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Japan: the Colombian connection on the rise.

The spirit of Juan Valdez casts a long shadow. Although the Colombian coffee bean industry is, comparatively speaking, a Johnny-come-lately to this area of the Pacific Rim, it has not ignored the lure of what is considered a largely untapped market: Japan.

This fact was pointed out in a recent interview with Salim Janna, the U.S. Representative of the Colombian Federation of Coffee Growers of Colombia in New York City. "You have to remember," he said, "that we were the last ones (in the coffee business) to penetrate the Japanese market and we've only been dealing with Japan for the last 10-15 years."

While many growers sell through the Federation and Gavicafe (the other principal coffee traders), there are also many other private companies which sell directly to the Japanese not to mention a number of Japanese traders who have representatives in Colombia, the largest of which is Mitsubishi. The Big Three among the roasters - UCC, Nestle, and General Foods - have the tendency to buy through these representatives rather than via other alternatives.

Japan, essentially a tea-drinking nation, would not appear at first glance to be a likely prospect as a buyer of green coffee beans. Nevertheless, of the approximately 50 countries in the world that produce coffee, many of them now deal at least to some extent with the Land of the Rising Sun. In fact, so far this year, Japan has bought from just about all of them with the exception of Madagascar, Rwanda and the Dominican Republic based on the 1992 first quarter figures provided by the All-Japan Coffee Association.

Not surprisingly, Brazil leads the pack with 25.1% of the market share, a fact that reflects the historical link between the two nations. (There is a large Japanese population in Brazil dating back from the beginning of this century, many of whom returned to their original homeland. They brought back with them a number of Brazilian products as well as a taste for Brazilian coffee which they acquired in their adopted country. Later on, the IBC succeeded in promoting its consumption. As a result, Brazilian coffee has dominated the Japanese market for quite some time.)

Salim Janna also commented on this phenomenon. "When the (Brazilian-born) Japanese returned to Japan, they also brought back big business (ties) with Brazilian coffee. Brazil was the main provenance and a |natural' country of origin for Japan as well as the coffee-producing Asian countries like Indonesia and Thailand."

Despite their comparative newness in this market, Colombian coffee has made considerable inroads - especially in the last five years - and is now second only to Brazilian coffee (that occupies the numero uno position and supplies a 25.1% share) with 17.3% of the market. It is surpassed only by Indonesia (21%) whose proximity to Japan as well as the quality of its coffee makes it a "natural" trading partner.

Gaining market share in a market as competitive as Japan's has been described by the Federation's Tokyo office as a "hard job." Last year alone, no fewer than 38 countries exported their coffees to Japan. Despite all this, however, Colombian coffee exports have steadily risen. in 1992, for instance, Colombia exported a total of 894,741 bags of coffee which represents an increase of 102,363 bags over the previous year. Although Brazil sold a good deal more (1,191,550 sacks) during the course of the same year, their exports only amounted to a 47,501-bag increase over 1991.

Despite the hurdles of inducing a tea-drinking nation to switch and fight for coffee, consumption has slowly but steadily increased. Says Janna, "In 1987, the |disappearance' rate of Colombian coffee to Japan totaled 66,000 bags a month. Now, we're shipping 77,000 bags a month. We're talking close to 900,000 to a million bags a year. The growth potential is very big because the current per capita consumption overall is very low. We believe that in a few years - five or ten years down the road - we will be selling 60% more than we do right now. There's really no major problem in Japan. The Japanese are learning about quality coffees and we have the right coffee available to serve them. As in many places in the world, Colombia is the only country that really spends a lot on marketing, advertising and promotion."

Few would dispute the fact that the Japanese palate has been formed by the Brazilian-type taste in coffee and that translates to a preference for a less acid coffee prompting roasters to dark roast their beans. As a general rule, Colombian coffee fits this middle-of-the-road predilection being devoid as it is of gustatory "extremes." It is usually full-bodied, but not as much as, say, a Sumatra coffee, less acid than an Ethiopian brew, and is comparable to but not quite as rich in flavor as the best Jamaican Blue Mountain.

Colombia's highest grade of coffee, Supreme, caters to this particular taste along with its second grade or extra, often combined and sold as one comprehensive grade coined as Excelso. All Colombian coffees fall into the hard-bean category. Most of them are grown at fairly high altitudes - over 1400 meters above sea level - and special coffees are grown at 1600 meters. Like elsewhere in the world, Japan buys Supremo, Excelso, and some special coffees.

Notwithstanding its obvious suitability, Roberto Velez of the National Federation's Tokyo office points out that developing a more sophisticated connoisseurship based on country of origin is not an easy task. "The history of the Japanese coffee market is very different to the ones in Europe and the U.S. First of all, coffee consumption in Japan started in a significant way around the middle 1960's when it was already well established in the States and Europe. The general public in both these areas were aware of the different coffee producing countries and the pros of each country of origin as a result of the numerous campaigns carried out by each individual nation like Colombia, Brazil and Costa Rica struggling to differentiate their coffee from their neighbors. The same is not true in Japan where the market was long dominated by Nestle, General Foods and the UCC, all of whom concentrated their efforts on introducing their worldwide labels of instant coffee (i.e. Maxim or Nescafe)." As a result, the Japanese consumer is brand conscious as opposed to provenance conscious.

"At the mention of the name Blue Mountain, Mocha, or Kilamanjaro," continued Velez, "any Japanese will know immediately that you are talking about coffee, but none of them will know where Blue Mountain comes from or the country of origin of Mocha. As far as Colombian coffee is concerned, it is fair to say that there is no niche within the Japanese coffee market in which roasters compete for the favor of the consumer. Sporadically, they will launch brands of Colombian coffee, but either they don't last very long or they are targeted to a very specialized segment of the market."

