Swiss are quality conscious and buyers note that they are willing to pay more for a product of good quality. Nevertheless, in some cases the higher prices for the double certified coffees will likely mean that their retail differential against conventional coffees could be significant in the near future and could impact their rate of growth.
This may in part explain the recent slowdown in growth whose timing has somewhat correlated to the dramatic increase of double certified coffees.
A lack of visibility, particularly the paucity of promotion and branding efforts around the sustainable coffees appear to limit market demand as these coffees compete with other heavily promoted mainstream brands.
Reliability of sustainable coffee suppliers has been a major drawback dampening the enthusiasm of Swiss coffee buying firms. There have been a number of cases where contracted volumes and delivery dates were not respected as well as failures to present appropriate
Figure 17.9 Sustainable coffees as a percentage of the Swiss market
T he St at e of Sust ainable C offee
certificates and documentation. There were several mentions of bureaucratic problems and delays in obtaining import licenses from Bio Suisse and the Swiss Ministry. These administrative barriers encourage importation from other European countries rather than direct from origin.
Concerns about the clarity of certification standards arose, as they did in many countries, particularly concerning fair trade and how the benefits of these standards are not sufficiently apparent or transparent to the buyer. Some in the industry claim that there is concern, even among their own buyers, about whether and how the fair trade price “premium” is actually conveyed to the grower.
Further education about the workings and benefits of sustainable coffees directed toward the mainstream coffee industry could pay substantial dividends.
Key factors for growth
Members of the industry were asked to, “Rate the importance or value of the following factors for expanding your sustainable coffee business.”
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! Consistent and reliable supply
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! Price relative to conventional coffee
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! Clarity between different types of certifications, criteria, and labels
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! Awareness of consumers about these coffees If the industry does not fulfill these factors it is likely that its future growth will be constrained.
Respondents were offered 4 choices ranging from
“not at all important” to “very important” (figure 17.10).
The Swiss coffee industry agrees that, after quality, consistency and reliability are of paramount importance. Many concurred that quality has been laudable in recent years, particularly for organic coffees, and that this factor has helped secure a strong market share. Consumer awareness about sustainable coffees is considered quite high in the Swiss market and is therefore not considered a limiting factor. Price is considered the least important factor for these coffees.
Figure 17.10 Key factors for the expansion of sustainable coffees
T he St at e of Sust ainable C offee T he St at e of Sust ainable C offeeT he St at e of Sust ainable C offee T he St at e of Sust ainable C offeeT he St at e of Sust ainable C offee
182 182 182 182 182
The overall market context
The UK market is unique in Western Europe for its predominance of instant coffee. The market is also relatively small, due to the low per capita sales. The British are primarily tea-drinkers and coffee has traditionally been considered a luxury product. In the past, coffee was rarely discounted to attract customers, although this has started to change. The higher overall price level has provided sustainable coffees a better opportunity to compete than in other EU markets such as Germany, where coffee is often discounted and positioned as an inexpensive consumer item.
Over the last two years both the overall market volume and per capita volume sales have declined slightly (figures 18.1 and 18.2).
Compared to the 1990 level of 2.2 kg, however, per capita sales
Source: European Coffee Federation, 2002 and industry sources.
Figure 18.1 Total UK coffee consumption (Metric tons green)
18. Sustainable C offee in the
U nited Kingdom
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have increased. Notwithstanding the overall decline, specific segments such as higher quality coffees and out of home consumption have expanded. The sustainable segment is also growing rapidly.
While roast and ground (R&G) coffee accounted for 13 percent of total sales, instant coffee accounted for 87 percent of sales by value and 83 percent by volume. The latter category experienced a decline of 6 percent by value and 2 percent by volume on the previous 12 months.
Soluble coffee also lost market share against R&G, of approximately 1 percent by value.
Annual sales of R&G according to industry sources will top US$100 million in 2002, an increase of 2 percent in value and 1 percent in volume.
Sales of instant coffee of all types (freeze-dried, granules, powder and novelty products, conventional, decaffeinated, organic and fair trade) were $700 million in 2001, with granules being the biggest-selling product type, by a shrinking margin over the increasingly popular, and more expensive, freeze-dried. Freeze-dried coffee accounts for 36 percent by value and 18
percent by volume of the total coffee market, 41 percent by value and 22 percent by volume of the instant market.
The UK’s green coffee imports in 2001 were up just a bit from 2000 figures without a noticeable corresponding increase in per capita consumption. Although the market relies heavily on robusta coffee, a slim majority of the UK imports (53 percent of total) is still arabica. There was a reduction of about 10 percent for the mild coffees in 2001 and primarily unwashed arabica and some robusta replaced these. Vietnam is still the dominant supplier by far followed by Brazil, Colombia, and Indonesia. Together these four supply two-thirds of the total conventional market.