Coffee and Tea International 1-2012 - FREE

PRESSING ISSUE: WINDS OF CHANGE HANGXHOU, FUXHOU AND THE PHILOSOPHY OF THE MOMENT… EUROMONIOTR INTERNATIONAL ABOUT COFFEE&TEA # 1 (95) 2012

CAFES AND BARS MARKET IN RUSSIA: THE PAST AND THE FUTURE

contents

№ 1’2012

10 The brand-new Ritz-Carlton met the symposium guests

18 When travelling, we often receive vast amounts of new information

Strangers in Tansania

EDITORIAL

3 CALENDAR OF EVENTS

Nielsen: coffee&tea statistics in Russia

38

34 2

22

A Land of Opportunities

26 28 30

50 Looking for ways to attract new customers and to increase their revenues

WHO IS WHO?

Hot drinks in Germany Hot drinks in Ukraine

42

Hot drinks. Hot Beverages

as the core of competitive business

market in Belarus: Surviving

6 PRESSING ISSUE

the Crisis

Going beyond paper: Sustainability

46

Cama announces strategic partnership to meet record growth

7

NEWS REVIEW&STATISTICS

22 24

32

ECONOMICS

in cups technology

Private Label Coffee

HoReCa

Nielsen statistics

Potential in Eastern

Hot drinks. Coffee market

Europe

performance in Poland, Czech Republic and Slovakia

34 38

50

CafJs and Bars market in Russia: the past and the future

Strangers in Tansania A Land of Opportunities

52 ADVERTISER INDEX

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EDITORIAL

№ 1‘2012

T

he Chinese New year is the final link

Establisher ZAO INTERNATIONAL TEA HOUSE

in a long chain of holidays – so long, in fact, that one ends up feeling tired

instead of refreshed. We are now ready to fly away on the Black Dragon: the year is promising to be dynamic and full of interesting events.

Publisher ZAO INTERNATIONAL TEA HOUSE Chief Editor RAMAZ CHANTURIYA Deputy Chief Editor SVETLANA BELIKOVA Computer aided makeup VALENTINA GUSKOVA

The year started with a big international con-

Advertising Director JULIA CHANTURIYA

ference on tea, organized by FAO in Sri

Advertising Manager ANNA ANTONOVA

Lanka. This biannual event is eagerly anticipated by the tea community, because it allows us to identify important industry trends and problems that we all are fac-

THE EDITORIAL BOARD Chairman of the Editorial Board R.O. CHANTURIYA, general director of Rusteacoffee Association

ing. One such problem is the issue of pesticide use (and I am sure that this issue is important for the coffee community as well). On the one hand,

Members of the Editorial Board S.G. BELIKOVA,

many developed countries are starting to introduce more stringent

deputy editor in chief of Coffee&Tea in Russia magazine, PhD of Philology, Editorial Board Secretary

restrictions on toxic substances in their food supply; on the other, growing

chairman of the board of directors of Orimi Trade company

demand for tea and coffee cannot be met given the existing rates of plan-

S.V. KASIANENKO, I.V. LISINENKO, general director of May Company

tation expansion. This means that the only solution is to use new technologies aimed at increasing the yield of existing plantations, and this

A. MALCHIC, chief executive of Montana kofe company

R.D. PANZHAVA,

involves some amount of risk of harm to the environment and

Georgian Tea Producers Association

to human health. So the tea and coffee industry has an impor-

International Tea Committee

tant strategic decision to make: if effective measures for con-

EDITORIAL

trolling pesticide use are not implemented, the reputation of

V.A. TUTELIAN, Head of the Institute of Nutrition of Russian Academy of Medical Sciences, Member of the Academy

G.V. SMIRNOV,

these beverages, at present very good among consumers, may

general director of SDC FOODS company

suffer. Coffee and tea are natural, non-toxic beverages; fur-

general director of KLD Coffee Importers

thermore, tea is usually associated with a healthy way of life.

If this image is undermined, these beverages will lose their mass appeal, and their consumption may greatly diminish.

This year, our magazine will keep a close eye on this issue.

In the last few years I have visited China quite often; but it is only recently that I felt compelled to view my Chinese experiences through the prism of the global developments that will be taking place in the tea and coffee world in the next few years.

So, in full accordance with the dialectical principle of quantitative changes leading to qualitative shifts, my experiences in China during the last few years have led me to some general conclusions, one of which I want to share with you in a piece about the Hangzhou International Tea Expo (see pp. 18-20).

Ramaz Chanturiya Editor-in-Chief

2

M. PEYRIS,

COFFEE&TEA INTERNATIONAL # 2/2011

A.V. ELSON,

Photo on a cover: Photo by Marina Parshina

Editorial Address: Russia, 123060, Moscow, Berzarina str., 36, building 2, of. 214 tel./fax: +7 495 935-87-07 E mail: magazine@coffeetea.ru, www.coffeetea.ru

Printed in Union Print, Nizhny Novgorod Distributed worldwide among coffee and tea producers, wholesale companies, shops, and restaurants. Printed in Russia.

According to the registration certificate of mass media П И №77 7213 from 30th January, 2001.

Reprinting of materials is allowed only by permission of the magazine. The reference to the magazine «Coffee and tea in Russia» is obligatory. The editors don't bear any responsibility for reliability of data placed in advertising blocks or announcements. The editor's point of view may not coincide with the author's point of view. All provided materials will not be returned or reviewed.

Coffee&Tea International magazine has been included in the VINITI (All Russian Institute of Scientific and Technical Information of the Academy of Sciences Vserossiisky Institut Nauchnoi i Tekhnicheskoi Informatsii (VINITI)) list of synopsis journals and the institute's data base.

Information about the magazine will be annually pub lished in the «Ulrich's Periodicals Directory», international handbook of periodic magazines and ongoing publications.

Coffee&Tea International is an appendix to the Coffee&Tea in Russia magazine.

CALENDAR OF EVENTS March—November 2012

All materials are provided by support of WWW.COFFEETEA.RU

25–27 March 2012

27–29 April 2012

16–18 August 2012

TEA & COFFEE WORLD CUP EUROPE

LONDON COFFEE FESTIVAL

HONG KONG INTERNATIONAL TEA FAIR

Country: Austria City: Vienna Company Page: www.tcworldcup.com

Country: United Kingdom City: London Company Page: www.londoncoffeefestival.com

Country: Hong Kong City: Hong Kong Company Page: www.hkteafair.com

28–29 march 2012

4–6 May 2012

17 September 2012

UK COFFEE LEADER SUMMIT 2012

MELBOURNE INTERNATIONAL COFFEE EXPO 2012

3-d MOSCOW INTERNATIONAL COFFEE FORUM

Country: Austria City: Melbourne Company Page: www.internationalcoffeeexpo.com

Country: Russia City: Moscow Company Page: www.coffeetea.ru

18–21 May 2012

17–20 September 2012

CHINA TEA EXPO

WORLD FOOD MOSCOW

Country: China City: Shanghai Company Page: www.tea-shexpo.com

Country: Russia City: Moscow Company Page: www.world-food.ru

Country: United Kingdom City: London Company Page: www.ukcoffeeleadersummit.com

3–5 April 2012

GLOBAL DUBAI TEA FORUM Country: United Arab Emirates City: Dubai Company Page: www.dttc.ae

9–12 April 2012

13–15 June 2012

EXPO COFFEE & TEA 2012

SCAE WORLD OF COFFEE

20–22 September 2012

COTECA

Country: China City: Shanghai Company Page: www.expocoffeetea.com

Country: Germany City: Hamburg Company Page: coteca-hamburg.com

17–20 April 2012

25–28 September 2012

FOOD & HOTEL ASIA 2012

PIR. HOSPITALITY INDUSTRY

Country: Singapore City: Singapore Company Page: www.foodnhotelasia.com

24–26 April 2012

Country: Austria City: Vienna Company Page: www.scae.com

25–28 June 2012

Country: Russia City: Moscow Company Page: www.exhibition.pir.ru

30 October– 2 November 2012

RESTAURANT & HOTEL WORLD

FISPAL CAFI 2012

THE MIDDLE EAST COFFEE & TEA CONVENTION

Country: Russia City: Moscow Company Page: www.mirrestorana.info

Country: Brazil City: San Paulo Company Page: www.fispalcafe.com.br

Country: United Arab Emirates City: Dubai Company Page: www.coffeeteafest.com

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NEWS

MAJOR RUSSIAN GREEN COFFEE

IMPORTERS DECLARE SUPPORT FOR

Moscow International Coffee Forum According to the organizers of the third Moscow International Coffee Forum, at the end of last year the two most influential raw coffee importers declared their support for the largest industry event in Russia.

They have become Golden Sponsors, demonstrating the significance of the event for the Russian coffee market.

ANDREY ELSON, General Manager, KLD Coffee Importers, Moscow: When we learned about the idea of organizing the first Forum in 2008, we decided to support the event. We did this in 2008 and 2010, and we are doing it again this year.

– Why? – Because we now have a forum for industry professionals to discuss current issues. Market participants, regardless of their size and market share, have an opportunity to participate, to present and receive information in their native Russian language, to meet other participants and engage in discussions with them. And our company, KLD Coffee Importers, has an opportunity to state its own opinions on various issues and trends, helping further develop the Forum.

This is very important and very beneficial!

ANDREY SAVINOV, General Director, SFT Trading, Moscow: – Moscow International Coffee Forum, which is being held for the third time this year, has become an important event in the life of the Russian coffee Andrey Elson community. It is a rare opportunity for all those who are interested in the development of the Russian coffee industry to meet each other and to exchange professional opinions about the state of the market, domestic as well as international, hear about new trends, learn something new and simply taste good coffee.

The format of the Forum is unique: the whole event lasts only one day, and each participant can choose the sessions that are the most interesting to him. This is a place where you can meet people from other countries who are well-known in the coffee world and where you can feel that you are a member of the international coffee community.

SFT Trading, as a supplier of green coffee to the Russian market, has supported and will support all initiatives that help improve the market’s overall quality level, and the coming Forum is one such initiative. We are pleased that the coffee roasting industry is spreading throughout Russia, and we hope that the Forum will give us a chance to meet many new partners and friends from all over the country.

See you in September at the MICF-3!