According to the Federation's statistics, a case in point would be General Foods, one of the largest users of Colombian coffee, which markets only one brand of 100% Colombian bean brew and that one is targeted toward the gift season market.

While Colombia provides good quality coffee to the soluble coffee manufacturers, the roast and ground coffee, segments of the market are growing and is described as being the "most dynamic" by Velez. There are now several brands of Colombian coffees on the Japanese market, the most popular of which is the Columbian Supremo. However, several others like Emerald Mountain (a favorite for the gift season market), Cristobal, Emerald Forest, and San Agustin have been launched of late and have been fairly successful.

Among others, the first of these, Emerald Mountain, is sold by the Federation. As Salim Janna explained, "What we do is we sell them the coffee and let the people package it with our name which we are promoting in Japan. It's a very special coffee selected from specific regions. It has a distinctive flavor and aroma."

Weaning the Japanese away from the instant habit and toward the freshly-brewed is no easy task either. "Originally, Japanese coffee consumption in the home was mainly instant because of its ease and speed of preparation. Instant coffee, however, is made of lower quality beans and only recently did the big multinationals like General Foods introduce ground roast which is mostly drunk outside the home."

Like just about everything else in Japan, prices are very high and Colombian coffee is no exception selling for about $30 a pound attributable to elaborate packaging and expensive "participation" which almost doubles the cost to the consumer. As the Tokyo office points out, "in general, packaging all goods and products in Japan is superior to those in any other country in the world. This is even more visible when you consider the |gift market' where packaging is a major component in the competition between manufacturers."

As though the elaborate packaging problems were not enough, coffee sellers have to contend with an equally elaborate system by which, unlike any other market, coffee wends its way to the consumer via a staggering array of "participants," each one of whom exacts a price. The end result is "a very expensive organization" that can only be surmounted by a value-added solution to the problem.

In an arena as different from the European and American markets as Japan is, the message is the most important means by which to differentiate their product, a fact that is not lost on the Colombian coffee growers who are going after the message part of their promotional campaign in a big way.

"First," explains Roberto Velez of the Federation's Tokyo office, "we have developed a campaign to spread the word about Colombian coffee in high schools and colleges. This year, more than 1,000 institutions will show their students educational videos about our country and our coffee. Equally educational advertisements are being placed in magazines stressing what factors make Colombian coffee unique. All these activities are complemented with a strong PR campaign aimed at the roasters and other potential clients of the Colombian product."

While all of this may sound as if their publicity campaign is primarily aimed at Japan's youth who do represent a sizable percentage of the coffee-drinkers in Japan, such is not quite the case. The Colombian Coffee Federation feels that there is still a lot of incentive to introduce their product to "middle-aged people interested in changing their lifestyle - especially when it comes to eating and drinking - to a more westernized one."

Even though most of the coffee drinking in Japan is done by the younger generation, promotional campaigns are aimed more towards an economic class rather than a generational one and geared to the middle class with an annual income of $40,000 and over. Salim Janna does, however, elucidate this point: "Contrary to many western countries, coffee is mostly consumed by younger people. The older generation is more traditional and the traditional beverage is tea, not coffee. In Japan, when it's youth rebelled against the strictures enforced by their elders, they began drinking coffee. If Japan ever reaches the European or American consumption level, they will buy more than double of what they are buying today. And if you keep a market share of about 20%, you are going to double your exports to Japan."

Janna elaborated on this theme. "The promotion is first to show people that Colombia has good coffee; show them the virtues of Colombian coffee; show them that Colombia is a coffee producing country; show them that Colombian coffee is hand-picked; show them our mountains, our sun and the way the coffee is ripened. In the U.S., we have already spent 20 years showing that to people. Once we have people aware of Columbian coffee, our aim then is to create an awareness in the customer of how to identify with products that are 100% Colombian. Because once you promote the quality of Colombian coffee, people start tasting it. Then you have created a consumer demand and they will begin to buy 100% Colombian, but we still have a long way to go before we have the same presence as we have in the U.S."

With an eye to increasing their market share to 20% or even more given the present possibilities of the roast and ground coffee markets and in keeping with Japanese marketing techniques, this is being bolstered by frequent participation in food fairs throughout the Japanese archipelago and tastings carried out in bustling places. Right now, for instance, there is a promotional campaign located in the Tokyo train station where a "Cafe de Colombia" coffee shop is in operation, offering harried commuters a chance to sip a good cup of 100% Colombian.

Making the switch from tea to coffee is going to entail considerable effort, cautions Janna, involving "a change in attitudes and customs, a change in the way instant coffee is drunk, a shift from the consumption of instant coffee to ground roast, an appreciation for the distinctive quality and consistency of Colombian coffee." (In the eye of the Japanese consumer, consistency is a big plus in any product.)

While this may sound like a tall order to many, Salim Janna is undaunted. "We still have a long way to go," he says, "but we're only just beginning. I don't think we have reached our true potential."

Reaching that potential is not just a matter of getting the Japanese to buy their bean, but for the Colombians to bite the bullet of learning a very alien tongue. "Our people over there (in the Tokyo office) are learning Japanese in order to try and understand their customer better. And I think we have gone a long way there. One of the things we admire about the Japanese is that they learn other languages. So, for us, we are encouraged to feel that we have (our) people learning their language."

Considering the premise that quality and consistency constitute the key components to the Japanese consumer and the cornerstones for success in the nipponese market, it looks like Juan Valdez has a better than average chance of casting an even longer shadow extending from a skyscrapered city to a rural rice paddy - even if he has to speak Japanese to do it.
COPYRIGHT 1993 Lockwood Trade Journal Co., Inc.
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Author:Lorence, Mauritzio
Publication:Tea & Coffee Trade Journal
Date:Apr 1, 1993
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