• Soluble coffee - segmentation


    The soluble coffee market is dominated by two multinational firms: Nestlé and Kraft Foods. One or the other or both have a presence in every main consumer market and indeed probably in many producing country markets as well. In addition there is often a third large supplier in each main market, for example in the United States Procter & Gamble enjoys a reasonably large share of the market while the Ueshima Coffee Company (UCC) is of some significance in Japan. The larger companies manufacture soluble coffee in their own plants and rarely obtain soluble coffee from outside suppliers.

    Nestlé also operates a small number of soluble processing plants in producing countries, primarily aimed at supplying the domestic market there, but also nearby regional markets.

    The scope for outside manufacturers lies in supplying product for:

    • Secondary (own label) brands that have no manufacturing facilities (although this market tends to be rather sluggish); and  
    • Specialist packers of own label coffee in consuming countries. 

    Most supermarket chains prefer to buy from a specialist packer rather than direct from origin, and usually insist that bulk supplies are repacked in retail jars. For all practical purposes, an origin supplier seeking to enter the own label market would be best advised to trade through a specialist packer in a consuming country, especially as in most cases the finished retail product is a blend of coffee from several sources.

    There are several specialist packers of soluble coffee for own label product in consuming countries. Some operate their own processing plants, but also often purchase soluble coffee for blending from other sources to fulfil contracts that are beyond their capacity, or when imported soluble is cheaper than their own product. Other specialist packers have no processing capacity of their own and merely blend and repack product from other sources.

    The retail market for soluble coffee has three general segments:

    • Premium brands of freeze-dried soluble. Nestlé and Kraft Foods dominate in this segment, but there is some significant participation by other brands, particularly supermarkets’ own labels. Both Brazil and Colombia supply freeze dried soluble coffee to this market, which is still growing. Although not the most popular form of soluble coffee, in general freeze-dried is gaining market share in every consuming country at the expense of other types of soluble coffee. It has obtained around 40% of the soluble coffee market in Japan, the United States and the United Kingdom, a little over 30% in Spain and around 25% in Australia. Extra premium blends of freeze-dried coffee composed solely or mainly of arabica and sometimes from a single origin are also marketed in this sector.  
    • Standard brands of spray-dried soluble. These generally consist of coffee that has been agglomerated. Agglomeration is a process that not only improves solubility but also transforms the coffee powder into more attractive granules. Agglomerated coffee is the most popular form of soluble coffee. It accounts for more than half the sales in the majority of consuming markets, although it is losing market share to freeze-dried.  
    • Cheap blends of spray-dried powder. This is often soluble coffee that has been imported from origin and repacked. Considerable excess manufacturing capacity has resulted in extreme price competition and although this is by far the cheapest type of soluble coffee available in many markets, it is losing market share to all other types of instant coffee. It does, however, constitute the larger share of the market in the Russian Federation and many other Eastern European and Asian markets as well as in producing country markets. 

    The total market for soluble coffee is showing signs of strong growth after being relatively flat throughout the decade of the 1990’s. Estimated consumption in countries that do not produce coffee was 22.4 million bags GBE in 2009, of which 28% was manufactured in producing countries.

    Updated 11/2010

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