Andrey Savinov

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COFFEE&TEA INTERNATIONAL # 1/2012

PRESSING ISSUE

Pressing issue:

WINDS OF CHANGE Polling by Alena Velichko

We all live in the time of change. And the factors that bring the change have always been of a particular interest. Tea and coffee markets have their natural phases of development. But apart from that there are always factors that come unexpectedly and influence the situation, sometimes dramatically. We have turned to the tea and coffee experts with the question which is not easy to be answered: "What are the three factors that influence tea/coffee market nowadays and why in your opinion?"

The opinions that we got show the variety of these factors and at the same time different angles from which the market changes can be seen.

MIKE BUNSTON, International Tea Committee:

VINCENZO SANDALJ, Sandalj Trading Company:

– The overriding factor which effects prices is supply and demand.

Dramatic increase of world crops with consumption going up created little overhang in the market.

Adverse weather conditions in Kenya and Sri Lanka have pinned back their crops and this helped to keep prices reasonably firm. The problems in North Africa and the Middle Eastern Countries have also led to disruptions in supply chains.

Problems in the World economy since 2008 has affected ability to buy or has led to a down grading in quality in some cases.

The imponderables are, crop distribution dependent on weather and how quickly the economic situation will show some improvement, thus enabling a more predictable buying pattern.

TYEAB AKBARALLY, Akbar Brothers: – Consumers worldwide are moving up the value-chain from packetted teas (loose tea) to teabags and RTD teas. The market leaders are promoting trendier tea based beverages The critical link between the consumer and the product is the Brand.

The leaders in all tea markets are investing huge amounts on their Brands Promotion. Branding has emerged as a major factor that influences the Tea market.

Quality of tea has a major influence in the affluent tea markets.

Connoisseurs of tea prefer quality tea and pay higher prices for the product.

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MANUJA PEIRIS, International Tea Commettee: – Disposable incomes in developing countries. The greater affluence of developing countries continues to drive consumption of tea where generally, per capita consumption remains relatively low.

Relatively cheaper cost base in baskets of goods with higher food price inflation of food and beverages. Tea remains a cheap beverage amongst consumer requirements and is in fact, at times used as a loss-leader at the retail level by supermarkets. With food prices having increased world over in recent times, the cost increases relevant to tea have proved to be relatively less significant.

Increasing availability of beverages fighting for share of throat. A profuse increase in the choice of both hot and cold beverages tends to have a bearing on the consumption growth of tea as the population growth is not as high as it used to be.

COFFEE&TEA INTERNATIONAL # 1/2012

– During 4 of the last 5 years coffee production has been in deficit compared to world consumption.

Stocks are now at their lowest level on record. This year the exceptional Brazilian crop will alleviate the shortage of Arabica, while a good crop of Robusta is forecast in Indonesia. These factors may contribute to a slight easing of the market levels.

Investment funds have become everyday players on coffee futures, bringing greater volatility to the market. Nevertheless they can’t be blamed for the average levels of coffee prices in the medium term, since they can influence the market only in the very short term.

Farmers have now plenty of alternatives which have a much quicker return than the 5 years needed for a new coffee plantation to become fully productive. We should not expect therefore big increases in world coffee production.

DICKIE JURIANSZ, Imperial Tea Exports: – Currency fluctuations in consuming markets. Tea is generally sold at origin by Auction and if your currency is weak other countries with stronger currency will outbid you.

Political developments in consuming markets, for example Political Unrest, Sanctions, etc.

Perceptions, for example the fear of the effect of a drought, of industrial unrest, etc.

NEWS

Greenfield presents new assortment line orimitrade.ru

reenfield presents new assortment line – the collection of leaf estate tea in transparent pyramid teabags is launched at the Russian market. Greenfield today – is the most popular brand of the premium segment and the leader of the Russian tea market in terms of value. One of the key indicators of current brand position is high consumer loyalty. Greenfield refers to the number of the most popular and favourite tea brands by Russians. New col-

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lection became a logical extension of progressive brand development, a prompt answer to expectations of Russian consumer’ audience. Pyramid teabags is the most contemporary and the most functional format of supply of the leaf tea: due to pyramid teabag leaf tea could be brewed directly in the cup. In new Greenfield collection each pyramid teabag is wrapped in individual sachet from multilayered materials, that perfectly preserves flavour and aroma of rare sorts of tea.Collection is presented by 9 assortment positions – exquisite varieties of black and green estate tea, oolong tea and excellent tea compositions with fruits, berries, herbs and spices. Rich Ceylon – leaf black Ceylon tea from Ruhunu province; Yunnan Wonder, leaf black Chinese tea from Yunnan; Royal Earl Grey, leaf black Ceylon tea with bergamot aroma; Harmony Land, leaf green black tea from Hunnan province; Milky Oolong, semifermented Chinese oolong tea with slight milky and creamy notes; Jasmine Symphony, leaf jasmine Chinese tea from Guangxi plantations; Blueberry Forest, leaf black Ceylon tea with blueberry berries; Oriental Spirits, black leaf tea with ginger, mint and lime peeland Orange Blossom, natural herbal tea with rosehip, apple, orange petals and rosemary.

thehindu.com

FAO Tea summit discussed climate change effect and MRLs levels he 20th session of the FAO has drawn up scope and the terms of reference of the climate change working group at its meeting on Sunday 29.01.2012. Discussions will now start formally with all the producing and exporting countries, and consumers.

The major producers – India, China, Kenya, Sri Lanka and Turkey – have to agree on the steps ahead for a meaningful strategy to emerge. Sri Lankan officials were of the view that there were many steps that could be taken that did not need significant investment.

Sri Lanka Tea Board chairperson Janaki Kuruppu said that while climate mitigation efforts cost money, in the long term this would benefit the industry.

On monday 30.01.2012 by FAO IGG on Tea presented report on Current situation and medium terms outlook for tea. Document overview market situation till 2021 and ivestigates production, exports, consumption and price situation.

A second half of same day was discussed report of working group on Maximum Resiude Levels (MRLs) on tea and on tea brew. Member

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countries recognize urgant needs to harmonize of tea MRLs to reduce cost of compilance by exporting countries in meeting requirements of importing countries.

Starbucks takes on Nespresso in coffee capsule war news.com.au offee wars are set to take off with Starbucks expected to launch its capsule range. As more and more coffee drinkers take brewing to their homes, analysts expect the global coffee giant to make an announcement on a Europe launch of capsules as soon as this month, reports The Financial Times.

Starbucks’ launch of their capsule coffee

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has had huge success in the US market. But the coffee capsule market it not an easy one to enter with Nestle building a formidable barrier of patents around its capsules and the machines that use them.

In Europe alone, Nestlй has launched legal action against rival capsule developers in France, Belgium, the Netherlands and Switzerland.

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HOSPITALITY INDUSTRY his year was rich in interesting coffee events and expos. One of those events – Host 2011 Expo – took place at the end of October in Milan, Italy and truly became a global innovation center for the hospitality industry. This year the expo spread over 100,000 square meters and welcomed more than 125,000 guests from 153 countries. And it served as a venue for a new world record: 623 cups of espresso made in one hour!

Virtually all large coffee companies presented a wide range of products: from green coffee beans to new design ideas for coffee shops. This is the reason so many people attend this expo: to meet the manufacturers face to face and see firsthand everything that is new, trendy and interesting. In addition, almost all large Italian coffee equipment manufacturers offered expo guests trips to their factories, where one could learn lots of new and interesting things.

I will not go into details here – as they say, a picture is worth a thousand words. All I want to do is highlight several interesting points. First, even though coffee pods remain a niche product today, they are gradually conquering hearts and minds of consumers. Practically every manufacturer has pod machines in its product line-up,

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COFFEE&TEA INTERNATIONAL # 1/2012

GLOBAL INNOVATION CENTER Julia Chanturiya targeted at coffee houses, hotels and restaurants, as well as at the individual consumer. These devices are easy to operate and do not take up a lot of space. Another popular item at the Expo was coffee and tea tablets; the same machine can be used for both beverages, which is very convenient. Many coffee maker manufacturers are using new technologies, trying to perfect the design of their devices and also make them easy and convenient to use. And coffee grinder manufacturers decided to implement a system of quality control and developed RFID-grinders that work only when a special tag enclosed with the coffee bag has been activated (the patent is held by Mahlk`nig, a German company).

Finally, I simply have to show you a wonderful roaster shaped like a train, a coffee cup tree and a coffee maker that resembles a flying saucer.

In two years the Expo will once again bring together members of the HoReCa industry, and if you want to stay ahead of the wave and see everything that is new and interesting, you simply have to be there!

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NEWS

EUROPEAN COFFEE SYMPOSIUM

Photos: ITH

Ramaz Chanturiya

Photos: ITH

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COFFEE&TEA INTERNATIONAL # 1/2012

As far as I can see, the most important aspect of this new market will be not the product itself (it will be of consistent high quality), Photos: ITH

erlin, a majestic city that constantly reinvents itself, is the ideal setting for large events, especially if they have “European” in their name. The capital of Europe’s largest economy adds status to every summit. This was the bet made by Allegra, the corporate organizer of the European Coffee Symposium – and they hit the jackpot.

The brand-new Ritz-Carlton met the symposium guests in all its splendor, immersing them into a world of luxury and comfort. At first, the luxurious atmosphere almost seemed distracting, but as the event began, this worry disappeared – the setting turned out to be very conducive to productive work. The two-day event had a very tight schedule, with not a minute to spare, and this helped the participants to get a lot accomplished.

On the first day, the participants had the opportunity to attend a small exhibit and to have discussions with prospective clients; on the second, the exhibit area was transformed to create room for interesting presentations and discussions about the current state of the industry. The only two guests from Russia were G. Neveikin and N. Motyl’kova from Coffeemania, who conducted their presentation together and answered questions from the audience.

But the most interesting and impressive presentation was by Maarten Dekker from Nespresso. Using high quality visual aids, he, perhaps without realizing it, identified the most probable direction the mass coffee market will take: transition to capsules.

but methods for creating brand loyalty. Instant coffee manufacturers will have a lot to think about.

NEWS

The «Coffee OPEC» Elects New Leader Coffeetea.ru he 107th session of the International Coffee Council (ICO) took place in London on 26-30 September, 2011. One of the main issues on the agenda was the impact of high coffee prices on the world consumption of coffee.

