How to increase internal coffee consumption

HOW TO INCREASE INTERNAL CONSUMPTION OF COFFEE: BRAZIL´S SUCCESS STORY

Carlos Henrique Jorge Brando

BRAZIL IS SECOND LARGESTCONSUMER IN THE WORLD

MORE QUALITY = MORE CONSUMPTION

BRAZIL’S INTERNAL

CONSUMPTION OF COFFEEOF COFFEE

YEAR 2001- 13.6 million bags of coffee

- 40 % of average Brazilian green coffee production

- 4.65 kg per capita/year

- 1,500 working roasting concerns

- 2,500 brands traded

- Earnings : US$ 2,0 billion/year

- Target: 15 million bags/year

SUMMARY HISTORY1986/88

ROASTERS’ CONCERN ABOUT CONSTANT DECLINE INROASTERS CONCERN ABOUT CONSTANT DECLINE IN INTERNAL CONSUMPTION

1965 1985

Consumption per capita

1965

4.72

1985

2.27(kg / year)

V l I d t i li dVolume Industrialized(million bags / year)

8.15 6.45

ABIC (THE BRAZILIAN COFFEE ROASTERS ASSOCIATION) POSITIONED ITSELF AS THE FORUM )

FOR DISCUSSION OF THE SECTOR’S PROBLEMS AND TO SEEK THEIR SOLUTIONS

1988VOX POPULI SURVEY

“coffee is all the same”coffee is all the same“all coffee is of bad quality”

COFFEE HAD BECOME DISCREDITEDCOFFEE HAD BECOME DISCREDITED, BUT CONTINUED TO BE SEEN AS A SYMBOL OF SOCIABILITY AND WASSYMBOL OF SOCIABILITY AND WAS

STILL AN INGRAINED HABIT IN PEOPLE’S DAILY ROUTINEPEOPLE S DAILY ROUTINE

19881ST NATIONAL SAMPLE - 1988

30% OF BRANDS ANALYZED WERE30% OF BRANDS ANALYZED WERE BELOW STANDARD BECAUSE OF

USE OF MIXTURES AND IMPURITIESUSE OF MIXTURES AND IMPURITIES

É14º CONCAFÉ- RIO DE JANEIRO

APPROVED ESTABLISHMENT OF COFFEE SELF REGULATION ANDCOFFEE SELF-REGULATION AND

PURITY CONTROL PROGRAM

SELF-REGULATION AND PURITY CONTROL PROGRAMPURITY CONTROL PROGRAM

• Only 100% pure coffees canOnly 100% pure coffees can use label on packaging

Auditing program• Auditing program - independent company

d li- random sampling- penalties

• Introduction- campaign oriented tocampaign oriented to

consumers- actions within roasting

communityABIC PURITY LABEL

community

1989AUGUST

LAUNCH OF ABIC PURITY LABEL

- NATIONAL TV CAMPAIGN

SUPPORT OF PUBLIC RELATIONS FIRM AND- SUPPORT OF PUBLIC RELATIONS FIRM AND ACTIONS AIMED AT DIFFERENT SEGMENTS OF THE PUBLIC:THE PUBLIC:

CONSUMER PROTECTION AGENCIESTRADE ASSOCIATIONSPUBLIC SECTORPUBLIC SECTORDISTRIBUTION CHANNNELSPRESSINFLUENTIAL PERSONALITIESINFLUENTIAL PERSONALITIES

BRANDS WITH PURITY STAMP ATTRACT INCREASING DEMAND FROM

CONSUMERS, DISTRIBUTION CHANNELS AND THE PUBLIC SECTORAND THE PUBLIC SECTOR

THE START OF THE RECOVERY OF COFFEE’S CREDIBILITYCOFFEE S CREDIBILITY

THE SECRET

DETERMINATIONAND

HARD WORKHARD WORK

ABIC PURITY LABELABIC PURITY LABELTHE UNION OF THE SECTOR LED TO A

PROJECT WHICH IS CONSIDERED TO BE ONE OF THE FOOD & BEVERAGE SECTOR’S MAJOR SUCCESSES IN RECENT YEARS

A FACT WITH WORLDWIDE REPERCUSSION:THE BRAZILIAN MARKET WAS THE FASTESTTHE BRAZILIAN MARKET WAS THE FASTEST

GROWING COFFEE MARKET IN THE WORLD IN THE LAST 5 YEARSIN THE LAST 5 YEARS

INITIATIVES 1989 TO 1998INITIATIVES 1989 TO 1998National Electronic Media;Media Relations;Participation in Trade Fairs & Other Events.Participation in Trade Fairs & Other Events. Research Studies: Market

HealthHealth Technology

Opening of Coffee Shops/Bars;Launch of Gourmet & Special Coffees;Launch of Gourmet & Special Coffees;New Coffee-based Products (cold drinks, sachets, desserts, ice creams, etc.);desse ts, ce c ea s, etc );

