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Solubles into the new millenium.

What are the current trends for the soluble coffee industry in USA and Europe? Reg Butler asks several European soluble associations and industry members to access the marketplace.

According to statistics compiled by AFCASOLE - EC Soluble Coffee Manufacturers Association - total soluble consumption by the original 12 countries of the European Union has risen during the past decade from 98,466 tons in 1990 to a 1997 level of 106,810 tons. The addition of newcomers Finland, Austria and Sweden in 1995 has increased the EU consumption by a further 3,500 tons.

For its population size, the world's biggest single consumer of soluble coffees is Britain, (which takes over 40% of the EU's total consumption) is holding steadily at around 45,000 tons throughout the past 10 years.

Most of the increase in the EU's total consumption has come from France, the next largest European consumer of soluble coffee. The French consumption, presently running at 23,000 tons, represents a major rise during the past 10 years, from the 1990 level of 16,500 tons.

With their smaller populations, Belgium, Luxembourg and Netherlands have seen parallel rises in soluble use during the 1990s.

In Britain, the coffee scene is totally dominated by the soluble segment. This represents 87% by value of Britain's total coffee consumption, with roast and ground at the remaining 13%. It's an exact mirror image of the statistical picture in the U.S., where R&G takes 87% of the market, soluble 13%.

Even at this level, soluble sales in Britain are still increasing, at the expense of tea which remains as Britain's favorite hot beverage but in gradual long-term decline. In 1980, tea accounted for 70% of hot beverage servings, coffee 28%. Today the shares are 66% tea, 32% coffee.

Despite the dominant market share of soluble, the value of ground coffee retail sales still rose from 85 million pounds sterling in 1996, to 94 million in 1997. The parallel sales figures for instant coffee were 610 million pounds in 1996, to 633 million in 1997.

The onward march of soluble in Britain started 60 years ago, with the launch of Nescafe Original in 1939. This was followed in 1954 by Blend 37, the first instant premium coffee; then Gold Blend in 1965 as the first freeze-dried instant; and Nescafe Original in granules, 1970. Aromatization in instant coffee was launched in 1991 through Nescafe's Alta Rica and Cap Colombie. In the same year, Nescafe Cappuccino appeared. The innovation of 1998 was Douwe Egberts' Cafinesse liquid coffee.

A recent market survey shows that a jar of soluble coffee can be found in 93% of all British kitchens. Consumers have become increasingly experimental with different coffee blends and types. Typically, 80% of coffee buyers have now tried a cappuccino, either in or out of the home. Many consumers enjoy a repertoire of coffees, choosing different blends to suit a variety of moods and occasions.

The growing consumer demand for product choice and quality has led to expanded sales of the leading premium freeze-dried coffee brands. During 1997, the combined sales of Nescafe Gold Blend, Kenco Really Rich and Carte Noire increased in value by ten million pounds sterling.

Even outside the home, Britons drink seven times more instant coffee than roast and ground. That's mainly due in recent years to a major growth in the vended hot drinks market, especially in the workplace. According to a National Drinks Survey, the workplace accounts for 91% of soluble coffee drunk out of home. Coffee is selected for 7 out of every 10 drinks from Britain's vending machines.

Nescafe has become the leading brand in the hot drinks vending market, as well as in the retail sector (where Nestle has a 58% market share, followed by Kenco at 9%, Maxwell House 6%, Carte Noire 2.4% and Own Label brands 16.7%).

The EU's third largest consumer of soluble is Germany. According to Winfried Tigges of the BLK Soluble Coffee Association based in Hamburg, the total volume of soluble coffee consumption in 1998 was 13,110 tons. That represented a 100-ton increase from 1997, but was still slightly short of the level prevailing 1994 through 1996 of around 13,480 tons.

Out of the 1998 total, 1,100 tons was decaffeinated. It was reported that 55% of the total soluble production was freeze-dried, 45% in granule form.

