If you were to pile up every bag of coffee a country bought in the last coffee year on record, Germany’s stack would do more than just shadow over its European peers.
At nearly 22 million 60-kilogram bags in the 2012-13 crop year, the country imported almost 20 per cent of total world imports. To put this figure into perspective, Italy, Europe’s second biggest importer and the continent’s darling of coffee, brought in 8.8 million bags, followed by France at 6.6 million.
In the last 2013-14 coffee year total German imports grew to around 22.5 million bags, and the number is pegged to rise to as much as 23 million bags in the new 2014-15 crop year, according to ICO and other industry figures. Even at these levels, the German coffee industry is expected to keep growing.
“We are in the very highest end of consumption when it comes to per capita consumption in Germany and the German coffee market is also the biggest market when it comes to being an exporter of processed coffee products,” Holger Preibisch, Secretary General of the Hamburg-based German Coffee Association, tells GCR Magazine.
“We have the knowledge of green coffee from hundreds of years of roasting experience, we have logistics centres at ports such as Bremen and Hamburg, and we have everything in between from the instant market to decaffeination technology. Germany is very much a coffee nation and coffee is the most important beverage in Germany. It even surpasses beer, which is no small feat,” laughs Preibisch. “Our latest figures show that per capita consumption of beer in Germany is 107 litres while water is 140 litres and coffee comes in number one with 165 litres. And the coffee industry is still increasing across all the market segments,“ he says.
When international coffee statistics group the European Union together as a single market, over half of the coffee reported is either consumed in, processed, manufactured, or re-exported by Germany. Add to that the coffee machinery segment, from brewers to roasters, sorters and millers, and the world’s coffee industry has largely been built on, and expanded with, German equipment.
When the first coffee growing countries started moving into large-scale commercial production, they used German machinery to make this transition. The vast majority of coffee consumption industries across the world were started using German Probat roasters.
It’s been over 200 years since the first big pieces of machinery used for coffee processing were invented in Germany, and the local coffee industry isn’t slowing down, but rather expanding across all market segments.
“The industry is still increasing capacity, for example in soluble coffee (Swiss food giant) Nestlé opened a new plant specifically for the soluble market in Eastern Germany four years ago, and a few months ago Nestlé opened a second plant with capsules for the Dolce Gusto market,” says Preibisch.
Total imports in Germany make up half of the coffee imported by the European Union. Germany is almost on par with the United States as the world’s largest import-based coffee market.
Despite the arrival of capsules and other single-serve products, surprisingly to many, traditional drip coffee is still king in the German market. Preibisch says that the arrival of new products like capsules may even have helped spark the revival of filter coffee.
“When you look at the main market in Germany, filter coffee is still the number one way, [accounting for] 70 per cent of consumption. What is very interesting is that filter coffee really is the mainstream product that roasters and coffee shops cater to. As such, we’re seeing that filter coffee has had a revival in the past few years,” says Preibisch.
Drip coffee has increased its market share to 70 per cent in 2013. This is up from 60 per cent in 2012 and 56 per cent in 2011, according to the German Coffee Association. The association credits this growth to improved quality and more variety in the roasted coffee segment.
“Filter coffee is regaining strength in Germany now. Black coffee is related to bean quality and that is the reason why filter coffee is coming back in the high-end segment of the specialty coffee market,” says Dr. Steffen Schwarz, a private analyst with the Coffee Consulate consultancy. Schwarz is also a professor at the Baden-Wuerttemberg Cooperative State University Heilbronn, where he lectures about coffee, sensory and food-management.
“Filter coffee is still one of the most consumed coffee beverages in Germany at home, because it’s easy to prepare with already existing technology. But since the late 1990s, we have also seen coffee in Germany become more of a fashion with coffee shop culture spreading across Europe. And the profession of the barista has been growing as well. That means that today there are far more places to sit down and enjoy a good cup of coffee and people also take some pride in preparing nice and decent coffee more and more at home,” he tells GCR Magazine.
Schwarz and Preibisch agree that strong competition has been a key factor in promoting the roast and ground industry, prioritising quality above all else.
“The coffee market in Germany, unlike the United States, is characterised by fierce competition at the processor, wholesale trade and grocery level,” reported German analysts F.O. Licht in a market report.
