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Orimi’s Jardin coffee.
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Maria Drabova, group corporate communications director, Orimi Group.
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Inside coffee factory of Orimi.
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Jhokey coffee, a flagship coffee brand of Russia’s Orimi Group.
The demand for coffee in Russia grows steadily, thanks to the recent lifting of the majority of Covid-19 restrictions and a developing economic recovery after the pandemic and its consequences. This is according to recent statements made by representatives of some leading local producers and analysts. While the pandemic led to the growth of the overall consumption of coffee in Russia, it also resulted in a change of preferences of local customers, and the growth of consumption of previously uncommon roasted coffee (both ground and whole bean).
According to Russian analytical resource Check Index, in the first quarter of 2021 overall sales of coffee in Russia grew by almost 20% in retail and 61% in vending. A significant part of these sales are now in roasted coffee, with the biggest demand coming from the largest, primarily Moscow and St. Petersburg.
Alexander Matevosyan, general director of Almafood, the Russian-Swiss company, one of the largest coffee distributors in Russia and the CIS countries, predicted in an interview with Check Index further growth in roasted coffee demand this year.
“The Russian market of roasted coffee has been growing steadily over the past several years,” said Matevosyan. “That led to a significant increase of the number of its local consumers. For many of them, roasted coffee has become a favorite hot drink.
“In general, Russia gradually becomes a coffee-drinking nation despite its rich traditions of tea consumption, which is more typical for Asian countries,” he continued. “This is especially noticeable in St. Petersburg [as well as the entire north-western region of Russia], which is the ‘coffee capital’ of the country at present. In addition to St. Petersburg, the demand for roasted coffee along with its consumption is also growing in the southern regions despite traditionally high popularity of tea there.”
In the meantime, the current market trends are confirmed by some interviewed leading local coffee producers.
“The growth of coffee consumption is a stable trend for the Russian market of natural hot drinks at present,” said Maria Drabova, group corporate communications director, Orimi Group of Companies, in an exclusive interview. “From our side, we observe a more intensive growth of the demand towards roasted coffee although instant coffee currently still dominates in the overall sales structure of finished packaged coffee products in the Russian retail, with the share of 69% in volume terms, [compared to 31% in the case of roasted].” Orimi is Russia’s largest domestic coffee producer taking an 11% share of the local market).
According to Drabova, the growth of the overall coffee market in Russia last year was slightly lower than 2019 mainly due to quarantine measures and closure of HoReCa enterprises. However, according to her the decline was offset by increased coffee sales in e-commerce segment, with the biggest demand in roasted coffee beans and roast and ground coffee, as well as coffee capsules. Drabova believes that the complete lifting of Covid-19 restrictions in Russia will result in a further growth of “outside home consumption”, the demand for which may even exceed the pre-pandemic figures.
Viktoria Gavrilova, an official spokesman of The May company, another leading Russian coffee producer, shares almost the same position. In an interview with the Russian Ria Novosti newswire, Gavrilova said that the pandemic led to the shift of the consumption of coffee in Russia from the HoReCa segment to home consumption. According to her, this year the demand for roasted coffee in Russia continues to grow, resulting in at least a 10% growth in the beginning of this year compared to the previous year.
However, most analysts believe further growth in both instant and roasted coffee may be complicated by the ever rising prices in the domestic market. The purchasing power of the Russian consumer remains generally low due to the pandemic and its consequences, that may have a negative effect on the local coffee Still, the roasted coffee segment is expected to be more resistant to such prices growth.
According to Ekaterina Petrova, a well-known Russian columnist and expert in the field of coffee business, the increase of prices will not have a catastrophic effect on the segment of roasted coffee, as a significant part of local range is traditionally positioned as premium products, which are usually less sensitive price increases, compared to economy segment of the market.
As for the producing segment, so far the majority (both local companies and global majors operating in the local market) announced plans to increase prices. According to them, that will be mainly due to Russian rouble devaluation, maintaining quarantine restrictions in Russia, and the ever-growing prices for raw materials. Finally, the ongoing increase in logistics, packaging, and other costs puts additional pressure on their business.
According to producers, in recent months many faced an acute shortage of arabica coffee, mainly due to its low harvest in Central America and a general decline in production and supplies by leading exporters. Amid the ever-growing demand for roasted coffee, many of producers are considering an increase in local output this year and more localization of their businesses.
In recent years, local production has become more profitable for them than imports from abroad. That resulted in the building of large-scale processing factories within Russia, which are supply products to both the domestic and export markets.
According to Drabova, the development of local production allows producers to significantly reduce overall costs and ensures implementation of stricter control over the quality of products, which contributes to their competitiveness.