Another central issue was the election of the new Executive Director of this influential organization. Three candidates were considered, from Brazil, India and Mexico; the winner of the vote was RobJrio Oliveira Silva, Director of the Coffee Department and Chief of Staff of the Secretariat of Production and Agroenergy in the Brazilian Ministry of Agriculture, Livestock and Food Supply.

Russia, which has the observer status in the ICO, did not take part in the vote; but according to the Russian Ministry of Economic Development, the process of joining this organization has already been started.

The ICO continues to pay close attention to the Russian coffee market: during one of the recent sessions Ramaz Chanturia, Director of the RosTeaCoffee Association, was invited to make a presentation about the current state and perspectives of the Russian coffee industry.

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Ethiopia is changing the rules: will the price of export coffee go up?

Coffeetea.ru those small companies to use the services of third parties who are able to warehouse large batches of coffee and then repackage them in small quantities. Given that the closest such facilities are in Germany, we may expect a considerable increase in the price of coffee for the retail consumer”, continued Mr. Elson. The cost of premium coffee will rise, as it will now have to be purchased in Germany from companies who own specially equipped storage facilities. As far

as Russian consumers are concerned, there is no reason to worry: Ethiopia is not a major supplier of the Russian market; besides, those who drink premium coffee are not so sensitive to price that they will stop drinking it if the price goes up.

According to the RosTeaCoffee Association, in 2010 Russia imported 2608 tons of green coffee from Ethiopia, which was only 3% of the total amount of coffee sold on the domestic Russian market.

he Ministry of Agriculture of Ethiopia has announced a change in the procedure of packaging and loading coffee intended for export. The document calls for discontinuing the use of burlap sacks for packaging of green coffee for export and switching to bulk loading methods (using special containers with 21.6 ton capacity). The government claims that this change will result in better preservation of coffee, a reduction in weight and cost of export batches and will also alleviate the shortage of burlap sacks.

But this government initiative worries those who are in the coffee business.

“Ethiopia is one of the major suppliers of coffee to the world market. Coffee from this region is used not only by transnational companies, but also by small players who operate in the specialty coffee segment of the market”, said Andrei Elson, General Director of the largest Russian coffee trader KLD Coffee Importers. According to Elson, this change will hurt first of all small companies who tend to buy small batches, up to several tons. “This change will force

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Technology and art brought

Photos used in the collage: ITH

Julia Chanturiya

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his time, the coffee expo Coffeena, which takes place annually in Cologne, Germany, was successfully merged with another expo, Eu’Vend, that focuses on vending equipment. My immersion in the world of vending started right at

the hotel: on the breakfast table you could find not the usual thermos jar but a vending machine that offered you a choice of black coffee, coffee with milk, cappuccino, macchiato and other beverages in different sizes. And if you did not have time to enjoy the superb morning coffee at the hotel restaurant, you could take it along in a convenient to-go cup.

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COFFEE&TEA INTERNATIONAL # 1/2012

together by coffee At the Expo, where the fresh issue of our International Coffee&Tea Magazine had already been delivered, we had the opportunity to see the latest industry innovations. What struck me there was the variety of coffee vending machines: from the very small, with only a few functions, to whole coffee shops.

A lot of attention has been paid to aesthetics of coffee equipment lately, and the industry offers you an amazing variety of colors and patterns, from bright and silly designs to conservative corporate high-tech.

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And even the roasting equipment looked modern and fashionable.

Expo participants presented brand-new solutions for the vending industry. One section, called Vending Innovation Area, displayed several technological innovations. There was a programmable dispenser that works with cups of any size – from 30 to 90 mm (laminated paper or plastic), remote controls for vending machines and even a yogurtdispensing machine!

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COFFEE&TEA INTERNATIONAL # 1/2012

We also saw pod machines that take not only coffee pods, but also tea pods as well as juices and other beverages. And if you get caught out in the rain, the coffee machine will take you in under its roof and, of course, serve you hot tea or coffee!

One last note: it makes me happy to see that many European companies today are thinking not only about constantly perfecting their vending machines but also about recycling disposable cups, which show more and more variety every year. We saw several interesting methods for stacking and recycling used cups. Vendors who use these methods not only reduce the amount of loose garbage but also offer various programs to reward customers who are proactive about recycling.

Leaving the Expo I realized that technology and art can exist side by side, and the force that brought them together was one of the most delicious, multifaceted and enchanting beverages on the planet – coffee!

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NEWS

Global coffee consumption grows despite economic turbulences: ICO hehindubusinessline.com

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offee consumption has grown in 2011 despite economic turbulences in many importing countries, the International Coffee Organization said in a report. Total consumption in calendar year

2010 reached 135 million bags; this represents a 2.4% growth compared to 2009.

Demand prospects for coffee continue to be promising, given the arrival of new consumers in emerging markets and exporting countries, according to the ICO. For example, the ICO estimates that domestic consumption in India has risen by 7% in 2010 compared to 2009 and reached 1,03,500 tons.

Green tea business grows in India amid health awareness smetimes.in

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ore and more tea makers are adding green tea to their portfolio as consumers in India are developing a taste for the beverage

for its many health-promoting effects. Green tea consumption in India is rising at a rate of more than 10 percent annually.

According to Indian Tea Association (ITA) Secretary General Manojit Dasgupta, Indian domestic market for green tea has shown evidence of growth.

Dasgupta said people were adding green tea to their diet as it is full of antioxidants that can reduce the risk of cancer and help in weight loss.

in.reuters.com

Coffee drinking not linked to chronic illness

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offee drinkers have no more risk of getting

conditions. For the next nine years, the team fol-

chronic illnesses than non-drinkers, accord-

lowed up on the participants every two or three

ing to a study published in the American

years to see whether they developed any health

Journal of Clinical Nutrition.

problems, particularly cardiovascular disease,

German researchers collected information on coffee

stroke, heart attack, diabetes and cancer. They

drinking habits, diet, exercise and health from more

found no differences between drinkers and non-

than 42,000 German adults without any chronic

drinkers.

COFFEE&TEA INTERNATIONAL # 1/2012

NEWS

Coffee pulping companies warned about waste water With the coffee-picking season in full swing, water bodies are getting polluted with waste from pulping units. This year some villages have started taking action against this type of pollution.

Waste water released from coffee pulping units is a health hazard, hence the Pollution

Control Board has strictly imposed methods to treat water used for pulping. But in many estates, these rules are not followed.

This year, local village governments will inspect coffee estates in their areas and confirm that they are adhering to the rules laid down by the PCB or inform the board to take action.. articles.timesofindia. indiatimes.com

Starbucks targets Nestle market share U.S.-based Starbucks Corp (SBUX.O) is planning to strengthen its presence in Europe and grab market share from Switzerland's Nestle (NESN.VX) in the area of instant coffee, its chief executive told a German newspaper.

“Nestle has done a fantastic job with Nespresso and created a billion-dollar business – it is time that we heat up the competition”, Howard Schultz was quoted by Financial Times Deutschland in an interview published on Friday.

Schultz added Germany should have about 1,000 Starbucks stores, without giving a specific timeframe. The company currently has about 150 outlets in Germany, Financial Times Deutschland said. in.reuters.com

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Photos: ITH

hen travelling, we often receive vast amounts of new information and do not always have time to process everything we have seen and heard. And when we return home, we get back into our routine and it becomes impossible to go back to analyzing external data. However, this time the transition from the “travelling” state to the “back home” state was more productive.

The International Tea and Coffee Expo in Hangzhou was attended by delegates from Russia, a large group from Canada, colleagues from Great Britain, representatives from USA, Malaysia, Japan, Vietnam, Italy and even Brazil! The warm welcome from the Chinese Commodity Import and Export Board made us feel at home, and our wonderful guide and international group curator, Scarlett, who seemed to have stepped out of a fairy tale, gave our stay in China an unforgettable oriental flavor.

The trip schedule included visits to several cities: Shanghai, Hangzhou and Fuzhou. All along the way we never put down our photo cameras, because we wanted to take pictures of everything. I took pictures not only of cultural landmarks and the faces of my colleagues, but also of anything that spoke of the current level of development in China.

When you visit manicured plantations and modern factories, taste ridiculously expensive tea, sit in a Starbucks, which are

Photos: ITH

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Ramaz Chanturiya

HANGZHOU, FUZHOU

and the philosophy of the moment…

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scattered all over China, look at the prices of industrial and agricultural products at Chinese supermarkets, you realize just how much this market has grown. Clearly, high prices are the consequence of an increase in incomes in this densely populated country that only very recently was extremely poor. Today China is second only to the US in the number of billionaires, and according to unofficial counts it may have already surpassed the US with respect to this indirect but highly visible indicator of economic growth. The price levels in downtown shops in any Chinese city show how attractive this market is for importers. Judge for yourself: prices for the fairly expensive English tea in the Whittard of Chelsea or Tesco supermarket chains are 25 to 30% higher than prices for comparable products in London. Another example: the price of roasted whole-bean High Mountain Jamaica Baronhall Estate coffee exceeds 80$ for 227 grams.

But this is not the most significant observation. While it is impressive that in almost every provincial city of the 1.5-billion-strong China you can buy prestigious brands of tea and coffee, shop at the most famous international retailers and see Porsches and Lamborghinis roaming the streets, what is truly amazing is that you see high prices all across the board in almost every downtown district. This market is already sucking in high-quality goods like a vacuum, and this process is only going to accelerate.

Thus, if the influence of China on the world economy continues to increase, the demand for quality merchandise will become even more impressive. Chinese customers with thick wallets will raise the price of high-quality coffee and tea, and we

Photos: ITH

Photos: ITH

Another year, another trip to China by a delegation of the RUSTEACOFFEE Association. This time, the delegation consisted of the representatives of Santi, Moscow Tea-Packing Company, Orimi-Trade and Sapsan.

The trip was conventional, both with respect to its agenda and to the outcomes. No doubt, it is very important for market participants to see the achievements of their colleagues and to show off their own, to share experiences and opinions about the development of the industry and to enjoy the Chinese culture; but no less significant is the opportunity to analyze external factors, especially as they relate to the current situation in Russia.

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COFFEE&TEA INTERNATIONAL # 1/2012

Photos: ITH

will have to ask ourselves whether we can still afford to buy our favorite beverage, given the already existing shortages of good coffee and tea in the world.

I am certain that the Chinese factor will soon have a great impact on the availability of quality foods around the world, and we have to keep this in mind. Another piece of advice: look outward, to global markets. Compete where the demand is high, conquer new markets, globalize your business – all this will help make it more stable and secure.

