediately became the leader in canned coffee production as they had access to all the vending machines and prime locations and can easily vary the number of canned coffee in the machines.

Canned coffee sales still increase every year. Consumption in summer months does not fall as the Japanese find refreshment in iced coffee and canned coffee. The market has room for growth and several breweries entered the canned coffee business just four years ago. Each brewer penetrated the market with heavy advertising. Their immediate access to their own vending machines quickly and easily established them in the marketplace.

Coffeeshop coffee consumption is decreasing fast. While the Kissatens were practically opening up one after another, almost next to each other, 10 years ago, over 10,000 coffee shops closed in the last three years. Real estate rents in Tokyo are so astronomically high that the shops couldn't keep up with the rates and so home consumption, in turn, has risen.

Coffee consumption is expected to continue to increase. The young people are drinking more coffee and are replacing the old dying tea consumers who didn't drink coffee.

The Japanese economy is prosperous and lifestyles are changing. Instead of traditional rice for breakfast, coffee is being ingested. The young people seem to prefer canned coffee.

The All Japan Coffee Association heavily promotes coffee consumption in the country. All promotions are funded 50 percent by the ICO. Regularly advertised in magazines is a coffee club for young people to join. Free coffee is distributed to them along with mugs and tee shirts. Coffee forums are held for people of ages 25-60 where movies, health discussions and talks from medical doctors are available at no cost. A coffee queen is elected every year and is a model for posters used in the cafes. The Association has found that canned coffee's convenience and taste is preferred by young, and the older people prefer hot coffee.

Japan has changed its green coffee purchasing patterns over the past 10 years. Imports have been increasing every year since WWII. In 1988, imports slightly dipped but every importer interviewed told us it was due to over-purchasing coffee during 1987 when prices were low. Indonesia is the #1 supplier of green coffee to Japan. Both the roasters and importers in Tokyo told us Brazil and Colombia straight blends are too acidy for the Japanese palate and by blending it with the Indonesia coffee, the acidity is removed.

The Japanese find Indonesia's coffee prices competitive and the quality has much improved. Indonesia has ousted Africa with Robusta/Arabica exports. Japan claims Indonesia is geographically advantageous as Indonesia is only 10 days away by ship and thus, they enjoy low freight rates.

The Indonesians should be happy to note that all Japanese importers expect to continue this trend. Japan, according to Mitsubishi, has a stable supply network where importers maintain large stocks and roasters don't hold any stocks.

At the time of these interviews, the June ICA meeting was due to meet the following week and so the ICA was discussed throughout the trade. The trade was divided, some wanted a free market and no ICA and others felt that the ICA brought stability to coffee prices but changes must be made. One importer stated the ICA should take better control over quotas and make it difficult for non-members to enjoy lower coffee prices. With coffee prices high, farmers will produce and it's really the supply and demand rule that can truly control the world market in the long term.

PHOTO : Wataru's major players - L to R: Wataru Nishibayashi, president, Yutaka Nishibayashi,

PHOTO : director & secretary to president, and Masao Arai, director & manager, imports.

PHOTO : Wataru's Jamaican company--Dyoll--is based in Kingston.
COPYRIGHT 1989 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Author:McCabe, Jane Phillips
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1989
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