Market Reports

Price drop may increase coffee consumption in Russia

Coffee prices in Russia may significantly decrease by the end of the year, according to Ramaz Chanturia, CEO of the Russian Association of Tea and Coffee Producers (Rusteacoffee). Chanturia says this is mainly due to Russia joining the International Coffee Agreement 2007, which was recently ratified by the Russian National Parliament State Duma. The signing of the agreement means Russia is joining the world’s leading coffee producers, as well as optimising coffee supplies of coffee to the country and reducing logistics, transportation and other costs. This should also provide an impetus for further development of the Russian coffee market despite the current economic crisis in the country. The economic crisis in the country and devaluation of the national currency – the ruble – has not had a negative effect on coffee consumption in Russia, which continues to grow. Since 1998, coffee consumption in Russia has increased by more than 50 per cent, reaching 250,000 tonnes in 2014. In value terms it has amounted to US$3 billion. The percentage of Russians who regularly consume coffee is currently estimated at between 76 and 77 per cent. The Russian coffee market  is currently experiencing serious changes, which are mostly reflected in the decline of consumption of instant coffee in favour of natural. Instant coffee accounted for 67 per cent of the market in 2011, but at present its share is estimated at 60 per cent and expected to decline to 55 per cent by 2018, according to analysts at the Russian Ministry of Agriculture. In 2014 the Russian coffee market amounted to 123,300 tonnes, which is comparable to the figures in 2013. High prices currently remain one of the major obstacles in the increase of coffee consumption and growth of the market in Russia. Currently, coffee prices in Russia are the highest in Europe, estimated at US$37 per kilogram in 2014, compared to the average of US$23 per kilogram in the countries of Western Europe and $18 per kilogram in Eastern Europe. However, according to analysis from the Russian Ministry of Industry and Trade, the consumption of coffee in Russia will continue to grow this year, as local customers remain very loyal to the brands to which they are accustomed. Elena Mazur, Director of Corporate Communications at Rosinter Restaurants, which operates the Costa Coffee houses in Russia, says the ever-growing popularity of natural coffee in Russia has been observed since 2010. This was when the first coffee house, owned by the British multi-national coffeehouse company, was opened in the country. “In recent years coffee houses have become those places where people spend more and more time eating breakfasts, organising business meetings or romantic dates,” she says. “The demand for natural coffee in Russia will continue to grow in the near future, however, due to a current economic decline in the country, its rates may not be so rapid as initially expected.” According to Mazur, Russia joining the International Coffee Agreement 2007 will have a positive effect on the country’s coffee market and will result in a further increase in consumption. This trend has also been confirmed by Russian retailers. According to Andrey Golubkov, an official spokesman for Azbuka Vkusa, one of Russia’s leading retail chains, sales of natural coffee are steadily growing. This is in contrast to the instant coffee sector, which is going backwards. Andrei Bader, Board Member of Nestle Russia, says that, like other countries, the majority of coffee in Russia is consumed in the morning. According to his predictions, despite the ever-growing share of natural coffee, sales of instant coffee will remain stable during the next several years. He adds that the popularity of coffee machines, which have not been common in Russia until recently, will also continue to grow. The increase in coffee consumption is also driven by the ever-growing popularity of coffee houses in Russia, as well as the increasing popularity of the take away concept. According to market analysis, the coffee house sector has the biggest potential for further growth in Russia. Oleg Klepikov, CEO of inFolio Research Group, one of Russia’s leading analyst agencies in the field of tea and coffee markets, the Russian coffee market is currently far from saturation. This is seen in the case of Moscow and St. Petersburg – the country’s largest cities. According to Klepikov, the current number of coffee houses in St. Petersburg is estimated at about 700, and has the potential to open 300 middle-priced outlets, as well as ten to 15 premium coffee shops during the next couple of years. Klepikov adds that the current level of saturation in Moscow’s coffee house market is estimated at 70 per cent, while the overall potential of the city is estimated at between 1500 and 1800 outlets. According to Klepikov, one of the main features of the Russian coffee house market is a complete absence of the low-priced sector of the market, which is covered by fast food chains. Up to 74 per cent of the market is controlled by the coffee shops from the middle-priced range of the market, where the average bill is around 700 rubles (US$15-17). The Russian coffee market is currently in an intermediate stage of development, according Evgenia Kopylova, General Director of OOO Vanlang, one of Russia’s largest coffee importers. Kopylova says the popularity of coffee is still significantly lower than tea, which is consumed by 90 per cent of the Russian population. In contrast to the tea market, the level of saturation of the Russian coffee market still remains relatively low. Vietnam currently remains the largest supplier of roasted coffee to Russia with a market share of 31.9 per cent in 2014. Indonesia is second at 19 per cent, while Brazil sits at number three at 17.3 per cent. Among the largest importers of instant coffee to Russia are India (19.4 per cent), Brazil (19 per cent) and Germany (18.2 per cent). Currently, 85 per cent of all coffee consumed in Russia, is manufactured within the territory of the country. Among the largest market players are Nestle – 23 per cent, Kraft Foods (Mondelez) –  19 per cent, and Strauss and Orimi Trade, with market shares estimated at 7 per cent each. GCR

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