Market Reports

Southeast Asia – the next target for growth

Although Korea and China have made headlines for the phenomenal growth of their coffee industries in the past few years, industry observers are betting on Southeast Asia as the next hot spot. From 2007 – 2011, the region’s total trade in coffee has risen at a compounded annual growth rate of 14.2 per cent to reach US$6 billion, according to Singapore’s Minister of State for Trade and Industry Teo Ser Luck who opened the CaféAsia/International Coffee & Tea Industry Expo (ICT) in Singapore on 14 March 2013. Overall, coffee markets in Southeast Asian nations are a varied lot. Some are both producing and consuming nations like Vietnam and Indonesia (the world’s number two and three producers in crop year 2011-12), while others are purely consuming ones, like Singapore. Each of the major markets – Indonesia, Thailand, Singapore, Malaysia, the Philippines and Vietnam – present unique challenges and opportunities for equipment manufacturers and traders alike, who say the region’s sustained economic growth and increasing consumption mean they need to raise their game now. At ICT, international exhibitors were certainly walking the talk. A total of 95 exhibitors from 22 countries attended the event, as much to promote their businesses as to survey the market. Many say that the launch of this new trade show, and the interest it generated, is itself evidence of the region’s potential. Germany’s Neuhaus Neotec is no stranger to Southeast Asia. Stefan Graack, the company’s Area Sales Manager, says that Europe’s stagnating economy makes it an even more attractive market. “Southeast Asia has grown significantly for us. In Europe, new plants are not being built. Refurbishment, yes, but there has been no new capacities added,” he tells Global Coffee Review. “The coffee industry is growing in Asia due to strong consumer demand, and that makes it one of the best places to sell our equipment. Southeast Asia started slow but the coffee industry in countries like Thailand, Indonesia and Vietnam is picking up. There is opportunity for us here.” Southeast Asia is equally a target market for leading coffee roasting manufacturers Probat Werke. “We sell a lot of products in Southeast Asia,” says Rainer van der Beek, Executive Director for Sales, Probat Werke. “In terms of turnover, Indonesia is our top market. But all forms of coffee are on the rise in this part of the world – specialty coffee, soluble or instant coffee and Nespresso-type single-serves. In Indonesia where the ‘two-in-one’ and ‘three-in-one’ single-serves are very popular, there is great demand for all models of our roasters, especially for tangential roasters of the Jupiter series. This one country contributed strongly to our bottom line and prospects continue to be good.” Van der Beek says that enquiries continue to come in from other Southeast Asian countries. “In Vietnam, industrialisation of coffee roasting has taken off in a big way in the past five to seven years,” he says. “We sell more large roasters there than small ones. This is in contrast to Singapore, where shop roasters are the norm. In Malaysia, we see more interest in torrefacto roasting, which is a well-entrenched local practice.”
Countries with larger populations such as Indonesia, Malaysia and Thailand are important markets for large-scale industrial roasters made by Italy’s Brambati. “The demand for large coffee plant equipment like ours is rising in Southeast Asia,” says Giuseppe Giacobone, Brambati’s Area Manager. “Our business here has grown in the past 10 years, and the region is still growing. Some countries, like Indonesia, are more coffee-oriented and are well-established markets, but there are still a lot of opportunities. The Brambati brand is well known and we are working hard to get it even more known, so it is important for us to maintain contact with Southeast Asia’s coffee trade.” Manufacturers of brewer, grinder and dispensers also tell of Southeast Asia’s promising prospects. According to Ho Chee Wu, Vice President, Sales and Marketing, Asia Pacific for Bunn, the region’s economic vitality and the expansion of food and beverage chains are behind this company’s 30 per cent year-on-year increase in turnover in 2012. “Asia’s home-grown chains such as Malaysia’s Old Town White Coffee and Taiwan’s Sharetea are expanding in Southeast Asia alongside their better-known American counterparts such as McDonald’s, Starbucks and Burger King,” says Ho, who’s based in Singapore. “They are all strong, fast expanding brands. Singapore, Malaysia and the Philippines are our leading markets in Southeast Asia last year.” Ho says that chains like McDonald’s, Starbucks and Dunkin Donuts – all Bunn clients – continue to expand in this part of the world because there is little growth in the Eurozone or the US. “Because equipment purchases are often approved at the headquarters level, their franchisees are automatically our customers,” he says. “We follow the big boys when they make their forays into emerging markets like Southeast Asia.” For Pentair/Everpure, the presence of many regional headquarters of multinational corporations such as Starbucks and McDonald’s in Singapore means it needs to be there too. “Singapore is where purchasing and servicing contracts with equipment manufacturers are signed,” says Pentair/Everpure Sales Director KL Wong. “Being in Singapore gives us the chance to work with global clients through their supply chain and quality control managers, technicians and baristas. Singapore may be a relatively small market for us, but it influences our business in the rest of Southeast Asia.” Brands which do not have a direct presence in Southeast Asia are rethinking their modus operandi. Michael Paquin, CEO of Diedrich Roasters (US) says the Diedrich brand is working towards having better representation in Southeast Asia. “We sell direct to customers now, but hope to grow our service and maintenance capability in Asia,” says Paquin. “To that end, we have just established a partnership in China which will be able to serve customers in Southeast Asia. We think specialty coffee markets in Malaysia and Singapore are likely to follow that of South Korea, which has exploded over the past six or seven years. We are also seeing rapid growth in other Southeast Asia countries. The market is opening up, and people are discovering our machines.” Paquin says that existing customers are today thinking about the next size roaster to acquire. “We have done well in South Korea, Japan, Taiwan and Australia, and we are seeing China taking off,” he says. “The missing part for us is Southeast Asia. We have not been as serious about this region but I want to grow our distributor network around the world, wherever the action is. And we are committing ourselves to this part of the world.” Southeast Asia’s interest in coffee is behind the conceptualisation of the co-located trade show CaféAsia and ICT. The events are organised by Singapore-based Conference & Exhibition Services (CEMS), and its Korean partner Exporum, who is behind the successful Seoul International Café Show. CEMS Managing Director Edward Liu says he hopes the magic will rub off on the Singapore show. “While the idea for CaféAsia first germinated about five years ago, it was not until I saw the phenomenal growth of the Seoul café show – it doubled in size in a year – that I thought the time was right for a similar event to serve the coffee trade in Southeast Asia,” he says. “While Singapore is not a coffee producer, we are a strategic hub and this exhibition can be a gateway to other Southeast Asian markets for those looking to find a foothold in the region.”  Liu says that in Singapore, the standard of living is rising and consumers now have a better appreciation of “the finer things in life and quality coffee has become a part of that”.

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