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The saga of coffee in Denmark.

For most people of the world, Denmark is considered a Scandinavian country with close similarities to Sweden and Finland, but this is not the case in coffee nor in recent history. Denmark is, in reality, more closely related to Germany than to other Nordic countries in geographical terms, as well as in coffee.

The countries to the North generally use a higher quality of green coffee than Denmark and Germany. For instance, in Denmark there is a higher quantity of Unwashed Brazil, less Washed Milds are utilized, and some Robusta is part of the lower quality-price blends.

Denmark is a member of the EEC, so the competition in the coffee retail market is intense from non-Danish brands. The green coffee sources were, in fact, established centuries ago when Denmark was a colonial power--particularly in parts of Asia. Through the Dutch East India Company, the types of coffee produced in Indonesia and Thailand, for example, became a standard element in Danish coffee.

These patterns of importing raw material from colonial possessions was certainly not unusual, but has gradually been dwindling down. In fact, the Dutch shipping line, which traditionally carried the cargo, has decided to quit the coffee trade as there is no profit in a commodity with such a low price.

Coffee consumption has, in fact, declined about 5% in the period 1988-92. Currently the consumption of roast coffee is 44,000 metric tons per year and this figure is expected to stabilize or increase slightly over the next few years. The Danes, like in many other prosperous countries, are putting more and more emphasis on the quality of items consumed. They are becoming a little more particular, which will probably translate into a higher percentage of quality coffees in blends.

Running counter to the increased usage of Washed coffees from East Africa, Colombia and Central America is the recent tendency to cut retail margins to move more coffee. This is perhaps in response to a weak economy, but once the price comes down, raising them is difficult.

In the retail market

The traditional retail margin for coffee is 8% and coffee in Denmark presently sells for a margin anywhere between 3-11%. (Obviously the higher percentage is from previous years when coffee sales were soaring and the lower percentage is only a phenomenon of the last year or so.) Coffee is in no way a loss-leader, but retailers have been willing to cut margin on one of the top-10 selling items in order to maintain customer loyalty.

The market place in Denmark is dominated by Kraft General Foods and Merrild Coffee-Douwe Egbert with 42% and 30% of the retail market, respectively. The other players are Coop with 16-17%, and DMK with 6-7%,

The situation is slightly different in when it comes to the catering segment. KGF and Merrild each have a 30% share, DMK has 5% and the remainder is shared by local roasters who emphasize service. Coop does not participate in the catering area of the business.

The breakdown on coffee packaging is as follows: 35% brick with carton; 28% brick without a carton; and 32% in a soft standing bag. The only unusual package is the latter one which Merrild uses for its top selling brands. This special package is a 3-ply foil laminate which provides a 12-month self life and is 99% recyclable. According to Merrild, the consumer likes the soft standing bag--the soft feel is reminiscent of the old grocery bag. This package certainly appears to be appealing, as the Merrild brand has 22-23% of the market, while the Gavalia brand from KGF has a 19% share.

Another unusual packaging item in Denmark is the availability of BIG Kaffee to vacuum pack whole beans, grind them in the retail outlet, and then use the same bag for packaging the ground coffee. This package, like the Merrild bag, is supplied by Raackmans in Horsens.

The Danes are quality conscious about coffee, packaging and service. They want the higher quality but not necessarily the price that comes along with it.
COPYRIGHT 1992 Lockwood Trade Journal Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Lockwood, George
Publication:Tea & Coffee Trade Journal
Date:Nov 1, 1992
Previous Article:Finland: coffee fights for its market share.
Next Article:Germany: high stocks with no consumption increase in sight.

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