By the way, these kinds of trips, during which you attend expos and conferences and visit manufacturing facilities, allow you to see the level of development and demand on a potential export market, to evaluate the achievements and failures of your colleagues. We certainly had such an opportunity during our visit. The enormous exhibition in Hangzhou, which occupied two levels of a modern expo complex, brought together representatives of every region of the country as well as all major manufacturers.

Here one could see packaged teas in all their variety and see what bulk vendors had to offer. An important addition to the expo agenda was an educational conference where members of various delegations presented reports about the state of the international and domestic markets. One session featured Anton Makarov, the General Director of one of the oldest Russian tea companies, Moscow Tea-Packing Company. I must say that his presentation, which followed the presentation by Mr. Twining (the head of the namesake company and a descendant of its founder), generated great interest.

After the Expo our Chinese colleagues took us around on a tour of the tea industry’s flagship facilities.

Our group visited a modern tea extract factory belonging to the Tata company, as well as factories belonging to Zhejiang Tea Group and Jiasheng Tea. Next stop was the birthplace of jasmine tea (Fuzhou, Fujian Province), where we visited Fujian Chunlun Tea, the largest company in the region, and took part in the opening ceremony of Jasmine Tea Street, a street in one of the modern districts of the city.

I had the feeling that even several months would not have been enough to see all the interesting tea-related places around China.

But we had business waiting for us back home… Our departure was a little sad but hopeful: it was clear that we would visit China again.

REVIEW&STATISTICS

Study of TEA Retail Sales in Russian Cities with the Population over 10,000.

Data for April–November 2011 Distribution of TEA Sales in Terms of Money. Percent April-May 2011 by urban type population over 1 million population of 250 000 – 1 000 000 population of 50 000 – 250 000 population of 10 000 – 50 000 by distribution channel supermarkets mini-markets grocery stores pulse shops and open markets by region Central Northwestern Volga South Ural Siberia Far East Southern

June-July 2011

August-September 2011

October-November 2011

FOR SUBSCRIBERS ONLY

Source: Nielsen

Share of Packed Tea in Total Sales Volume of TEA Monetary sales volume, percent

April-May 2011

June-July 2011

AugustOctoberSeptember 2011 November 2011

Physical sales volume, percent

April-May 2011

June-July 2011

AugustOctoberSeptember 2011 November 2011

FOR SUBSCRIBERS ONLY

Source: Nielsen

Share of Each Category in Total Sales Volume Monetary sales volume, percent

April-May 2011 black black flavored mixed: Hedbal&Fruit green green flavored black & green red white

June-July 2011

AugustOctoberSeptember 2011 November 2011

Physical sales volume, percent

April-May 2011

June-July 2011

AugustOctoberSeptember 2011 November 2011

FOR SUBSCRIBERS ONLY Source: Nielsen

Share of Leaf, Granulated & Mixed Tea in Total Sales Volume of TEA Monetary sales volume, percent

June-July 2011

AugustSeptember 2011

Main cities Tea in teabags Granulated Leaf Mixed

OctoberNovember 2011

Physical sales volume, percent

June-July 2011

AugustSeptember 2011

OctoberNovember 2011

FOR SUBSCRIBERS ONLY Source: Nielsen

REVIEW&STATISTICS

Study of COFFEE Retail Sales in Russian Cities with the Population over 10,000. Data for April–November 2011 Share in Total Sales Volume Physical sales volume, percent

April-May 2011 Sublimated instant Granulated instant Powdered instant Coffee mixes Ground coffee and coffee beans

June-July 2011

AugustOctoberSeptember 2011 November 2011

Monetary sales volume, percent

April-May 2011

June-July 2011

AugustOctoberSeptember 2011 November 2011

FOR SUBSCRIBERS ONLY Source: Nielsen

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COFFEE&TEA INTERNATIONAL # 1/2012

REVIEW&STATISTICS

Distribution of COFFEE Sales in Terms of Money. Percent April-May 2011 by region Central Northwestern Volga Ural Siberia Far East Southern by urban type population of 50,000 – 250,000 population of 250,000 – 1 million population over 1 million population of 10,000 – 50,000 by distribution channel supermarkets mini-markets grocery stores kiosks and pavilions open markets

June-July 2011

August-September 2011

October-November 2011

FOR SUBSCRIBERS ONLY

Source: Nielsen

Share of Various Packaging Types in Total Sales Volume of Instant Coffee Physical sales volume, percent

April-May 2011 metal can glass jar brick packet other

June-July 2011

AugustOctoberSeptember 2011 November 2011

Monetary sales volume, percent

April-May 2011

June-July 2011

AugustOctoberSeptember 2011 November 2011

FOR SUBSCRIBERS ONLY Source: Nielsen

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REVIEW&STATISTICS

24

in Poland,

FOR SUBSCRIBERS ONLY

Milan Ă&#x2019;t<bel, Research Analyst at Euromonitor International

HOT DRINKS

COFFEE MARKET PERFORMANCE

Poland, Slovakia and the Czech Republic are important markets for coffee in the Central and Eastern European region. All three markets combined were responsible for 30% of total coffee volume consumption within all of Eastern Europe (including Russia). In total volume terms in 2010 Poles drank more coffee than in the whole of Russia with per capita consumption approximately three and a half times higher than in Russia. However, according to preliminary data, the size of Russian coffee market might top Poland in total coffee consumption already in 2011.

Fresh coffee vs Instant coffee, 2010

Source: Euromonitor International

Per capita coffee consumption, 2010

COFFEE&TEA INTERNATIONAL # 1/2012

Source: Euromonitor International

REVIEW&STATISTICS

Czech Republic and Slovakia On-trade volume sales growth

Source: Euromonitor International

FOR SUBSCRIBERS ONLY

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REVIEW&STATISTICS

in Germany

FOR SUBSCRIBERS ONLY

HOT DRINKS

Coffee Pod and Standard Fresh Coffee Percent Growth 2010â&#x20AC;&#x201D;2015

26

COFFEE&TEA INTERNATIONAL # 1/2012

Source: Euromonitor International

2010 Category Retail Volume Share of Total Tea

Source: Euromonitor International

HOT DRINKS

By Olga Murogova, Research analyst at Euromonitor International

REVIEW&STATISTICS

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in Ukraine

According to Euromonitor International, both on-trade and offtrade Ukrainian hot drinks markets declined in 2009-2010 and reached 56 thousand tonnes in volume terms. Offtrade value of hot drinks amounted to almost UAH9 bn in 2010, posting the slight increase of 2% in comparison with 2009. Market was traditionally driven by coffee with its 51% share in total hot drinks volume sales in 2010. However, during 20092010, tea strongly increased its share in Ukrainian hot drinks market, amounting for 44% in volume sales in 2010 in contrast to only 33% in 2008. The most stable category in hot drinks market in Ukraine during 2009-2010 was the category of other hot drinks with its 4% share in total hot drinks volume sales in 2010.

FOR SUBSCRIBERS ONLY Hot Drinks market in Ukrain, total volume, tonnes

Source: Euromonitor International

Hot drinks market in Ukrain: future forecasts Retall value, UAH

Source: Euromonitor International

Tea categories, 2010. Retall value, UAH

COFFEE&TEA INTERNATIONAL # 1/2012

Source: Euromonitor International

Olga Murogova, Eastern Europe consumer market analyst, Euromonitor International

HOT BEVERAGES MARKET IN BELARUS: SURVIVING THE CRISIS

HOT DRINKS 30

COFFEE&TEA INTERNATIONAL # 1/2012

in Belarus Strategic market research company Euromonitor International notes that in 2011 the total sales volume of the retail hot beverage market in Belarus has grown by 78% and reached 1.2 trillion Belarus rubles (BYR). The main reason for this significant increase is the doubling of retail prices following the national currency crisis, accompanied by devaluation and inflation.

Another factor was the state of the global market: lower production of tea and coffee caused by a drought and an increase in demand for these commodities.

Thus, by the end of 2011 many Belarusian consumers had to forgo the extra cup of coffee or substitute tea bags for more expensive bulk teas. The same was true for other hot beverages; this led to a 15% decrease in total hot beverage consumption compared to 2010.

THE RISE OF THE ECONOMY BRANDS Of course, Belarusian consumers have always been interested in imports. For hot beverages, this interest is explained by the fact that the country’s climate is not suitable for growing tea, coffee and cacao. Thus, as incomes increased by 2010, Belarusians could from time to time afford quality tea and coffee varieties. However, in May of 2011 the first step in the devaluation of the national currency was taken, and the difference in price of the same brand of coffee or tea imported before and after that date could reach 50%.

After the store shelves were cleared of the “old supplies” imported at the 2010 exchange rate, cheaper brands took over the market. It needs to be noted that this transition towards lower prices happened mostly in the medium-priced segment, whereas in the premium sector Chinese bulk tea and quality coffee have largely retained their loyal customers. Thus, in 2011 green coffee beans were the only category that avoided the slump and actually increased by 1% compared to 2010. This increase is due to the rise in the use of household coffee equipment and the general tendency toward more healthy and, consequently, natural products. But in the current economic conditions only the most affluent Belorusians and those whose income was indexed to a foreign currency could afford those luxuries.

A DROP IN CONSUMPTION According to Euromonitor International, in 2011 virtually every hot beverage category saw a decline in sales. The steepest decline was observed in the category that included cacao and other flavored beverages, since they are not considered to be necessities and are the first ones to be cut from consumption when incomes decline.

The next in line were niche tea varieties such as weight-loss tea, fruit and herbal teas, etc. Every product that added a premium to the base price was left on store shelves. Thus, in 2011

REVIEW&STATISTICS

Growth, %

Market volume, tons

Hot Drinks Market Dynamics in Belarus, 2007-2011

Source: Euromonitor International

Belarus saw its level of per capita hot beverage consumption, already low compared to the neighboring countries, decline even further. The easiest decision was to reduce tea consumption, which declined by 15% compared to 2010. In 2011 the consumption of coffee stabilized at the level of 0.5 kg per person per year.