A survey of age-group trends shows that consumption of pure instant coffee in Germany is slanted towards heavier use by the older generations, while the new instants are being chosen more frequently by the younger age-groups.

Thus, 4.4% of the volume of pure instant is absorbed by consumers under 29 years of age; 14% by those in the 30 to 39-year age-group; 19% by the 40-49s; 23.8% by the 50-59s; and 38.7% by those over 60 years.

In contrast, consumption of other soluble drinks, including cappuccino, is taken 8.2% by the under-29s; 22.4% by the 30-39s; 25.2% by the 40-49s; 19.4% by the 50-59s; and 24.7% by the over-60s.

Cappuccino Classic represented 67% of the sector; cappuccino aromatized (Amaretto, Vanilla, Hazelnut, Irish Cream) 18%; Iced coffee 7%; and Cafe au Lait 6%.

In the neighboring Netherlands, consumption of soluble coffee has substantially increased in recent years. Home market sales for soluble coffee represent an almost 11% market share. To illustrate the steady growth, the 1998 total of 1,948 tons compares with 1,490 tons in 1994; 1,585 tons in 1995; 1,741 tons in 1996; and 1,905 tons in 1997.

Espresso is an increasingly popular drink, especially in cafes and restaurants. As evidence of the trend, the number of espresso machines increased by 18% in 1998. Margo Huijsmans of the Netherlands Coffeeroasters and Teapackers Association reports that during 1998 espresso drinks (including cappuccino, cafe creme etc) represented 33% of all coffee consumed in cafes and restaurants. The share of espresso in the overall coffee market was around 3%.

The home market for instant specialties like cappuccino, espresso and new instants showed a 10% turnover growth in this sector. A closer look at Dutch consumers shows that 91% are coffee drinkers, with 85% drinking coffee every day. In Spain, the soluble coffee market is about 9,475 metric tons, of which 7,300 tons are sold by retailers, while 2,175 tons are sold to foodservice establishments.

Looking at trends in the marketplace, pure soluble coffee (regular and decaf) takes the dominant share with a stable volume of 8,800 tons. Torrefacto (roasted with sugar) accounts for 100 tons, but decreasing. Mixtures with cereals and chicory were stable at 35 tons. But specialties - such as cappuccino, and espresso - are growing at a rate of 500 tons, with new products and new packaging.

Among the current soluble trends in Europe, U.S. and to some extent in the Middle East, is the progress made by a company like Douwe Egberts in manufacturing a coffee extract system for the catering industry. So is there a tendency for more catering facilities to use concentrates and extracts rather than regular powdered soluble?

From his Salt Lake City base, Larry Brog - founder-owner of the BrewFresh Coffee Company - is the innovator of an exclusive concentrating process for liquid coffee extracts. He said: "Our coffee concentrate was developed to replace traditional brew pot systems. The resulting cup of coffee is smoother (less acidic), more consistent and less expensive than traditional brew packets.

"Increased sales have resulted from expanded markets and consistent quality products. BrewFresh concentrate is currently used for OCS, catering, cold drinks/smoothies, confectioneries and food additives.

"We feel that the market will continue to expand at its current rate, as consumers and distributors experience the enhanced flavor and economic benefits of pure coffee concentrates."

An alternative view is offered by Pablo Ontaneda of Miami Foods and Products, Inc. Ontaneda said: "It might be the case that coffee extracts sometimes are used instead of powdered soluble. But the disadvantage of the extracts is the storage conditions, handling and shelf life. The powdered soluble can have a much longer shelf life.

"To overcome the changing trends, I perceive that the soluble industry is becoming more creative in finding new products and markets that are users of powders. For instance, cappuccino mixes and flavored instant coffee drinks are gaining a share of the market. You may notice that more new coffee-related products are offered in powder or granules than in liquid form."

