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Soluble Holds Extreme Niches Within Market.

Soluble coffee has the unique position of occupying tow distinct and seemingly dissimilar niches, and at the extremities of those niches, at that.

The first is what might be called the nether world niche of coffee, the dark fringes of coffee drinking where the word quality has never even been whispered and where the only laughter heard is when someone asks for a latter or an espresso. The only thing more moribund than this business sector is the dynamics of the beverage itself or the dynamics of people drinking it.

The second region is not dark exactly but up with clownish, artificial colors. This is a corner of the "specialty" business, where products that were originally inspired by desire for better quality on the part of the consume are actually increasing the demand for what many consider to be the lowest "quality" coffee product available. Before anyone starts writing letters or pulling ads, though, it should also be noted that there are many instant product that are will made, given the limitations of the processing technology that is extant and the price for which these products sell. The extract-based bottled and many other coffee products are dependent on the flavor reinforcement that should coffee can provide. And even though these drinks are the inevitable and fargone dumbing down of specialty coffee, they can be profitable little products, at least for a time. It is because of these products that soluble coffee producers, a few of then at least, are now benefiting from the specialty coffee trend, and not m inding the irony one bit. (There is a little secret to the ready-to-drink coffee beverage business most of these products have some soluble coffee in them in order to boost the aromatics to a reasonable level. Since the volatile aromatics won't stay put, the TDS or Total Dissolved Solids get ratcheted up in an effort to rely on a more concentrated base for the aromatics that are still there).

Soluble coffees come from many different parts of the world and the number of products is increasing. So is the range of quality Originally produced only in consuming countries soluble coffees were then produced at origin, most notably in Brazil and Colombia, but also in smaller producing countries such as Nicaragua and El Salvador. As far as the U.S. was concerned, the next biggest entry was Mexico, and the freight advantage made it tough to compete for a time. But now soluble coffee producers in Asia are giving everyone in the business some stiff competition. Some observers question, though not for attribution whether some of the concerns that have put up instant plants recently really did any research to see if another instant plant was needed. There is no other sector of the coffee business, it seems, that is operating at a lower percentage of full capacity.

Robert Briante, of Paragon Coffee Trading Co., in White Plains, New York, speaks to the first half of the solubles coffee business. To hear him tell it, "moribund" overstates the case. He noted that, "There must be something that keeps them going--[but] it's more like just fighting for survival. There are a few guys that have specialty applications but in general it is a dying industry. The volume in those deals is not enough to constitute a turnaround. Working with our folks at source, we were always a little higher than the cheapest ones. But then a whole new group started offering solubles and these guys had invested in newer technology and they just wanted to do some business. I believe they decided to do it even if it meant selling below cost."

Briante pointed out that it is not only the new plants like the two in Mexico, and the ones in Venezuela and India, among others, that are keeping the solubles market depressed but old line suppliers like the Brazilians as well, "The Brazilians keep funneling coffee into existing plants down there, especially in a down market in general, when it's harder to get rid of the lowest quality coffees. They'll start putting them in instant and selling it for whatever they can get."

However, other things can happen in a rising market, as Briante pointed out somewhat obliquely. "We were the guys with an Ecuadorian instant and I always took note that in a rising market there was always a lot of interest in Ecuadorian coffees. Where were these coffees going? Where was the market before prices went up?"

Before elaborating on the current state of affairs in the instant market, he attempted to characterize the market in general: "It's a type of a business that was going downhill anyway. With the emergence of specialty, instant was going down on a regular basis, and you've ended up with a few companies who are occupying a very specialized niche."

Some historical notes were also in order, according to Briante. He noted that immediately after the Second World War was the golden age for soluble coffee. "People were looking for what they believed was modern and convenient. At the time, they loved the idea of instant--there was rapidly growing demand and business was booming. A bunch of large, independent coffee companies got together and formed Tenco, which in turn built a single instant facility that was built to serve the soluble coffee needs of all ten companies. As the years went by, though, people became more interested in quality, and slowly the business dwindled. Now, each of the major roasters makes their own instant coffee. Remember that Nestle's was originally all instant before their acquisitions (their now shuttered plant in Freehold, New Jersey, was the largest in the country at the time it was built). General Foods has their own soluble facility and Superior has the old Tenco plant. What's more, just to keep their plants up and running, each of these roasters will do private label packing, making it that much harder for everyone else. Unlike in other sectors of the industry, the big roasters are always looking for little jobs, and this makes it very difficult for everyone else."

