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Eclectic geodesic dome Traveler’s Coffee shop in Novosibirsk, Russia.
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A Starbucks coffee shop in Saint Petersburg, Russia
The consumption of natural coffee in Russia is returning to pre-Covid levels after a steep decline in 2020, however the rates of growth are lower the pre-pandemic figures, according to a recent report, prepared by experts of the Russian Agricultural Bank (RSHB), as well as some independent Russian analysts in the field of coffee business.
In accordance with the report, the overall consumption in 2021 reached 303,000 tonnes, while most of this volume (241,000 tonnes) accounted for imports. Among the major import destinations were Vietnam, Brazil, Italy, Indonesia, and Uganda. According to data of RSHB, consumption grew by only 6%, compared to 13% a year earlier.
In general, the consumption of natural coffee in Russia significantly increased in the last 30 years. According to analysts, since 1991 the average per capita consumption of such coffee in Russia grew from 0.2 - 2.1 kg. This is mainly due to the rise of living standards in Russia and the development of a culture of coffee consumption there. Over the past five years, the consumption grew by 30%, while the growth is currently ongoing, with the “coffee to go” concept being the main driver for such growth.
“Now, the average Russian drinks about 300 cups of natural coffee a year, which is equivalent to 60 liters per person and 8.76 billion liters for the whole country,” said Andrey Dalnov, head of the Rosselkhozbank Center for Industry Expertise.
In the meantime, the instant coffee segment experiences stagnation although the demand for various coffee substitutes (extracts, concentrates, and essences) among Russians remains relatively high.
In case of instant coffee, the volume of its consumption in Russia in 2021 amounted to 93,000 tonnes. In 2021, the per capita consumption of coffee substitutes and instant coffee in the country was 0.7 kg. Unlike natural coffee consumption, the consumption of instant coffee is stable, remaining at an average of 0.8 kg per capita for the last two decades.
At the same time, imports of instant coffee significantly dropped: to 450,000 bags in the 2021/22 season, compared to 1,215,000 bags in the 2017/18 season. That became mainly due to localization of the production of ground and instant coffee in Russia by some largest global and domestic coffee producers among which are Orimi, Jacobs, Nestle, My Foods, Strauss, Fes Product, Paulig etc.
The main suppliers of instant coffee to Russia are Brazil, India, Germany, Vietnam, Switzerland, which provide more than half of imports. About 50% of instant coffee produced in Russia is exported, mainly to Belarus, Kazakhstan, Uzbekistan, Turkey, and Georgia.
Most of analysts believe the Covid-19 pandemic and associated with it negative economic consequences will prevent a more active growth of the market this year and force producers and suppliers to increase prices for their local range.
So far, some leading coffee producers, operating in the Russian market have already announced their plans to increase prices for their products in the local market, with the planned increase being in the range of 10-25%.
One of such producers is Jacobs Douwe Egberts and there is a possibility a similar decision may be taken by other global coffee producers, operating in the Russian market, as well as some local coffee manufacturers.
Still, most of local analysts do not expect a significant rise of coffee prices, including in retail segment in Russia at least until summer, that will be also due to relatively high stocks of green beans in Russia.
Ramaz Chanturia, general director of the industry association of Russian Tea and Coffee Producers (Roschaikofe) in an interview with the Russian Gazeta.ru business paper said there are low risks of a shortage of raw materials in Russia, as most of contract suppliers have a semi-annual supply of coffee beans in stock.
“The coffee market has its own cycle — 7-10 years,” said Chanturia. “The previous peaks were in 2011-2012. But even then, there was no shortage in the global market. Sales grew, despite high prices. We expect the same situation will be observed in 2022.”
In general, as most of analysts believe, amid falling incomes of Russians, producers, operating in the Russian market, will look for ways to reduce costs. That means that producers will probably keep from the growth of prices in the economy segment and will try to shift part of these costs to buyers of the middle and premium segments.
Analysts of Roschaikofe also believe the demand for premium coffee in Russia will be growing in years to come. That will be mainly due to the change of customer preferences of Russians, have shifted towards higher quality product, particularly natural coffee (with particularly preferences to bitter coffee due to cold Russian climate), with simultaneous decline of demand for its instant analogue.
According to data of the Russian research company Roif Expert, the existing market trends are confirmed by the reduction of spending of Russians on instant coffee in recent years.
As analysts of Roif Expert said in 2019 the volume of such spendings amounted to RUB 267 billion (US$3,51 billion) and RUB 232 billion in 2020. While the official results for 2021 have not yet been announced, analysts expect these figures will be significantly lower, compared to previous years.
Experts of the Russian Ministry of Agriculture in an exclusive interview said coffee market in Russia has huge potential, especially in the segment of coffee houses.
According to a spokesman of Dmitry Patrushev, Russia’s Minister of Agriculture, if in the classic coffee country of Italy, there are about 1,700 coffee houses per 100,000 inhabitants in case of Russia these figures are estimated at only 150.
Anyway the number of coffee houses in Russia grows by 10-15% annually, as well as the popularity of coffee to go format, which grows even faster than classic coffee houses.
According to Pavel Sigal, first vice president of Opora Rossii, one of Russia’s leading analyst agencies in the field of coffee and agriculture Russian small businesses make good money on takeaway coffee, as this is a high value-added product, which is in high demand among customers, and there is no expectation of a decrease of its consumption.