TOTAL INVESTMENTS IN THE PROGRAM TO PROMOTE THE GROWTH OF THE INTERNAL MARKET

TOTAL ABIC INVESTMENTS UP TO 1998:US$ 26.7 MILLION SAMPLING:US$ 5 5 MILLION MARKETING:US$ 21 2 MILLION

4,5 4,1

SAMPLING:US$ 5.5 MILLION , MARKETING:US$ 21.2 MILLION

3,9MI US$

1,1 0,63,5

43,5

2 5 2,5

0 4

0,7

0,32,5

3 Monitoring

M k ti

1,9 2,02,2

2,4

1,7

2,5 ,

2,8 3,0 3,30,2

0,5

0,40,4

0,50,8

1,5

2 Marketing

1,72,2

1,22,0 1,8 1,5 1,7

0,5

1

01989 1990 1991 1992 1993 1994 1995 1996 1997 1998 YEAR

INVESTMENT: • US$ 27 MILLION IN 10 YEARS

RETURNS: • ADDITIONAL SALES OF 7 MILLION BAGS PER YEARMILLION BAGS PER YEAR

• US$ 1 BILLION PER YEARUS$ 1 BILLION PER YEAR IN SALES (average retail price basis)price basis)

• SIZE OF INDUSTRY• SIZE OF INDUSTRY DOUBLED

RESULTS ACHIEVEDRESULTS ACHIEVED

1988 - 30 % OF BRANDS CONTAINED IMPURITIES988 30 % O S CO U S

1998 - 5 % OF BRANDS CONTAINED IMPURITIES, CORRESPONDING TO LESS THAN 1 %CORRESPONDING TO LESS THAN 1 %OF ALL COFFEE CONSUMED IN BRAZIL

InterScience Surveys 91 vs. 97

WHAT DO PEOPLE THINK OF WHEN THEY ARE THIRSTY

92%86%Soft drinks

83%

77%62%Fruit Juice

83%

19%

57%

41%Coffee

Water

39%15%

19%

Milk

9%

22%11%

Ch l t

Tea 1997

1991

11%9%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Chocolate

InterScience Surveys 91 X 97

RESISTANCE TO BEVERAGESRESISTANCE TO BEVERAGES

24%18%Soft Drinks

16%

33%

18%

24%

14%Tea

Coffee

16%

11%8%

10%

Powdered Drinks

Tea

21%

9%

9%

10%

Milk

Groselha

199714%

7%5%

8%

Chocolate

Fruit Juice1997

1991

5%

0% 5% 10% 15% 20% 25% 30% 35%

DIVERSIFICATION OF PRODUCTS OFFERED TO THE CONSUMERTHE CONSUMER

BRAZILIAN COFFEE CONSUMPTIONREAL & PROJECTED

Per Capita (Kg/year) Million bags

11 12 2 13,515,0

8,17,1 6,4

8,2 8,5 8,9 9,1 9,3 10,111,011,5 12,2

, 6,4

4 7 R+G4,73,2 2,3 2,7 2,8 2,9 2,9 2,9 3,1 3,3 3,5 3,6 4,0 4,4

5 5 5 0 1 2 3 4 5 6 7 8 1

R+G

196

197

198

199

199

199

199

1994

199

199

199

199

200

5.9 2.8 3.4 3.5 3.6 3.7 3.9 4.2 4.33.6 4.5 4.9 GREEN

INTERNAL CONSUMPTION & EXPORTS (thousands of 60 Kg bags)

YEAR CONSUMPTION EXPORTSYEAR CONSUMPTION EXPORTS1985 6,450 19,1001986 5,560 9,9001987 5,900 18,5001988 5,800 17,1001989 6 400 18 3001989 6,400 18,3001990 8,200 17,0001991 8,500 21,1001992 8,900 18,8001993 9,100 17,8001994 9 300 17 2501994 9,300 17.2501995 10,100 14.5001996 11,000 15.3001997 11,500 16.7001998 12,200 18.200

THE INTERNAL MARKET AND MAIN IMPORTING COUNTRIES IN

19981998( In thousands of 60 kg bags)COUNTRIES VOLUME %

USA 2.825 11,6%GERMANY 2.597 10,7%

ITALY 1.637 6,7%JAPAN 1.398 5,8%JAPAN 1.398 5,8%

BELGIUM / LUX. 853 3,5%GREECE 585 2,4%SPAIN 571 2 4%SPAIN 571 2,4%

SLOVENIA 560 2,3%ARGENTINA 538 2,2%

SWEDEN 510 2,1%BIGGEST IMPORTERS 12.074 49,7%

BRAZIL 12.200 50,3%BRAZIL 12.200 50,3%TOTAL 24.274 100,0%

THE INTERNAL MARKET AND MAIN IMPORTING COUNTRIES IN 1998

( In thousands of 60 kg bags)( In thousands of 60 kg bags)

12.000

14.000 USAGermanyItaly

8 000

10.000

ItalyJapanBelgium / Lux.GreeceTE

RS

6.000

8.000SpainSloveniaArgentinaM

POR

TR

AZI

L

2.000

4.000g

SwedenBiggest Imp.BrazilO

P 10

I BR

0

T

PER CAPITA CONSUMPTION:kg/person in 1998

10 00

12,00

8 248 469,5510,56 6,00

8,00

10,00

2,794,094,524,535,005,416,59

8,248,469,55

2,00

4,00

6,00

y ce taly

AZIL Spain USAJa

pan

0,00

Finland

Norway

elgium/Lux.