A LOOK INTO THE FUTURE We should note that by the end of 2011, the Ministry of Commerce took measures aimed at slowing price growth by lowering

The market share by type of tea, %

Black

STRUCTURAL CHANGES IN THE MARKET There were some changes in the structure of the hot beverages market in Belarus in 2011. For example, in the coffee segment the consumption of brewed coffee increased, mainly due to an increase in popularity of coffee beans. This tendency is driven by an increased health consciousness and also by the increased availability of household coffee equipment. At the same time, the share of instant coffee declined by 2%: instant coffee lost some affluent consumers who switched to brewing and also those who had to reduce their coffee consumption because of a drastic decline in income.

The tea market showed a preference for tea bags, which turned out to be the most affordable tea product under the current economic conditions. Following an established trend, in 2011 black tea comprised the largest share of the market by volume. Fruit and herbal teas saw their consumption reduced slightly and lost 1% of the market to green tea.

Other hot beverages that saw an increase in popularity are plant-based varieties, produced, for example, from barley or chicory. The main reason for this is their attractive low price and their origin in nature, which gives them healing properties.

and wellness awareness will cause Belarusian consumers to be more interested in hot beverages than in alcoholic ones. But this will come only when the devaluation stage is over and incomes start rising again.

Thus, the transition towards natural hot beverages and more refined varieties, such as large-leaf green tea or organic high-quality coffee, is clearly a possibility. But even in the best case, this possibility will become reality no sooner than in 5 years.

According to Euromonitor International, by 2016 the hot beverages market will attain annual growth rate of 0.5% in bulk volume and of more than 2% in sales volume, adjusted for inflation. The main engine of such growth will be natural (brewed) coffee and green tea, since the increasing focus on health and wellness will remain a key component of the consumer market in the near future.

The faster growth of the sales volume reflects the global tendency of increasing

Fruit and herbal Green

Source: Euromonitor International

the maximum rate of value-added tax for coffee and tea from 30 to 22%. This should help Belarusian tea and coffee consumers in 2012; however, if things take a turn for the worse and devaluation of the ruble and a slide in incomes continue, this measure will hardly be sufficient.

As a whole, the hot beverages market in Belarus remains attractive, since the per capita consumption is among the lowest in Eastern Europe.

Besides, an emerging trend towards health

prices for tea and coffee due to rising demand and to various negative climate factors that can lead to crop losses.

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ECONOMICS

PRIVATE LABEL

COFFEE POTENTIAL IN EASTERN EUROPE

By Richard Haffner, Head of Beverages Research

Global private label coffee volume share stood at 11% in 2010, having risen slowly but steadily since 2005.

Global private label coffee value share peaked at 8% in 2009, before falling to pre-recession levels in 2010.

PRIVATE LABEL - WESTERN EUROPE BACKGROUND Private label is a strong competitor mainly in the developed markets of Western Europe and North America, where fresh coffee has a strong presence. Its share in these regions, particularly in Western Europe, is also a function of the overall strength of private label in all food and beverage categories.

Western Europe features the highest private label share in the world, with several countries where private label coffees represent a quarter of the market or more. A highly developed retail environment drives much of this competitive situation, with high profile discounters like Aldi featuring a majority of private label products in their stores.

Cultural acceptance of private label coffee also arises out of many decades of presence in the marketplace and, over time, demonstrating that the product quality is close to branded competitors.

GAINING A TOEHOLD IN EASTERN EUROPE Private label coffees in other regions, like Eastern Europe, have made share gains in recent years, but cultural and retail distribution barriers mean that private label's share is unlikely to reach double digits in the near term.

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COFFEE&TEA INTERNATIONAL # 1/2012

Eastern Europe may be more indicative of how private label coffee sales will develop in the rest of the world. Only Slovakia had a private label coffee share above 10% in 2005. By 2010, private label had doubled its share in Croatia, while in Hungary it increased by four percentage points to 14%.

Once introduced, private label has shown potential for rapid success in the region. The expansion of private label into fresh coffee and the continued development of chained supermarkets and large retailers will drive this growth.

It is unlikely that private label coffee in Eastern Europe will be able to achieve the near parity quality perceptions that it has achieved in Western Europe over the period of many years. However, the retail barriers that have existed in the past are beginning to be eroded.

FAVOURABLE DEVELOPMENTS IN THE RETAIL ENVIRONMENT In 2006 supermarkets plus hypermarkets plus discounters comprised only 39% of Eastern Europe grocery retail sales. This lagged Western Europe by a full 30 percentage point.

By 2016 this gap between Eastern Europe and Western Europe in formats that are conducive to private label in general is forecasted to be cut in half with supermarkets plus

ECONOMICS

hypermarkets plus disPRIVATE LABEL MAY SPUR Private Label Coffee: Eastern vs Western Europe Retail Value, 2010 counters growing to 58% INNOVATION FROM of grocery retail in Eastern BRANDED Europe (Western Europe MANUFACTURERS is forecasted to grow to If private label coffee is able 74% of retail grocery). to achieve the same quality So the grocery retail perceptions that it has achieved environment in Eastern in Western Europe, then there Europe is forecasted to may be even greater potential. rapidly transform to more In Western Europe private label closely resemble Western coffee had over a 26% retail Europe. However, Eastern volume share in 2010. Eastern European consumers do Europe, with only a 3% share not have the same longhas considerable potential for standing familiarity with not only short-term growth but private label purchasing for sustained growth into the as those in Western medium-term. Branded manuEurope, meaning that short-term potential is likely to be limited facturers, being aware of these developments, are likely to to volume shares in the 10-20% range, rather than 30% and respond with improved product quality and innovation at an above observed in Western Europe. attractive price. The consumer will be the big winner.

Source: Euromonitor International

COMPANY SHARES (BY GLOBAL BRAND OWNER) | HISTORIC | RETAIL VALUE RSP | % BREAKDOWN Categories Coffee

Geographie Czech Republic

Retail Value RSP(% breakdown) 5,0

Estonia

1,8

Latvia

5,3

Poland

1,4 Source: Euromonitor International

COMPANY SHARES (BY GLOBAL BRAND OWNER) | HISTORIC | RETAIL VALUE RSP | US$ MN | FIXED EXCHANGE RATES Categories Coffee

Geographie Czech Republic

Retail Value RSP (US$ mn) 17,1

Estonia

1,2

Latvia

2,6

Poland

21,6 Source: Euromonitor International

COMPANY SHARES (BY GLOBAL BRAND OWNER) | HISTORIC | RETAIL VOLUME | TONNES Categories Coffee

Geographie Czech Republic Estonia Latvia Poland

Retail Volume (Tonnes ) 1 782,9 89,3 250,4 3 042,0 Source: Euromonitor International

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ECONOMICS

STRANGERS IN TANSANIA Anastasya Papandina

Photos from Vera&Rudolph Meyer personal files

What is it like for Europeans, people of another culture and mentality, who got used to life in moderate climate, to do business in a hot African country?

To find the answer, we turned to Vera and Rudolph Meyer, a married couple from Germany, who own a coffee plantation in Africa, in Northern Tanzania.

Their farm called, the Ngila Estate, borders the Ngoro Ngoro national preserve, which adds some extra wilderness to the business in the form of frequent visits of elephants, monkeys and small antelopes. The owners share their experience and talk about the challenges of running a business on the sunny continent during a special interview for the Coffee and Tea International magazine.

— Please tell us, what is it like to do business in Tanzania?

Vera: Well, you see, Tanzania is an exotic country located in Eastern Africa. It has 5 coffee-growing regions. Coffee makes up about 20% of the country’s total exports. And, to be honest, it is a great place for doing business. Rudolph and I we are Germans, coming from Europe. Of course, European and African cultures are very different, and before we started, we had to spend a lot of time studying the new country, its laws, its political and economic structure, the local business customs. But today we feel very comfortable. There is an old coffee-growing tradition here in

34

Tanzania. The farm that we operate has been started in the 1920s; this is an old and distinguished business. We were lucky to find experienced help from the beginning. In general, people of Tanzania are very friendly, and always eager to help.

— How did you come to the idea of starting this kind of business?

When did it happen?

Rudolph: I visited this country when I was a child, and I literally fell in love with it! Visiting coffee plantations I realized that I want to become the owner of one of them one day. In 1992 my dream came true, and Vera and I bought a coffee farm. Of course, in the

COFFEE&TEA INTERNATIONAL # 1/2012

beginning everything was difficult, as we had to learn so much.

Vera: Besides, in this area there are not so many English-speaking people, and there are no German speakers at all. So one day I just picked up a textbook and started learning the local language, Swahili. I can’t say that I am fluent now, but my knowledge seems to be enough to communicate with Tanzanians.

— Everyone knows that competition in the coffee industry is heating up, and producers constantly have to innovate and raise the quality of their products. What determines the quality of your coffee today?

ECONOMICS

Vera: Coffee business is a very long, complex but incredibly interesting process. First of all, local growing conditions are very important. Our farm is located at a high altitude, and has a unique climate and special volcanic soil (Tanzania has many volcanoes), uniquely suitable for growing coffee.

Our farm is located in Northern Tanzania, 200km from the town of Arusha, 1600m above sea level, so the temperatures can fluctuate from 5-7 degrees at night to 25-30 during the day. In Tanzania there are two rainy seasons, so coffee plants bloom 3-4 times a year. During each harvest, we need to take care of the fruit-bearing plants. By the way, coffee plants can reach 2.5 meters in height. As we use the wet process, we can only take red beans; it takes about 7-8 months for them to ripen and acquire the proper color.

Coffee is harvested by hand; it is a difficult tiresome kind of work that requires a lot of focus and drawing attention to details. But it is crucial to ensure the quality of our future product! In order to fill a 1.5-liter jar with red coffee beans, you have to work for the entire day!

— And how do you monitor the harvesting process and the quality of the beans?

Vera: Our workers know all the requirements. When the beans have been harvested, we check them again to eliminate yellow and black beans.

Besides, we have a whole crew of managers who monitor the harvest.

— What happens to the beans next?

Vera: After the harvest and the first stage of processing the beans are sent in large containers to a factory for sorting.

The best fruits end up in a special machine where the shell is removed and the rest of the pulp washed off. Next, the coffee goes into a special moving drum that screens for low-quality or damaged beans. The next day, the best beans go through a 30-minute soaking.

