By Dan Bolton
Soluble manufacturers in coffee producing countries are reporting big gains in home markets. Exporters also see rising demand for better tasting instant coffee in Russia, Ukraine, Australia, South Africa, England and Turkey.
Consumers in tea-drinking lands prefer better quality soluble coffee. The Asia-Pacific region, where mixes account for 54% of coffee sales, is now the largest market by value for instant globally. Eastern Europe follows.
Accustomed to second-rate ground roast, many consumers in producing countries view solubles as superior, not just convenient. Coffee drinkers in these lands are more likely to choose flavored coffee with sweeteners and creamers packed together as 3-in-1 sticks.
One-third of all soluble coffee produced is consumed at origin, according to Judy Ganes-Chase, c.e.o, J. Ganes Consulting. The top-10 producing countries have expanded output by 30% since 2008, while domestic consumption has climbed more than 40% and is expected to continue growing, said Ganes-Chase.
Russia buys 2.4 million bags of robusta and 1.2 million bags of arabica yearly, but per capita consumption is less than a kilo (.8) per year.
“Almost 35% of the coffee market is freeze-dried,” according to Ramaz Chanturiya, general director of the Rusteacoffee Association. “Powdered coffee is actually being forced out of the market and is mainly used for coffee drinks [3-in-1 and 2-in-1] sticks,” said Chanturiya. Nestle dominates in agglomerated, he said. India is Russia’s largest supplier of instant accounting for 31.3% of imports with Brazil providing 20.3% and both Ecuador and Germany sourcing 10%. Colombia provides 3.4% of the instant consumed in Russia, mostly freeze-dried.
“The share of freeze-dried products will dominate the soluble coffee segment but the segment itself will be declining in absolute terms,” as Russia turns to fresh brew predicted Chanturiya in a technical presentation during 2013 ICO seminar on consuming markets.
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Americans prefer fresh brew, fewer than 7% drink instant coffee daily but that still amounts to 19 billion cups a year with $5.7 billion sales.
The US is the world’s second largest importer of instant coffee at 1.4 million bags. Volume hit a low in 2004 at 60 million pounds (450,000 bags), returning only recently to the consumption highs last achieved in 1994, according to Nestle USA ‘s Coffee & Creamer Business Review.
The successful introduction of VIA, coffee concentrates, cold brewed coffee, and a switch to freeze-dried arabica has reinvigorated sales and attracted new suppliers.
“Americans are eager to find European quality coffee in the US after visiting abroad and tasting the difference in quality,” according to Jamie Robinson, c.m.o., Egoiste Café/Coffee Globe. Germany-based Egoiste decided to enter the US because “the current state of soluble coffee in the North American market leaves a lot to be desired,” she said.
“American producers use spray-drying technology because it’s less expensive and faster, but it definitely lacks taste and aroma. Freeze-drying is a more complicated and expensive process, but it allows us to produce instant coffee of a high quality and with excellent taste and aroma that is closer to natural coffee,” she said. Egoiste uses a blend of Kenyan grown arabica.
The UK is the world’s third largest freeze-dried market just behind Japan at 28,936 tons and growing at 8% last year. According to statistics compiled by the International Coffee Organization (ICO) the country consumed an average 873,000 60-kilo bags per year during the 10 years beginning in 1990.
UK accounted for 29% of the retail value of all the instant sold in the EU in 2013, according to Euromonitor. UK consumers are no longer interested in traditional powdered robusta. Nestle’s Azera and Kenco Milicano are among the more successful “hybrids,” a new style of premium arabica that blends instant and roast coffee, according to Euromonitor.
Japan is the seventh largest importer of instant coffee and the second largest buyer of Colombian coffee, importing 1.1 million 60-kilo bags of arabica last year. While there were a lot of green beans in those shipments much of that coffee was freeze-dried, amounting to 29,701 tons in 2014.
In addition to freeze-dried sold in sticks, Japan also buys a lot of higher quality coffee extracts used in making canned coffee.
Georgia canned coffee is Japan’s leading RTD brand. The top selling Emerald Mountain blend uses 100% arabica from Colombia.
Nestle remains by far the largest manufacturer of instant coffee, dominating every major market except Korea and buying in every region. The Nescafé brand has a 44% share of sales globally and 40% volume share. Competition is slowly but steadily increasing, notes Euromonitor, which reported Nestle’s coffee market share has declined two points since 2004.
Brazil is a large solubles producer but exports have not grown for 10 years, falling to 9.8% from 14.4% of global totals. A Brazilian Soluble Coffee Development Plan aims to increase by 50% domestic consumption which now accounts for approximately 5.5% the market. Brazil produces three times the solubles of any country, exporting on average the equivalent of 3 million 60-kilo bags in the past decade. Solubles exports were 3.29 million bags in 2014/15.
Soluble coffee accounts for 57% of Indian domestic consumption, according to Coffee Board of India chair Jawaid Akhtar. He said per-capita consumption is higher outside the traditional coffee growing regions where demand for ground roast and whole beans is dominant.
A wide range of soluble coffees are available to meet the demands of distinct Indian consumer segments, he explained. Growth is triggered by the domestic and multinational producers and marketers: “Consider the stage at which India lies on the coffee consumption trajectory, it is expected that, during the next few years, the growth rates for ground roast coffees could exceed that of soluble coffee due to the emergence of discerning consumers who are able to appreciate the nuances of freshly ground roast coffee. This trend has already commenced with the growing sales of home coffee brewing equipment including coffee from capsules and pods,” he said.
In Toluca, near Mexico City, Nestle operates the largest soluble coffee factory in the world. Mexico, one of the world’s top soluble exporters, experienced an average growth rate of 11.6% in the production of soluble coffee between 2000 and 2011 – second only to Ecuador which has seen a meteoric rise in soluble exports. Annual sales of Ecuadorian solubles totaled $151 million in 2011, up an average 19.4% during the decade, according to ICO.
Vinacafe Bien Hoa, a partially state-owned enterprise organized in 1975, produces 4,000 tons per year of instant coffee of various kinds, from 3-in-1 packets (for which it owns the patent in 60 countries) to premium arabica/robusta blends. Vinacafe owns 41% of the Vietnamese market for instant coffee and in 2014 grew 30%, recording sales of $142 million.