By Mariano Peluso. When it comes to espresso machine manufacturing, the industry hasn’t strayed far from its original European roots. The continent continues to house the largest number of manufacturers of professional espresso coffee machines worldwide – by a long shot. Europe is not only the largest manufacturer of espresso machines, but has also found itself as the meeting point of two different philosophies. The world of traditional espresso coffee machines, catering to establishments with skilled baristas on hand, and the world of fully automatic espresso coffee machines, where technology picks up where talent lacks. In Europe, it would seem the availability of talent is dependent not only on the type of business, but also the country. According to the latest figures by Dataresearch, Italy, France, Spain and Portugal show a vast preference for traditional espresso machines. In Germany, Netherlands, Switzerland and Austria, fully-automatic machines find a more favourable audience. In the United Kingdom and Poland, traditional models prevail slightly, while in Nordic countries, fully automatic machines have only a slight advantage. The European production of professional espresso coffee machines currently sits at around 340,000 machines, of which 57 per cent are traditional models and 43 per cent are fully automatic models. Only two countries, Italy and Germany, account for two thirds of total production. Half of the main production sites are located in Italy, while other numerous sites are located in Switzerland and Spain, for a total of around 40 production sites in Europe, according to Dataresearch findings. Europe is the primary target market for professional espresso machines, accounting for 54 per cent of total sales (185,000 machines). But the share of exports outside Europe is also important, accounting for 46 per cent, with that figure increasing in recent years. Dataresearch has found that demand in Europe is stable or slightly decreasing, while the United States, Asia and Australia are seeing strong growth rates. The European espresso machine market has not been spared by the regional economic crisis and lack of new investments. Many espresso machine manufacturers are currently seeing the better part of their profits linked to spare parts and services rather than new sales. But Europe is a colourful and fragmented market. While some areas aren’t growing, others are recording good performance. Germany is the largest market in Europe for new espresso machines sold annually, of which 90 per cent are fully automatic. Eric Martin Vazquez, Marketing Director of Melitta System Service, explains that after years of growth, Germany is suffering from a general lack of business investment. The result is mainly affecting coffee machines priced at the upper end. Exports, in particular outside of Europe, are currently the main source of revenue growth. The HoReCa (hotels, restaurants, catering) industry is showing better potential than the café and coffee shop industry. Companies are seeing good results thanks to the service and sale of spare parts and in terms of the number of machines sold. Central Europe, the area that includes Germany, Switzerland, Austria and The Netherlands, currently accounts for around 29 per cent of the European market by number of machines sold. It is the richest region in terms of market value, worth around 237 million euro (US$322 million). In next few years, operators surveyed say this area should see strong performance thanks to the recovery of investments. The market expects growth from independent businesses (i.e. small bars and bakeries) and the development of petrol stations with bars and restaurants. Italy is the second largest market and, together with Spain, Portugal and Greece, represents the largest area in terms of the number of machines sold (59,000 machines) and around 93 million euro (US$126 million) in terms of market value. This area has suffered the most from the economic crisis and a lack of new investments. The value of the espresso machine market dropped significantly over the past few years but, according to David Escoda, Export Manager of Ascaso, there are early signs of recovery, at least for the Spanish market. According to Maurizio Giuli, Chief Marketing Officer at Nuova Simonelli, the success of the Italian professional coffee machine market comes mainly from exports, in particular from Far East markets, while the internal market is still weak. France and the UK are two other important markets in terms of the sale of professional coffee machines. In these markets, traditional models prevail, but a large share of fully automatic coffee machines are sold. Western Europe, the area that includes France, Belgium, Ireland and The United Kingdom, represents around 23 per cent of the total European market in terms of number of machines sold (43,000 machines). Currently, businesses in Paris and London have reported a strong interest in opening new coffee businesses. The UK, particularly, has large potential, according to Chris Salierno, Marketing Director at La Marzocco. The country is seeing a rise in the opening of independent coffee shops interested in offering quality coffee. He says that this niche is strong and is seeing large growth. Other professional coffee machine markets that are slowly expanding include Nordic countries and Poland. The professional coffee machine market in Eastern Europe accounts for 13 per cent of the total European market (around 25,000 machines). Poland and Czech Republic are the richest countries in term of market value at 34 million euro (US$58 million). Poland is the biggest in terms of the number of machines sold, and is experiencing growth thanks to new investments in the hospitality sector. In discussing main market dynamics, countries can more easily be aggregated. However, when discussing success factors and competition, it is more difficult because of peculiarities among territories. Kamal Bengougam, Deputy Chief Executive at Eversys, says that, for example, Germany and Switzerland have common characteristics, such as a large share of fully automatic coffee machines, a distribution linked to regional operators, and a knowledgeable customer mindful of the service and characteristics of machines. But when discussing market dynamics, these two countries have an important difference: Swiss customers have a greater propensity to investment. This means that while Switzerland is a good market to sell premium products, Germany is a good market for entry level machines and most bartenders prefer to rent (and not to buy) the coffee machine. Globally, most manufacturers say price and servicing are the top factors affecting a purchaser’s decision. However, some areas tend to prioritise pricing, including Italy, Spain, France and Poland. The economic crisis has increased the pressure on prices, and manufacturers are adopting a strong policy of discounts. The Polish market is one such market, according to local experts. Although demand in the Polish market is increasing, the average price of a machine is 20 per cent less than a comparable machine in Germany. According to John McGinnell, Sales Manager at Fracino, success factors in the British market are linked overall to the quality of machines and to the brand’s image. The British market has features that make it unique from others in Europe, explains Eversys’s Bengougam. The distribution of machines is in the hands of national operators that offer total solutions: machines, coffee, assistance, training and other services. UK coffee shops have an impressively high level of consumption of coffee per year, and baristas look for high-performance machines. The majority of espresso machine manufacturers surveyed say that the quality of machines is the true deciding factor in that machine’s success – even if the market will not necessarily pay more for that product. Horeca operators are becoming increasingly interested not only in the quality of the machine and the quality of coffee in the cup. Manufacturers are developing models that include new features and are investing in technology. A strategy of “new models” and often “old prices” is being used to try to capture new market shares. In surveying machine manufacturers, one interesting innovation is remote control. Producers of professional coffee machines are introducing this new technology to measure the frequency of usage and for maintenance. Modularity has also emerged as an important element. When a machine is modular, it is easier to remove only the part that malfunctions to facilitate servicing. Functions like this are allowing fully automatic machines to become more similar to small computers. Traditional espresso machines are also focusing on improving technology. T3 technology developed by Nuova Simonelli, provides advanced performance to improve the quality of coffee in cup. The principle is based on the ability of the machine to adapt to the characteristics of each coffee blend by controlling the temperature. To guarantee the best coffee in cup, each coffee blend needs different parameters of calibration for the machine. According to Giuli from Nuova Simonelli, this feature helps baristas to work with different coffee blends and origins on one machine. With all these new technologies, financial trouble at home is forcing manufacturers to look overseas for growth. Internally the strongest prospects are in Eastern Europe, in particular Poland, even if these markets are not yet ready to pay a premium for innovation. Excluding the UK, other Western markets are still weak but there is hope that innovations can stimulate demand.