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Greeks retain their enthusiasm for coffee in a turbulent market.
By Alf Kramer
A word of advice to decision makers diving deeper into the Green coffee market: Whatever you thought you knew has changed.
The economic recession has fundamentally altered the way that Greeks entertain themselves by encouraging them to focus more on price and product quality. This affects how they view cafes and specialty coffee shops.
“Demand for coffee-based beverages remains high, and the focus on product quality applies very much to coffee,” according to the Euromonitor report: Coffee in Greece. “In light of this, Greek consumers have increasingly been turning away from bars and nightclubs towards cafes and specialty coffee shops, while gradually shifting towards neighborhood outlets and takeaway options as ways to reduce their spending,” writes Euromonitor.
The turbulent Greek coffee market was never easy to understand because in Greece the traditional laws of supply and demand do not apply in every market segment.
A brief history
Greece is the model for democracy. Some economists say that Greek governance is malfunctioning so badly that the country is on the brink of becoming a failed democracy. Wave upon wave of market disruptions in the aftermath of the financial crisis of 2007-08 has resulted in 25% unemployment (60% among the nation’s youth). It will take a generation for the country to grow the economy out of the Greek depression yet many segments of the coffee market escaped that turbulence.
To understand the almost inelastic demand it is helpful to recall that the Turkish Ottomans were uninvited guests for 400 years, beginning around 1350. Athens fell in 1458. The Ottomans introduced Greeks to roasting, brewing, and enjoying coffee both in their homes and in public. The first coffee houses were well established 300 years before they appeared in London and some 700 years before retailers along the U.S. west coast built their first “coffee bars.” The coffee legacy remained when the Ottoman’s retreated.
ALSO: Mokka Coffee Bar
To the Greeks enjoying coffee is not just a national habit, it is a virtue — a virtue so strong that it has become a source of national pride and heritage. Greeks drink coffee three to five times a day in small quantities. The Greek love of coffee is so strong it explains why some segments of the coffee market were harder hit during the financial crises.
Growing value and volume
Finely ground, dark and heavily sweetened Turkish/Greek style coffee represented almost 100% of the market 50 years ago. Greek coffee is boiled, not brewed and heavily sweetened. A thick foam is prized.
The green coffee market is dominated by Brazilian suppliers. As recently as 2000 roasters favored a “Rio” profile using robusta with dubious qualities. Walking through the alleys during coffee exhibitions you could smell its burnt, musty, earthy notes in the distance. That has changed radically, but still exists.
The good news is that high quality arabicas have since entered the market. Consumption of arabica is still at an infant stage but volume is sharply rising along with more elegant robustas.
Then came the Greek frappe
Another innovation dating back 50 years is the use of instant coffee. In 1957, at a Thessaloniki fair, instant coffee, ice cubes, and sugar were accidentally whipped into a frothy beverage. The Greek frappe was born. The unintended consequences can be compared with the invention of Irish coffee at an airport in Ireland. The human ingredients in both situations were the same: stress, impatient customers, and a lack of time with strong ability to improvise.
The invention of the frappe coincided with the rapid growth in the tourist industry. A cold coffee drink in a hot climate tempted both tourists and locals and the frappe became a domestic and international success. The Greek frappe has evolved into many different recipes including the use of espresso shots to replace soluble coffee in urban areas, which leads us to the next important change.
In the 1990s there were a number of smaller national unbranded roasters supplying restaurants, cafes, and grocers. Gradually one of them, centrally located in Athens, branched out and eventually claimed 60% of the local market. In 1994 the brand was sold to Sara Lee. The original roastery, its staff and their knowledge of coffee was retained. Today a new generation of owners continues to develop the business under the brand name Mokka.
The first multinationals arrived during this period, penetrating every segment of the market. Espresso and cappuccino gradually became a staple.
Some traditional small roasters also changed direction, adapting to changing consumer preferences. The traditional kafeneio that opened early in the morning and offered sit-in coffee with modest décor evolved.
From 2000 onwards the scenery changed again. Imports began a steady climb from 798,000 60-kilo bags to nearly double by 2015. Per capita consumption rose from 220 kilos in 1995 to 4.73 kilos in 2002 when Starbucks opened its first store. Greece ranks 16th globally at 5.5 kilos (12 pounds per person per year).
Suddenly it was full speed ahead for the multinational brands both in the household and foodservice. Local coffee franchises began appearing. MIKEL Coffee, founded in Larisa in 2008, now accounts for the largest value share (51%) in Greece.
In rapid succession the first wave coffee gave way to second wave coffee retail and now there are third wave speciality shops promoting their Greek version of western style coffee bar chains, espressos, lattes, and the occasional filter coffees.
Independent shops in Athens like the rooftop cafe at Thiseio (affogato choco) and Kaya (African coffee) and Yiasemi expanded the selection of origins.
They all still serve classic Greek coffee. Expansion of multinationals like Starbucks and Costa Coffee, now the world’s second largest coffeehouse chain, were internationally driven. They rapidly established a number of outlets in major cities throughout the country. The number of multinationals mushroomed for a time but Costa closed 13 shops in Athens in 2012, and others have scaled back on the number of outlets.
Starbucks has 30 locations but rival MIKEL now operates more than 125, earning $35 million in 2014.
A strong nationalistic sentiment has encouraged Greeks to “buy local” and frequent humble urban coffee houses where they can enjoy their long-standing traditions of letting time pass by as they sip this local traditional ibrik made coffee.
A new generation
MIKEL founder Eleftherios Kyriakakis opened his first coffee shop in Larisa at 18 and his second within a year. He began franchising MIKEL coffee shops at the age of 31. His shops are open from 6 a.m. to 10 p.m. and provide ample seating but also sell a lot of takeaway coffee by discounting it 35%. Alcohol is served in the evening. His stronghold is Thessaloniki and cities in the north.
In central Athens a new generation of coffee “hipsters” has emerged. These entrepreneurs are very competitive coffee traders, retailers, and roasters. They employ vibrant, competitive, and self-confident baristas who often wind up traveling to other countries to work. One in particular has earned world fame and serves as a role model for anyone who wants to broaden their coffee horizon.
Two decades ago when he first took on the family’s traditional coffee business Yiannis Taloumis realized the need for change. He didn’t know a word of English at the time he embarked on a personal journey to learn all he could about coffee. He attended presentations and enroll in courses to master the basics. Then he travelled to producing countries to buy their finest coffees directly. He sought advanced technology and, above all, surrounded himself with the best coffee people he could find.
It paid off: Taf Coffee now employs 30 workers. His coffees are found throughout the country and exported overseas. The company operates a coffee shop, training facilities, and sales and distribution. Taloumis first earned the SCAE award of excellence in innovation, then the SCAE award for lifetime achievement. The staff he trained has won various medals in both the Greek and world coffee championships.
The first serious barista competitions took place in Athens 15 years ago and have since expanded into full-scale competition. During the past decade 11 Greeks have been named world champions and several more are medallists. When the results of all coffee competitions are combined, Greece has for two consecutive years come out on top of the “best nation” list. It is a competitive environment. Being a jury judge in the Greek national championships is quite a challenge.
In spite of the economic crisis coffee consumption remains stable, although it seems domestic consumption has shifted from clubs and multinational coffee bars and brands back to the private homes. During the past decade coffee the coffee industry has grown to an estimated value of close to $1 billion (€990 million), consuming 66,000 metric tons during 2015 an indication per capita levels remain unchanged. Tourism remains a bright spot for the county of 12 million with 26 million arrivals last year. Visitors spend an average two weeks adding a million affluent coffee drinkers on a permanent basis.