For a viewpoint on current trends, we contacted Kathleen Thurston, marketing manager of American Instants, Inc. which was founded in 1961 as a private label packer and blender of instant coffee and instant tea. Over the years the company has broadened into fresh brew tea and cappuccino, with the more recent additions of granitas and chai. Thurston said, "American Instants has noticed continued growth in bulk coffee sales as well as for our instant cappuccino, which is well established in the new beverage category, with an expansion of cappuccino into the fast food industry.

"The warm weather alternative to instant cappuccino is granita. This summer, the granita market exploded and it caught some operators off guard, and left them scrambling for reliable suppliers of product and machines. By the end of summer the year 2000, granita will be as well established as cappuccino.

"We believe the steady expansion in bulk coffee sales has been due in part to the usage of soluble coffee in a variety of dairy products like ice cream and yogurt, and in bakery items as well as coffee flavored beverages."

As a supplier of soluble tea blends and custom formulated premixes, American Instants has also seen a strong increase in soluble tea sales. Kathleen Thurston commented: "The incredible amount of packaging and advertising dollars has paid off for the bottlers for Ready-to-drink teas. Besides, in one form or another, iced tea is a staple in the American diet, and always will be.

"Chai is the next big trend in tea-based beverages. At a recent tradeshow, it was the most popular new beverage sampled. It can be served as a hot or cold drink, and can be dispensed from a cappuccino or granita machine. This product will drive tea sales in America to an all time high."

From his position as a major exporter of soluble coffee from Colombia, Fernando Rey, commercial manager of Decafe S.A., comments on the global scene. "All over the world, the cappuccino fever is not over. In the U.S. it is moving towards iced cappuccinos and granitas. Although we expected these products to take off in summer this year, it seems to us that it will take another year until this market seriously develops. In Europe, where the German market has already achieved maturity, cappuccino is moving towards other markets."

On the vending and catering side of the industry, Rey commented: "Coffee extract based machines have only seriously been implemented by Douwe Egberts, which has the support of a big R&D, and a good service in North America, Europe, and even the Middle East. We have felt interest in this type of package in various countries.

"Meanwhile, Nescafe has accelerated its entry into the catering market with powder-based products in Europe and many other countries, including Colombia."

Looking at the global retail market, Fernando Rey commented: "The trend is toward single origin soluble coffees - especially in the U.K. - and fighting against adulterated products both in the U.S. and in Europe.

"At current prices of soluble coffee, private label owners should be looking towards enhanced quality in order to maintain customer loyalty. This is especially important, now that private labels are catching up with national brands, and most retail chains managing their P/Ls as national brands."

In another global view of the world soluble market, Joseph Massoud, vice president of Ecuador's Ultramares Corporation, said: "The annual growth of soluble coffee is very erratic due to the unpredictable financial situation of emerging economies. We estimate an average increase of 4% over the next 10 years in emerging economies and a sustained 2% increase in the production of instant coffee for the specialty coffee market in Western Europe and U.S.

"Regular soluble coffee has reached high levels of acceptance in undeveloped markets. Nevertheless, it's important to emphasize that demand in markets like Russia and Asia is highly unreliable.

"Conversely, in developed countries the growth of specialty instant coffees such as cappuccino, which contain only about 15% coffee, represent a great opportunity for local packers and not necessarily for soluble manufacturers, as the net growth in instant production is minimal.

"Freeze-dried, aromatized and flavored coffees on the other hand will gain importance in the beverage segment as substitutes to roast and ground coffee and cold drinks. This is the segment where we see the highest potential for growth.

"Finally, there is a remarkable trend towards private label as an alternative to Nestle and Kraft products. This tendency opens the door to a strong integration between local packers and producers of instant coffee at origin."

Reg Butler, a freelance journalist, who covers the tea, coffee, and tobacco industries for Lockwood Publications, can be reached via e-mail:
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Title Annotation:sales of instant coffee in the EU
Author:Butler, Reg
Publication:Tea & Coffee Trade Journal
Article Type:Statistical Data Included
Geographic Code:4E
Date:Oct 1, 1999
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Next Article:The Netherlands and Belgium: companies with a difference.

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