Lighter beans float and are removed, and the heavier ones go in a trough for drying and then meet our “specialty”team that inspects them once more (it is easier to see defects when the beans are wet). Next comes another round of dry-

36

ing, and then it is off to packaging facilities where the coffee is once again inspected for quality and taste and, finally, is ready for export. Our unique approach to coffee and our methods, along with the fact that we deal with specialty coffee, make our product illsuited for mass market. Our buyers (In Germany, USA, Spain, Japan) know our product well and are interested specifically in it. They are those who are willing to pay for our labor-intensive methods.

— By the way, what are your thoughts about the increases in coffee prices?

Vera: Here’s an example. In 2001 you could buy a kilogram of coffee for 1 dollar. But our production methods, obviously, are incompatible with such prices.

Especially since we spend more and more money on equipment each year.

Besides, in order to motivate people who do this difficult manual work for us, we need to offer them a decent, living wage. We have to allow them to live on one salary, not several at once.

Manual labor should be well compensated: in the end, a well-motivated worker is a boost to the quality of the final product.

— Do you agree that the time has come to abandon the exchange mechanism of coffee price formation? Those exchange prices are driven not by the real demand on the market but by rampant speculation, aimed solely at high profits.

Vera: Yes, we do see this a s a problem. And this is one of the reasons why we only work with trusted and reliable partners. But what really sets us apart is the fact that our production is “limited edition”. Of course, when it comes to setting the price, we do look at the New York Exchange, as does everyone else; at the same time, the superb quality of our coffee allows us to buck the general economic trend. And even if the exchange price goes down, we try, as far as possible, to stick to our price, which testifies to the great quality of our coffee. So our price is somewhat different from the exchange price, although, again, it is influenced by New York.

Rudolph: The consumer is interested in quality and willing to pay for it. It is

COFFEE&TEA INTERNATIONAL # 1/2012

important to him where the coffee comes from and how much you can trust the supplier, so the choice is made largely independently of the price.

— Let’s change the subject a little bit. We know that your farm borders the Ngoro Ngoro National Preserve.

How do you handle the animals who roam freely throughout the plantation? Do they present a problem?

Vera: Yes, elephants, buffalo, monkeys and other jungle animals are frequent visitors to our farm. They all come for different reasons: monkeys, for example, like to eat ripe coffee beans, buffalo like to rub their heads on coffee plants, and elephants use our plantation as a watering hole. 25 elephants on our land is quite a sight! Of course, we do not bother them out of respect for nature. Nonetheless, we try to keep them at a distance from the coffee plants in order to prevent damage and protect our coffee from the unusual visitors.

— And how would you describe your business strategy? Apart from respect for nature, what is your motto?

Vera: Our goal is to be at peace with nature as well as with the people living around us. This is one of the reasons we do not seek to expand our farm.

Expansion can be detrimental to quality…

And we need to maintain high standards and strengthen the bond with the people who work with us. We understand that our footprint has to match the region in which we operate.

— And the last question. You are partners not only business colleagues, but also partners in your private life. How do you divide the responsibilities? Do you talk about business at home or prefer to leave work at work?

Rudolph: Our secret is that we handle different aspects of the business.

My wife is in charge of the agricultural part, and I handle the finances. At home we are simply loving husband and wife, and at work each of us has our own responsibility. This is the right way to do it, and this is the secret of our success.

ECONOMICS

A LAND

of Opportunities V. Savinov, Director, SFT Trading

38

Guatemala and Honduras, are raising production, and their combined volume has exceeded Columbia’s every year since 2008.

According to industry experts, in 2011/2012 Mexico, Guatemala and Honduras will harvest the equivalent of 13.5 million bags of coffee, whereas

тыс. мешков по 60 кг

Coffee Production in Central and South America

Thousands of bags (60 kg)

MEXICO’S ROLE ON THE WORLD COFFEE MARKET At first glance, Mexico’s role in the world coffee production is insignificant. Its modest 3-4% pale in comparison with Brazil, the world leader, supplying one third of all world coffee. The Asian giants, Vietnam and Indonesia, also far surpass Mexican production.

But if we realize that Vietnam and Indonesia focus mostly on Robusta and Brazil has only just begun exporting washed Arabica, the picture changes completely. Today the undisputed leader in world’s washed Arabica production is Columbia, despite a prolonged slump in production volume. But Mexico and its two southern neighbors,

The shape of this country on the map resembles Italy, only the tip of the boot has been turned from West to East; its capital, located more than 2000 meters above sea level, sinks several centimeters each year because of its excessive fresh water consumption. Also, this country is home to the world’s smallest volcano, only 13 meters high, with a ladder leading up to its crater. If you are still wondering what this country is, I can add that it is the birthplace of chocolate and the resting place of the secrets of the vanished civilizations of Aztecs and Maya. It is Mexico!

COFFEE&TEA INTERNATIONAL # 1/2012

Colombia Mexico, Guatemala, Honduras

ECONOMICS

Columbian production is unlikely to exceed 10 million. Thus, paired with the seasonal deficit of Brazilian coffee and a general deficit of the Columbian one, washed Arabica from Mexico and other Latin American countries is starting to attract attention of the major players on the world market. But it is unfair to attribute the increase of the role of Mexican coffee on the world market solely to the failures in Brazil and Columbia. We think that there are several other factors that compel the world coffee community to treat Mexico as an important element of their overall strategy.

MAJOR FACTORS LEADING TO THE INCREASE IN POPULARITY OF MEXICAN COFFEE

light-bodied coffees with a slight nutty flavor. This description is most suitable for the variety grown at relatively low altitudes in Veracruz, which is considered the most typical of Mexican varieties. But Veracruz also boasts varieties of coffee that will satisfy the most discriminating connoisseurs. Сoffee lovers will no doubt notice the coffee grown around the town of Coatepec: it has a sour note resembling white wine and the sweetness of white grapes.

As you go up the slopes of Sierra Madre, the coffee from Oaxaca and Puebla acquires more intensity and a higher acidity. One such variety is Oaxaca Plumas, which is deservedly famous all over the world.

Finally, the highest altitude varieties of coffee grow in the South-East of the country in the state of Chiapas, on the border with Guatemala. According to experts, this is the region where you can find the most interesting coffee in Mexico. In order to describe the coffee grown here, we need to remember the description of the coffee grown in nearby Huehuetenango, Guatemala.

The two coffees have a lot in common: high intensity, balanced and complex taste, hints of milk chocolate and nuts, a slightly fruity aftertaste.

Flavor variety Rich volcanic soils, suitable climate, moderate rainfall and availability of water attracted European colonists to Mexico as early as the end of the 18th century, when the first coffee seedlings were brought into the country from Jamaica. Now the basic mode of coffee production on Mexico is small farms, mostly less than 10 hectares, producing shade-grown coffee. The production is limited to 13 states, but we will focus only on four: Chiapas, Veracruz, Puebla and Oaxaca.

This is the place where the first Mexican coffee was grown, where it took root under favorable climate and soil conditions; it is here that 9/10 of all Mexican coffee is produced.

Finally, in these four states the number of farmers employed in coffee production is an impressive 400000. The Arabica varieties grown here – Bourbon, Caturra, Mundo Novo and Maragojipe – differ in flavor, but can be characterized collectively as MEXICO, CHIAPAS, Guadalupe Zaju Coffee Farm, 2011

The last thing to mention about Chiapas is Robusta, grown and processed here using the wet method.

Its taste characteristics are comparable to the best Guatemalan varieties.

Unfortunately, today the supply of Mexican Robusta, as well as its Guatemalan rival, is very limited.

Geographical Location and Marketing There is a saying in Mexico: “God is far away, but the US is nearby”. Indeed, the US has been the primary buyer of Mexican coffee for many years now.

Since Mexico has access to both the Pacific and the Atlantic oceans, it can easily and cheaply meet the demand for coffee from the Eastern and Western coasts of the United States; also, a welldeveloped infrastructure allows coffee to be delivered not only by sea, but also by trucks. As far as Europe is concerned, the port of Veracruz is the most important coffee hub, sending regular shipments of coffee across the Atlantic ocean. The price of transporting coffee from Mexico to any European country is comparable to prices for import from the majority of Central and South American countries and from Africa. In terms of price, Mexican coffee is rela-

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ECONOMICS

companies put a lot of effort into educating farmers about recultivating the soil, recycling the water and defending their plants from pests; as a result, it is much easier for farmers to find information about protecting the environment. According to Mexican experts, widespread use of hybrid coffee varieties and modern growing and processing technologies will allow Mexico to increase its coffee production in the near future by more than 15%. Also, a few international organizations that work on improving living standards of Mexicans have been active in the country: Rainforest Alliance is a program aimed at preserving forest biodiversity, Organic Coffee focuses on sustainable methods of coffee production; Fair Trade and C.A.F.E. Practices can also be AMSA offered us not only the best high-altitude Arabicas, but also varieties that contained 20 to 50 defects per 300g sample.

COFFEE LOVERS, TAKE NOTICE:

tively cheap: if we compare prices, we will see that the undisputed leader is the Arabica from East Africa (Kenya and Tanzania), followed by Costa-Rica, Guatemala and Columbia. At the bottom of the price list are Mexican, Nicaraguan and Honduran varieties.

As a rule, Mexicans are very flexible when it comes to price policy. Frequently the price of some particular batch of coffee depends on the number of defects; in addition, the seller and the buyer can agree in advance on the percentage of defective beans and the nature of the defects. The price of a batch of coffee with specified quality is also agreed upon in advance. In countries that have strict export classifications, such agreements are in principle impossible.

Thus, the price of Mexican Arabica gives it a marketing advantage, assuming comparable transportation costs.

Ecological and Social Programs As many other countries who are concerned about the preservation of their forest, water and soil resources, Mexico is doing all it can to develop its coffee industry using intensive methods. Thus, in order to increase their low productivity (360 kg/ha on average), Mexican farmers do not cut surrounding forests in order to increase the size of their plantations but participate in programs that encourage them to plant new hybrid high-yield varieties. Major

40

MEXICO, CHIAPAS, Guadalupe Zaju Coffee Farm

Growing region: Mexico, Chiapas, 15° 9' 28.68" N 92° 17' 13.36" W

Altitude: up to 1400 m Certification programs: Rainforest Alliance, C.A.F.E. Practices Mexico, Chiapas, Guadalupe Zaju Coffee Farm, 2011

seen throughout Mexico. The demand for certified coffee is growing every year, and Mexico’s role in supplying such coffee is only going to increase.