Briante reminded this writer that soluble and freeze dried are considered two very different products. "Freeze dried is the closest thing to regular coffee that the soluble industry has ever developed. They were always looking for a better way--the trouble is that the better way they found is also a dollar more a pound. Freeze dried lacks the caramel notes of soluble coffee, but, like any other instant, never tastes as clear and as fresh as regular coffee. The problem with freeze dried is that each additional process beyond spray dried is an extra and more costly step." And if people drinking instant cared about a better coffee, it would seem they wouldn't be drinking instant (soluble) to begin with. The industry has never collectively believed that the consumer would be interested in a "premium instant." The phrase itself has the ring of the quintessential oxymoron. Never mind that Europe and Japan have much healthier markets for freeze-dried coffee.

Paul Songer of Coffee Enterprises, Inc., in addressing the growing, if barely significant side of the soluble business (at least not significant in terms of the worldwide capacity of the aggregate soluble coffee industry) suggests that soluble coffee might be viewed as another product altogether. "In Japan, they consider instant coffee, vending machine coffee and canned coffee to be a separate beverages altogether and not ones they expect to taste like regular brewed coffee." Songer pointed out, in fact, that views of instant coffee all around the world are different than they are in the U.S. "In England I understand that 80% of the coffee they drink is made from instant. In Africa, I have heard that many people believe Nescafe instant to be the best coffee product available, because it is the best they have tasted. They are actually amazed that some of their own coffees taste better than instant, and I guess this is because in many African countries, all but the worst coffee is exported. Given what's left be hind, Nescafe probably is better." Bob Briante also observed that many people develop a taste for instant coffee and actually prefer it to brewed coffee.

(In the former Soviet Union, packets of Nescafe and other instant coffee products are said to have been used as a kind of barter/currency. It is unclear, however, whether when the market goes down the exchange rate worsens.)

Songer also noted that it is often necessary to use "low quality" coffee in manufacturing instant coffee that will do what it is supposed to do. "You need a lot of oil content in coffee for instant manufacture. Now, usually, a high oil content is something that we associate with lower quality coffees. But in soluble coffee, that oil content can actually help the product retain more of the aromatics we associate with the flavor of coffee. In addition to needing a coffee with high oil content, instant manufacturers also have to go for an extraction level that would not mesh with what most would consider proper brewing parameters, as coffee for instant manufacture is sometimes extracted to as much as 30%. Whatever problems this creates flavor-wise, the manufacturer tries to work out in the blending." But this high extraction allows you to end up with a product that contains enough of the right dissolved solids so that it can be dried into a shelf stable powder that will retain flavor.

Finally, Songer related, coffee destined for soluble manufacture should be roasted for maximum extraction, not necessarily for the best, most balanced flavor development. "Those fast roasts, whether or not they are the best way to roast a particular coffee, are the best way to achieve maximum extraction."

In getting back to the use of solubles in fortification of ready-to-drink coffee beverages, however, Songer did cite their increased use across a wide range of products--even what many people would characterize as the better quality drinks. "Even in the most carefully formulated drinks, you're likely to find as much as ten percent soluble coffee in order to boost the dissolved solids and give the flavor a stronger base note or undertone. Then, of course, in the lower cost drinks you'll probably a formula that bases all its coffee flavor on soluble coffee. Of course you're always fighting that 'instant' flavor. [For instance], there are ways you can adjust the caramel-like flavor that develops with instant coffee, such as the use of citric acid and other additives."

Again it is important to note that despite the use of soluble coffee in the manufacture of powdered drink mixes and ready-to-drink beverages, the instant sector is not exactly vibrant. Bob Briante was not alone in assessing the market as very quiet, or worse. Traders at other large dealers report lackluster and declining sales, or even no activity at all. Although there are some specialists thriving, they are doing it by catering to nearly infinitesimal slivers of the once dynamic solubles market.

The solubles market was created because of the desire for a product which delivered the flavor of coffee in instant form. It never really delivered what coffee lovers wanted and freeze dried, though an improvement, was and is still closer to instant than it is to a great cup of coffee. Until the technology and /or the economics of this equation change, the future for instant coffee looks uncertain at best.

Timothy J. Castle is the president of Castle Communications, a company specializing in marketing and public relations for the coffee and tea industries. He is also the co-author (with Joan Nielsen) of "The Great Coffee Book," recently published by Ten Speed Press, and the author of "The Perfect Cup" (Perseus Books).
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Publication:Tea & Coffee Trade Journal
Article Type:Brief Article
Geographic Code:1USA
Date:Oct 20, 2000
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