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Tchibo: custom roaster shops throughout Europe.

Tchibo is one of Germany's, if not Europe's, major roasters. The company's approach to selling and merchandizing coffee is rather unique, and may indeed be the forerunner to America's specialty coffee shops.

Tchibo was established in 1949 with coffee sold by direct mail; no outlets existed at the time. At the roasting facility in Hamburg, a little shop was opened in the front of the plant. The shop proved successful, and since 1955, 600 shops were opened, 40 of which were in the former East Germany.

In 1964 Tchibo started to cooperate with bakeries, and the bakers were offered franchise privileges. Tchibo would supply the coffee, and if the coffee doesn't sell within the alloted number of days, Tchibo would take the coffee back. Tchibo held the right to establish the price at which the coffee would be sold; a procedure which remains in effect today.

In the 1970's, Tchibo starting expanding. They entered the OCS and horeca business where their Tchibomat system would include brewing machine, maintenance and Tchibo coffee. All machines were Tchibo property.

The company also started selling/merchandising non-food goods in stores. Coffee was packed in fancy plastic cans, and then the company began selling coffee accessories, bowls, books, etc. The non-food items were priced lower than other stores, because Tchibo purchases in large quanties. Tchibo tells me that 30% of their turnover are in goods alone.

By the middle of the 1980's, lifestyles were changing and the supermarket became a more dominant food outlet for the Germans. Tchibo changed along with the lifestyles, and entered the supermarkets with self-service shelves with grinders. Tchibo now has 30% of their stores as single standing shops, 40% with bakeries and 30% in supermarkets.

Tchibo only sells whole bean coffee. The company has stuck to this policy in an effort to keep their product as fresh as possible and to distinguish themselves from Eduscho, who also has similar shops in Germany and parts of Europe.

Dr. Hasso Kaempfe, managing director, told me that while Tchibo and Jacobs are on the same quality level, Tchibo gets 70 pfennings more because people are willing to spend more for fresh coffee. When I asked Dr. Kaempfe whether the company could afford not to get into vacuum packed coffee bags, he replied, "The return rate of coffee from bakeries are less than 1%. All the outlets in bakeries are labeled 'freshness depots' by Tchibo. They have 19,000 depots under their jurisdiction. Every depot gets coffee 2X/week and the branches receive fresh coffee daily. The company has a turnover of 2.2 billion DM and roasts/sells 90,000 tons yearly."

Until 1990, Jacobs and Tchibo ran neck in neck in being the country's leading coffee supplier. Now with the merger of Jacobs and Philip Morris; Jacobs is the leader. Tchibo holds a 21% brand share in the former West Germany.

Tchibo started branching out into the former East Germany as soon as the Berlin Wall came down in 1990. They took the first risk of foreign exchange rates, as other companies chose to wait. Tchibo started with 2,000 depots and now have over 3,000 depots in the new Bundesland. As they were the only Western coffee company, they took 45% of the market with the remaining 55% going to local brands.

Tchibo's entry into the former East Germany took its toll, as their present market share has dwindled to 12%. The company met with four major problems: bakers weren't allowed to sell coffee; the image of whole beans did not have a good image as consumers thought it was similar to the local whole bean coffee offered; packed coffee was considered a luxury (all vacuum packers have an advantage as people view it as imported and better); and consumers still buy low quality and low prices coffee.

But even though the company was hit hard, it still feels it would be able to get a higher market share, similar to the West, within two years. Dr. Kaempfe says while the drop in market share was somewhat expected, it does take time for the company to install its distribution system.

Jacobs holds a 36% share in the East. The past 40 years of available television to the East Germans portrayed commercials of Kronung coffee (a Jacobs brand).

Tchibo is branching out into Czechoslovakia and has contracted with roaster, Balirny Jihlava in Moravia, to supply Tchibo quality to the Czechs. They intend to buy shares of the company. Tchibo purchased and brought all packaging machinery into Czechoslovakia. Their East German facility had 125 gm packers, and so they transferred the machine to the Chezch facility.

Tchibo opened two shop in Prague, situated on two of the busiest tourist squares. It also sells coffee in every supermarket in Czechoslovakia. Three Tchibo products are available. (Tchibio sells in 1/2 and 1 lb bags usually, in Czech they sell in 100-250 gm packs) A Tchibo vacuum pack is currently being test marketed in Czechoslovakia.

Tchibo is currently building a roasting facility in Budapest, Hungary. Roasting machinery to be installed will all be Probats, with the machines modified for Tchibo's specifications. For the fiorst step, no new equipment will be installed in these new factories. All the equipment that is to be sent to both Hungary and Czechoslovakia will be from their own facilities.

Tchibo is also looking into the Polish market, and is currently selling Tchibo in vacuum packs. Future brands will include brick packs. Yugoslavia is becoming interesting again, and in Bulgaria, Tchibo has an export contract.

Tchibo is hoping that after 3-4 years, the Eastern Bloc will form economic counsel together to serve all countries so one firm doesn't have to produce an entire plant for coffee distribution. The company has established Tchibo International to look into the markets of other Eastern Bloc countries.

Tchibo also purchased Jacobs Suchard in the U.K. which specializes in hotels. Tchibo serves 1,400 tons of coffee in the U.K.'s horeca trade and has become the market leader in the horeca trade. Tchibo also purchased Societe Parissienne des Cafes in Pairs, which also concentrates on the horeca trade.

The German household market is saturated with three or four roasters already. It's difficult for any new firm, but horeca provides opportunities for Tchibo's service.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:McCabe, Jane
Publication:Tea & Coffee Trade Journal
Date:Mar 1, 1992
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