Mexico has enough potential to significantly increase its presence on the world market. So it is not surprising that the world press agencies focusing on coffee, have been paying more and more attention to Mexico, and coffee blending professionals are increasingly using Mexican-grown varieties. Will the Russian coffee market catch on to this global trend?

Mexico, Chiapas, Tapachula, AMSA, 2011

COFFEE&TEA INTERNATIONAL # 1/2012

SFT Trading expresses gratitude to our regular supplier of Mexican coffee, AMSA (Agroindustrias Unidas de Mexico S.A. de C.V., www.amsa-commodities.com.mx) for the help in organizing our travels in Mexico and for all informational materials they provided.

WHO IS WHO?

Going beyond paper: SUSTAINABILITY AS THE CORE OF COMPETITIVE BUSINESS Р

Alena Velichko

Sustainability is a mega trend that has been putting its way through in business for some years. About a decade ago business people chose between their company paying attention to environmental issues or making more profits.

Those used to be two different directions. Nowadays the situation has changed a lot and these two issues – environmental care and efficient business – go hand in hand. A good case to illustrate how the principles a company is based on can support sustainable business is Glatfelter, the leading global filter paper supplier. It also demonstrates the advantages a sustainable approach can have for a company. “We understood that if we want sustainable changes, we have to invest a lot in strategy, people and quality,” - says Martin Rapp, Vice President & General Manager of Glatfelter.

Sustainability has to be seen in a broader sense as it has become more than just ecological issues that companies care about. Now it covers almost all spheres of company life – today, making a company sustainable has actually become a synonym for competitive.

GLOBALIZATION IMPROVES LOCAL SOLUTIONS

Glatfelter was founded in 1864 in the US. Now it is a company with 1.5 billion US dollar turnover, 4,000 employees, 10 manufac-

42

turing facilities in USA, Germany, Canada, the UK, France and the Philippines and sales offices in 6 countries including Russia.

Having acquired several companies in different countries within the last 14 years

COFFEE&TEA INTERNATIONAL # 1/2012

Glatfelter has embraced under its roof several business units united with one vision and common values, processes and system of execution.

By becoming more and more international and having offices in many countries Glatfelter ensures a more professional approach to working with national markets. Opening new sales offices in different countries makes the service more convenient for everybody. It also adds to a better footprint and just by that makes the company already more sustainable.

Globalization also leads to having the same quality of service and products no matter in which country you are.

“When customers ask what will happen if we have fire in the mill, we reassure them that we can produce the same product in another city with the same quality, measurements and specifications”, says Petra Bursian, CFBU Quality Assurance Manager. “In par-

WHO IS WHO?

allel, Glatfelter is also continuously adding capacity to insure the company can meet the growing demand of our global and regional customers around the world” added Fabrice Werner, Sales and Marketing Director CFBU. Expanding the global influence has been very challenging. “The task was for us to build one organization and we used the motto: “one company – one culture”. We needed to have one face to the customers because in the end the customer wants to deal with one company,” remembers Martin Rapp, the vice president and general manager of the company. “It required from us a lot of efforts: building a new operating model, a new culture, a new way how to deal with our customers. As a result our customers trust us and we are growing in the market share.”

SPECIALIZATION AND INNOVATION ARE DRIVERS OF SUSTAINABLE BUSINESS

Being not the biggest company, Glatfelter has been focusing on its own niche markets with special applications. In those markets they have a leading position gradually getting even stronger in all their three production lines: Specialty Papers (58% of overall turnover), Composite Fibers (29%) and Advanced Airlaid Materials (13%). Strategic acquisitions of production sites and companies helped Glatfelter almost double its turnover during the last 5 years with total expected revenue of 1.5 billion USD. And the company income allows it to invest money in innovations, new capacity and refurbishing existing equipment.

Leading the market, Glatfelter stresses it needs to keep its flexibility and responsiveness in a global and changing environment.

“It is paramount we are capable of reacting swiftly to the requirements and ideas of our customers” says Kai Wulff, General Sales Manager F&B, adding: “Aligning our Sales & Marketing and New Product Development resources is key to staying at the heart of the market and enables us to respond accordingly with value added products and tailor made solutions ”.

The company puts a lot of emphasis on innovation and development of new products, with the intention of enabling their customers to be more innovative on their side. For example, the company plans to invest 50 Million USD in the re-build of a paper machine, adding additional capacity.

But new technology also means more efficient usage of raw materials and energy.

“We try to invest in new processes and modernization as we hope that our suppliers will benefit from it, our customers will benefit from it and as a result we also will benefit.

This is what we call a win-win situation if innovations support all stakeholders involved in the process,” says Fabrice Werner, Sales and Marketing Director, CFBU. Right now the company is hiring a lot of researchers who will enforce the new prod-

44

uct development unit to stay ahead of competition and keep providing innovative, unique and relevant customer benefits.

THE IDEA OF SUSTAINABILITY IS REFLECTED BY PEOPLE

People are the focus of the company “compass” – the organization model bringing forth a strong set of core values that have been adopted by all employees.

Following these core values helped Glatfelter to set and achieve many targets, one of them being health and motivation of their employees. The company is really proud of its reduction of injuries twice within the last couple of years. Such an impressive record can only be achieved by establishing the necessary consciousness within the whole organization. Safety is reflected in the basic mission: injury free every day.

“We want our people to come to work and enjoy what they do and we don’t want them to be injured” stresses Martin Rapp. ”That is why we have trainings on safety and all core values especially on integrity and code of business conduct. We spend a lot of time on sharing the vision of where we are going. If employees don’t know where the company is headed, how can they contribute?”

According to Jan Nossent, Product Engineer F&B, people like working in the company as they have fine colleagues and mutual respect, as well as a flat hierarchy and good spirit. And of course hiring the right people “is the approach that adds sustainability to the company,” admits Ullrich Beyreiss, director of human resources.

Many employees feel that they do not simply sell something but they participate in achieving common goals and consequently, they do their best to make clients happy, making the principle “customer first” much more than a motto. If customers have a specific request the company can react fast by developing a product solution.

KEY PILLARS OF THE SUSTAINABLE APPROACH

For being recognized in the community Glatfelter chooses the strategy of being socially responsible. It is implemented through developing local communities and investing in kindergartens, sports clubs and a puppet theatre, sponsoring a local hospital for children, orphanage and building a fish ladder. Many social campaigns are also carried out in the Philippines, like supporting farmers with equipment for better harvesting (special knives, e.g.) and fibers processing so that they can make more money over the day. After the recent typhoon in the Philippines in December 2011 Glatfelter employees donated money to aid the families whose houses were destroyed. “They are our co-workers. How can we ignore it?” says Kai Wulff.

In the Philippines social responsibility goes hand in hand with environmental

COFFEE&TEA INTERNATIONAL # 1/2012

responsibility. The concern for ecological issues started in the 80s when the company started using a lot of unbleached paper, then reducing the water consumption when making paper and searching for advanced ways of water treatment. The company also works in the direction of reducing the carbon footprint and achieving zero landfill.

According to Reinhard Schiebeler, operations director and general manager, in the past year the company increased capacity by 5 percent just by utilizing equipment a better way. Reducing energy consumption and finding more effective ways of utilizing it made the company hire an energy manager.

Through creating sustainability initiatives in the new product development unit the company is improving its carbon footprint.

But of all environmental issues Abaca is one of the most crucial elements of the sustainable approach for the company meeting customer requirements and supporting sustainable development. The company has been investing in farmers and also drives forward a certification initiative with Rainforest Alliance for Abaca to promote its sustainable footprint and develop a fair trade mechanism.

Additionally, the company values its working in compliance with all environmental laws and regulations and is active at the market by working on a solution to create the second generation of biodegradable synthetic fibers.

But Glatfelter is open and transparent not only about their social and ecological issues but what is more: about financial discipline. Being a US stock exchange listed company, their share prices are open for the public. Being transparent and acting financially responsibly is highly important to ensure reliability for their customers and thus, sustainable business as a whole. “If we are financially healthy company it means we can invest in your products, your machines and we can go with the customers wherever in the world they want to go. We can invest in further training and education of our people,” says Martin Rapp.

QUALITY IN EVERYTHING – SUSTAINABILITY IN EVERYTHING One of the keys to success for Glatfelter is being consistent in quality and standards.

Especially important are BRC/I/OP hygienic standards, for their customers as well, as they see the advantage of using goods with certified quality.

If a company invests in people, stresses social and ecological responsibility and financial transparency, and focuses on innovation and quality as guiding principles for development, then it has laid the base for being sustainably competitive and earning trust of the customers i.e. – to survive in future. Things are changing all the time and if you stand still and do not understand what is going on around you – a wave can crash over you and wipe you away easily.

WHO IS WHO?

PRESS RELEASE

CAMA ANNOUNCES STRATEGIC PARTNERSHIP TO MEET RECORD GROWTH IN CUPS TECHNOLOGY Р

October 2011 (Cama Group). According to Politecnico Milan (State University), the ‘cups containing coffee, tea and herbal tea’ market, is now the fastest growing sector in the beverage market. Cama of Lecco, Italy, the world’s leader in cartoning technology and one of the early pioneers in the cup sector, have announced a brand new partnership to meet the growing demand in superior technology for high-speed packaging systems.

Cama’s partnership named ‘UNIQUE’ has been created to meet this trend, forming a brand new alliance of leaders in their respective fields, comprising of three outstanding Italian companies. The ‘Unique’ partnership consists of: SARONG (producing thermoforming systems), OPEM (cup filling machines) and CAMA for the cardboard packaging lines. The new consortium is now able to provide complete systems, starting from: cup thermoforming, filling, primary packaging (bag or flowpack), through to secondary (cup packaging and case packing).

Annalisa Bellante, Cama’s Marketing Manager, added: "Cama is not new to this type of strategic alliance. In these partnerships, where each company gives their unique expertise, it always offers the best possible solution for our customers, offering cohesion, flexibility, technical skills and unrivalled professional advice from the best of all three members. Since

46

COFFEE&TEA INTERNATIONAL # 1/2012

the formation of this partnership, it has been a huge success for Cama and we have subsequently gained further trust from leaders in the international market for coffee/tea cups.

Our unmatched high-speed technology and the knowledge that we supply extremely reliable lines are the main ingredients to our success.”