But not everyone sees the competition as healthy. Julia Koerner of the University of Kiel’s Department for Food Economics and Consumption Studies published a study on the retail price of roasted coffee from 2000 to 2010. She found that competition has continued to increase during the past 15 years since German roasters Tchibo and Eduscho merged in 1997. She found that this lead to “devastating competition among roasters who could be inclined to cut prices for the sake of mere survival”.
The bonus of keeping prices down was a boost in consumption. “On the supply side, few roasters dominate and that market structure influences the market outcome and explains the processors’ ability to exercise market power,” wrote Koerner. She added that the market is influenced “due to low price elasticity related to a high level of consumption”, among a number of factors.
On per capita consumption, Germans are the fifth biggest coffee drinkers in the world at 6.5 – 7 kilograms per person per year. They are only surpassed by Nordic consumers Finland, Denmark, Sweden and Norway. Considering Germany’s massive population of some 81 million people, this makes the country a giant in its own right. Total domestic consumption averaged between 8.9 – 9.5 million bags per year between 2005 and 2010.
A little over 50 per cent of all the coffee imported to Germany is supplied by Brazil and Vietnam, the world’s number one and two producers. Each has a 34 per cent and 18 per cent market share respectively of the German coffee market, according to official German import figures. Five roasters control 90 per cent of the German coffee market, according to industry estimates. Hamburg-based Tchibo GmbH, with its Jacob brand, takes the lead.
This major roaster has nothing but positive sentiments on where the German market is heading. Tchibo recently said it expects overall consumption in Germany is expected to grow to a stunning 10.7 million bags by 2019, according to local press reports.
That growth is expected to come from every segment of the German coffee market. Instant and decaf coffee sectors continue to grow, selling locally and overseas. Although capsules are doing relatively well, they still have a long way to go.
“In 2013 the capsule and single serve market increased 27 per cent, but still from a relatively low base. Since it was introduced to the market 10 years ago it currently [only] represents about 4 per cent of the total [retail] market,” says Preibisch. “At home what we see is that consumers now increasingly have more different systems for coffee preparation. But all have, and still prefer, filter coffee. In 33 per cent of households you now have at least two different brewing systems, mostly including some kind of capsule or single serve system.”
While the introduction of single serve seems to have increased consumption at home, in many cases it has also inspired Germans toward better roast and ground blends in their “preference for the easy making of freshly brewed, good quality coffee”, says Preibisch.
“The more the consumer understands about coffee, the lower their tolerance is for bad coffee. Single portion markets have been one of the strongest growing segments, but we should not forget the specialty coffee market with many small roasters and coffee bars. In general, all segments are growing but the small companies have been doing better than the big ones due to [making better] quality,” says The Coffee Consulate’s Schwarz.
According to market intelligence firm Euromonitor International, the specialty coffee market will grow significantly in the next few years, as coffee becomes increasingly valued as a luxury product.
“Demand for coffee products that are fast and quick to prepare is predicted to remain high… One group of consumers sought greater convenience and thus opted to use coffee pod machines at home and buy coffee-to-go when outside the home. The second group of consumers sought higher quality coffee and thus opted for coffee beans to use with espresso machines, instead of using filter machines,” said Euromonitor in an August 2014 report.
The report recognised the rapid growth in both single-serve and instant coffee products, but also said that “as coffee-pods become mainstream, developed markets are looking for products offering the retail/food service luxury experience at home”. It noted the quality component would be key to any continuing success in the German market. It also said that “specialist coffee and tea shops will be vital for educating consumer about brands and new products” and the importance of the coffee shop sector “will only grow” from now through to 2018.
If these predictions hold, bakeries are set to benefit. Preibisch explains that the “luxury feeling” going along with coffee is one that German consumers have traditionally found in bakeries, of which there are plenty across the country. With 45,000 bakeries producing everything from freshly baked bread to top-end pastries, this sector is the de-facto coffee shop culture in Germany. Here coffee is brewed freshly and a growing number of bakeries have invested in trained baristas and freshly roasted coffee as well.
“We have around 45,000 bakeries in Germany, 2200 coffee shops and 600 specialty roasters, of which half have opened in the last five years alone,” says Preibisch. “They provide hand-roasted artisan coffee and Germans have always preferred homemade food and beverages. So even if these 600 [specialty] roasters only represent about 3 per cent of the market for roasted coffee, they help spread the message about what coffee and quality is all about.” GCR