Sweden

German

yFran

ce ItaBRAZ Sp J

Belg

PURITY LABEL / PURITY CONCEPT

PURITY: INCREASED AWARENESS AND CREDIBILITY WITHIN THE SECTOR

Si h b i i f h PSince the beginning of the Program, in 1989:

• independent auditors

• approximately 50,000 samples of coffee

• all 27 Brazilian states

• approximately 900 cities/year

COFFEE AND HEALTH• Comprehensive Program

- Research- Dissemination of results

• Dr. Darcy Lima / UFRJ- Brazilian Studies- Creation of Institute for Coffee- Creation of Institute for Coffee Studies (ICS)

- Positive effects of coffee(depression drug and acohol(depression, drug and acohol addiction)

• Dissemination of results- Media- Public Relations

POSITIVE COMMUNICATION ABOUT COFFEE

Coffee and HealthInstitute for Coffee Studies (ICS)Institute for Coffee Studies (ICS)

Vanderbilt UniversityCenter of excellence: medicine, pharmacology and addiction

Coffee and HealthInstitute for Coffee Studies (ICS)Institute for Coffee Studies (ICS)

• Vanderbilt University, Nashville, USA

• Brazilian results and actions triggered its creation - Dr. Darcy Lima is co-director- Mr. David Nahum is chairperson of strategic planning committeecommittee

• Articles in prestigious journals

• Preliminary results are extremely promising• Preliminary results are extremely promising

• Contributions are welcome

ANDANDTHETHE

FUTUREFUTURE

ONE COUNTRY,MANY FLAVORS

São Paulo StateSão Paulo State

R iR i C ffC ff

São Paulo StateSão Paulo State

RegionRegion CoffeesCoffeesMogiana (Northeast) Naturals and

Pulped naturalsp

Center-West Naturals and

Pulped naturals

A d ti 3 5 il bAverage production = 3,5 mil.bags

Potencial production = 5,5 mil.bagsPotencial production 5,5 mil.bags

State Coffee ChamberState Coffee Chamber

• Bring together the coffee chain• Bring together the coffee chain

• Increase coffee businesses• Increase coffee businesses

• Improve coffee quality• Improve coffee quality

• Increase coffee consumption• Increase coffee consumption

Quality CampaignsQuality CampaignsQuality CampaignsQuality Campaigns

• Producers

• Roasters• Roasters

C• Consumers


• Good Practices for Quality

• Training growers and

employees

• Focusing on high quality

ffcoffees


“Quality through the coffee chain”“Quality through the coffee chain”

AGRONOMISTS GROWERS COOPS ROASTERS RESTAURANTS

CUSTOMERSCUSTOMERS


Phase 1 : GrowerPhase 1 : Grower• 6 regional meetings

Phase 1 : GrowerPhase 1 : Grower

• 70 agronomists• 300 field visits to

fazendas8 500• 8,500 growers


Phase 2 : RoastersPhase 2 : Roasters• Seminar “Coffee Quality in the Roasting

I d t ”Industry”

• 140 attendees (roasters)140 attendees (roasters)

• Segmentation according to different

qualities

Segmentation ProposalSegmentation ProposalR / G COFFEESR / G COFFEESR / G COFFEESR / G COFFEES

Sensorial EvaluationSensorial Evaluation0 3,5 6,5 7 6 10

Sensorial EvaluationSensorial Evaluation

7,6 10Not

0 1 2 3 4 5 6 7 8

Not Recommended Traditional Superio

rGourmet

0 1 2 3 4 5 6 7 8 9 10

Mininum acceptableacceptable

level

Quality CampaignsQuality Campaignsy p gy p g

Phase 3 : Restaurants / Phase 3 : Restaurants / ConsumersConsumers

• 16 fine restaurants

• 40 days of cupping activities

• 25,000 consumers,

Quality CampaignsQuality Campaigns

“ THE FLAVOR OF THE COFFEE CROP”“ THE FLAVOR OF THE COFFEE CROP”

• 25,000 customers• U$ 30,000 total cost

U$ 700 000 di t• U$ 700,000 media return• 10 TV theme10 TV theme• 3 Radio theme• Newspapers and magazines

Gourmet Coffee in SupermarketsGourmet Coffee in Supermarketspp

Gourmet12%

Superior4% 12%4%

Traditional84%

BETTER QUALITYBETTER QUALITY

=

HIGHERHIGHER

CONSUMPTIONCONSUMPTION

Business

How to increase internal coffee consumption