Cama has enjoyed extensive growth and gained much experience over the years in highspeed cup packaging and are no spring chickens to the field. In 2003, the company provided a large and reputable ‘multinational’ company with the one of the first robotic lines in the world that was able to package up to 1,400 cups per minute; arguably the fastest in the world. The ongoing success is due to Cama’s continuous attention to detail and commitment in constant innovation of its packaging systems that is driven by the customer.

Cama continues to offer its customers comprehensive tech-

WHO IS WHO?

nical advice on the best cardboard packaging solutions in relation to project specifications. The company presents itself as a "global consultant", offering customized technical solutions, combining both skills in packaging and robotics, materials, packing styles resulting in payback on investments.

Cama also offers multiple combinations that are made possible for secondary packaging.

Bellante adds: "Our customers tell us often that we are the "ideal partner".

Our experience in coffee packaging does not only concern cups though. We provide multiple applications for: pods, bags, doypacks and instant coffee stick-packs. Stick-packs now at run production speeds of 960 per minute, thanks to special hopper loaders used to handle high speeds."

For state of the art top loading solutions, Cama can pack at more than 780 cups per minute with special packaging configurations. The line, consisting of a box forming machine, a double-loading robot, a box closing machine and a case packer, has proven to be extremely flexible and reliable. Cups are loaded into a special configuration to optimize the size of final packaging. They are then placed in cartons containing 8 to 48

48

pieces, gathered together and packed in an American case. The increase in sales, combined with the high-level relationship between technology and reliability of the production system, has led some customers investing again and subsequently doubling the number of production machines.

For the primary packaging of coffee cups using flowpack or bags, Cama usu-

COFFEE&TEA INTERNATIONAL # 1/2012

ally offers side loading solutions, equipped with its legendary range of high-speed cartoning machines. The cartoning machines make light work of many different complex product configurations in a flexible and reliable way, with added reduced footprint and easy maintenance.

Depending on requirements and a wide range of project specifications, Cama is able to offer its clients custom made packaging systems from their diverse portfolio including: robotic solutions (top loading), cartoning (side loading) and case packing with wrap-around display stands or display-boxes.

Cama produces machines with what they describe as Italianitа (the Italian spirit) which lives right through the company philosophy today. It is still a privately owned company and headed up by the Bellante family.

Bellante adds, “The development of cups is always intrinsically linked to the machine, they are like hand and glove.

We have a strong cultural bond to coffee too here in Italy! This with our family spirit and creative technology offers what I would say is an unrivalled package in this exciting market. We are very proud to be at the forefront with Opem and Sarong.”

HORECA

CAFIS AND BARS MARKET IN RUSSIA: the past and the future

By Euromonitor International

In 2010 affected by the economic instability in the previous years, the developing cafJs and bars in Russia were looking for ways to attract new customers and to increase their revenues. Both cafJs and bars introduced breakfast menus and business lunches, and offered coffee to-go; in this way successfully competing with fast food outlets. verall, cafJs/bars saw a 7% increase in current value terms in 2010 reaching RUB49.6 billion, which was in line with the compound annual growth rate in the review period 2005-2010. After the channel saw some decline during the times of turmoil in the economy, the rebound in growth in current value terms started at the beginning of 2010. The improved economic situation in the country resulted in increased consumer spending on dining and drinking out in cafJs/bars.

O

‘000 RUB

CafJs/Bars market in Russia, 2010, Foodservice value

noticed that by the end of the review period, establishments specialising in serving coffee were gradually becoming popular meeting places not only for young people, but also amongst the older generation, and even in the business environment.

Specialist coffee shops are gradually becoming serious competitors for fast food outlets. In 2010, most specialist coffee shops were using menu diversification as a tool to maintain margins. For instance, Costa Coffee, developed by Rosinter Restaurants Holding, introduced a breakfast menu.

Shokoladnitsa, developed by Gallery Alex, also expanded its menu with non-coffee products; for instance various salads, new Italian hot dishes and dairy cocktails.

Selling coffee beans to-go has also become more popular amongst the leading chained players in specialist coffee shops. Although, according to trade sources, sales of coffee beans to-go still only account for a minor share (less than 5%) of overall revenue in coffee houses, it is considered to be a niche for stronger growth in the future.

Chained bars/pubs is another rapidly growing niche in Russia. Over the period 2008-2010, this channel saw rapid expansion. A number of companies operating in fast food and full-service restaurants decided to expand into bars/pubs.

Currently, most establishments offer both food and drinks. According to trade sources, drinksonly outlets account for around 6% of the total number of bars and pubs in the country; this mainly includes nightclubs and discos.

Whilst the majority of cafJs/bars are independently-owned and operated, chained cafJs/bars achieved stronger growth in terms of number of outlets in 2010. Consumers are increasingly inclined towards chained options, as those offer well-known brand names and reputation. Chained outlets invest more in the promotion of their brands, such as advertising on billboards, in magazines and on television, and running various campaigns on the internet. Chained establishments accounted for a 11% share of outlets in overall cafJs/bars in Russia in 2010.

Source Euromonitor International

Chained specialist coffee shops saw the fastest growth in 2010, with current value growth of 19%. The culture of drinking coffee out and “meeting up for a coffee with a friend” is not yet strongly developed in Russia. However, Russian consumers, particularly those living in the major cities, are rapidly taking on trends from Western Europe and North America.

Amongst Russians living in Moscow and St Petersburg it is gradually becoming very popular to meet in a specialist coffee shop such as Starbucks, Shokoladnitsa or Coffee House. It was

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COFFEE&TEA INTERNATIONAL # 1/2012

HORECA

Percentage of Chained and Independent Foodservice, Russia, 2010

Chained Foodservice IndependentFoodservice Source: Euromonitor International

Over the next five years cafJs/bars is expected to increase by a compound annual growth rate of 3% in constant value terms, and by a compound annual growth rate of 2% in terms of the number of outlets. The channel overall will be driven by the growth of the coffee culture in Russia, and as result, increasing demand for specialist coffee shops, as well as further expansion of bars/pubs.

The continued development of a coffee culture in Russia is expected to help to maintain the further rapid development of specialist coffee shops in current value terms, and in terms of the number of outlets and number of transactions. It is anticipated that consumers will further acquire the Western European trend of more convenient and busier lifestyles, which will lead to the development of take-out coffee. Specialist coffee shops is forecast to increase by a constant value compound annual growth rate of 7% over the forecast period, being one of the driving engines for the growth of the whole cafJs/bars channel.

The competition between chains and independent outlets, particularly those operating in Moscow and St Petersburg, is expected to become stronger. Consumers in general will show an increasing preference for known names and brands in the market, given the consistency in quality of offerings, as well as the likely wider range of choices. It is also anticipated that players in cafJs/bars which specialize in coffee will face more intense competition from players in other categories of consumer foodservice, such as convenience stores and fast food. Standalone outlets will be looking for unique selling points to distinguish themselves and to compete with the chains. It is likely that companies will try to offer outstanding designs, additional activities or theme parties. An increasing number of pubs might use television screens, darts, table football or billiards tables in their interiors. The challenge for players in cafJs/bars will be to find a concept which appeals to consumers, and to market it appropriately.

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ADVERTISER INDEX

AHMAD TEA LTD.

ZWIRNEREI A.D. WUTACH GmbH

AHMAD TEA LTD. Tel: +44(0)23 8027 8900 Fax: +44(0)23 8025 5867 www.ahmadtea.com Official distributor in Russia: «SDC-FOODS» Ltd. www.ahmadtea.ru report@ahmadtea.ru Moscow: Tel: +7(495) 234 69 91 Fax: +7 (495) 234 69 95

Zwirnerei a. d. Wutach GmbH P.O. Box 1163, ..

79780 Stuhlingen/ Germany Phone +49 7744 9396-0 Fax +49 7744 9396-20 info@zwirnerei-wutach.com www.zwirnerei-wutach.com

KLD COFFEE IMPORTERS

ELISENTAL

DRAHTWERK ELISENTAL W. Erdmann GmbH & Co Werdohler Str. 40 58809 Neuenrade P.O. Box 1260, 58804 Neuenrade, Germany Phone: +49 2392 697-31 Fax: +49 2392 697-39 teabag@elisental.de www. elisental.de

KLD COFFEE IMPORTERS 9 Pushkarev Pereulok Moscow, 107045, Russia Tel.: +7 (495) 223 0347 Fax: +7 (495) 223 0349 office@kld-coffee.ru www.kld-coffee.ru

MAI S.A.

MAI S.A. SOLIS 8250 B7608FLR — Mar del Plata Argentina Tel.: (54-223) 482-1817 Fax: (54-223) 481-0234 mdp@maisa.com.ar www.maisa.com.ar

TEAMAC S.r.L.

TEAMAC S.r.L. ViaMenghini,1 40054 Budrio(BO), Italy Tel.: +390516926276 Fax: +390516926277 info.teamac@marchesini.it Agent in Russia: TEA HOUSE TONUS St. Dubininskays – 90 Office #402, 115093, Moscow Tel.: 007 (495) 9527154 Fax: 007 (499) 2379908 tonus@teahousetonus.ru

GLATFELTER COMPOSITE FIBERS BUSINESS UNIT

Worldwide contact: GLATFELTER Gernsbach GmbH & Co. KG Phone: +49 7224 66 0 composite.fibers@glatfelter.com Russian contact: GLATFELTER Russia Phone: +7 495 775 69 22 service.russia@glatfelter.com www.glatfelter.com

ANCAP S.p.A.

:

Ancap S.p.A. — via Libia, 1 37066 Sommacampagna (VR) Tel. 045.82.93.088 export@ancap.it www.ancap.it

Cama Group via Como, 9, 23846 Garbagnate Monastero Lecco - Italy Tel: +39 031 879 811 Fax: +39 0 31 856 373 salesRussia@camagroup.com www.camagroup.com

ORIMI TRADE, Llc. :

HALSSEN & LYON GMBH

HALSSEN & LYON GMBH Pickhuben 9 20457 Hamburg, Germany Phone: +49 (0)40 361 43-0 Fax: +49 (0)40 361 43-117 info@haelssen-lyon.de www.haelssen-lyon.de

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CAMA GROUP

COFFEE&TEA INTERNATIONAL # 1/2012

ORIMI TRADE, Llc. 3, Tobolskaya str., St. Petersburg, 194044, Russia Tel: (812) 346 82 40 Fax: (812) 542 15 01 market@orimitrade.ru www.orimitrade.ru