The word “coffee” comes from the Arabic word “kaveh”, which means strength and energy. Every day, more than 1,400 million cups of this beverage are drunk around the world. Coffee is a key element of world trade, with the main varieties for sale being Arabica and Robusta. These two types occupy 98% of the market in the ratio of Arabica 70% and Robusta 30%. Approximately 2% is occupied by rare expensive varieties. Brazil is the world’s leading coffee producer – about 35% of all coffee beans are grown in this country.
Coffee market volume: top 10 producing countries (2014, in 60 kg bags, pcs.):
- Brazil – 45,342,000
- Vietnam – 27,500,000
- Colombia – 12,500,000
- Indonesia – 9,000 00
- Ethiopia – 6,625,000
- India – 5,746000
- Honduras – 4 650000
- Mexico – 4,000,000
- Guatemala – 3,500,000
- Peru – 3,400,000
Coffee market in Ukraine: production, imports and exports
Ukrainian producers import raw materials not from producing countries, but through intermediaries. They buy raw materials from neighboring countries – primarily Poland (almost two thirds of all orders) and Russia. The share of cooperation with producer countries (primarily Brazil) accounts for 23% of the total number of orders for 2015 and Q1 2016 (this does not apply to large international companies – they have established relationships directly with raw material producers).
The bulk of coffee supplies to the Ukrainian market in 2015 were made via Germany, Italy, Poland, Australia, Vietnam and India. Most transactions are made via the Internet, because of the lower prices there. In 2015, Ukraine imported coffee worth almost 86,294 thousand dollars.
Imports of finished products are carried out by large retail chains. Exports of finished products are at an extremely low level (due to the fact that raw materials are not produced in Ukraine). The main buyers of coffee and coffee blends from Ukraine are traders from Moldova, Belarus, Georgia, Lithuania and Armenia.
Market research: coffee market trends
In Ukraine in 2016, consumption remained at the same level (in physical terms), but coffee consumers shifted from the high price segment to the middle segment due to the depreciation of the hryvnia against the background of the previous level of salaries. In addition, due to the crisis, consumers began to spend less on visiting cafes and restaurants and spend more time at home, which also had a positive impact on the level of sales of packaged coffee and tea.
Over the last decade, the demand for coffee in Ukraine has increased significantly (between 2003 and 2013, consumption levels increased by 23%) and continues to grow. However, due to the unstable economy and currency devaluation, coffee prices have increased significantly. The coffee business in Ukraine is developing intensively, and today there is a growing demand for portioned sticks and the mid-price segment of products.
Coffee culture is developing in Ukraine, and coffee festivals are constantly taking place. Lviv is considered to be the capital of coffee. There for several years in a row there is a city festival “Na kava do Lviv”, besides the production of Galka and Nescafe is located in this city. Also popular are the brands “Kava zi Lviv”, and “Lvivska kopalnya kava”. Coffee festivals were held in Kyiv, Kamyanets-Podilskyi and even in Mykolayiv.
Indie coffee shops are gaining popularity in big cities, where you can not only drink coffee, but also buy ground or bean coffee in packaging designed specifically for a particular coffee shop.
Russian brands “Jockey” and “Zhardin” occupied a significant share of the Ukrainian market. They fell under the import ban together with other Russian goods. This partially changed the picture of the Ukrainian market, as these brands were quite popular. Today, they can still be found on the shelves of some stores,
Own brands. Together with the crisis, the markets are conquered by own brands of large retail chains. This is due to the lower price of such products.
Coffee market research: general consumer preferences
The most popular type of coffee is instant coffee. It accounts for 63.8% of sales, followed by ground and bean coffee – 21.4, coffee mixes – 14.4%. Although the level of awareness of varieties is growing, it is still relatively low (compared to the knowledge of the average European).
70% of all coffee consumption is for home use. About 25% of consumption is consumed in cafes and restaurants. The rest is consumed in offices and purchased from coffee machines.
When it comes to packaging, consumers prefer small batches weighing up to 400 grams. This applies to both bean and ground coffee as well as instant coffee. However, for ground and bean coffee, there is a tendency to increase the percentage of purchasing large packs. This is due to cost savings.
Coffee marketing research: frequency of consumption
More than 49% of consumers buy coffee once a month, 31% once every 2-3 weeks, 10% once every 2 months, 8% once a week and only 2% more than once a week. Regular customers on average drink 2 cups of coffee per day and buy coffee for themselves (80%).
Coffee market review: criteria for product selection:
- flavor;
- price;
- brand awareness and advertising;
- country of manufacture;
- package design;
- package volume;
- promotions and discounts at the point of sale;
- advice from friends and acquaintances;
- other.
When choosing coffee, consumers favor those brands with which they have had a positive experience. In addition, promotions and discounts play an important role (not only a cash discount, but also additional gifts – goods that the customer receives with the coffee: a cup, a spoon, chocolate). Coffee packaging design is important for consumers in the premium segment .
Coffee market in Ukraine: places to buy
More than 73% of consumers buy coffee in traditional places – these are primarily supermarkets, as well as grocery stores and markets. The share of purchases in hypermarkets is 13%, specialized stores and tea and coffee departments – 12%, stalls and tents on the street – 1%, other outlets – 1%.
Market features: analysis of coffee consumers
60% of Ukrainian consumers are inclined to buy tea and coffee of international brands. Firstly, because they are major market players, secondly, due to intensive advertising campaigns they are more recognizable. Thirdly, coffee is not growing in Ukraine, and subconsciously an international brand is associated with higher quality products.
Tea and coffee in Ukraine are the most vulnerable to a drop in sales due to price increases. This means that the culture of coffee drinking is not fully formed, and there are no strong links with brands among mass consumers.
The largest amount of bean and ground coffee is consumed by residents of big cities and western part of Ukraine. In the southern and eastern regions of Ukraine its consumption is low – only 9.2%.
Tea in Ukraine is consumed more than coffee, coffee is much less well understood, and the choice is often guided by advertising or external factors.
Coffee market analysis: price level
Between 2001 and 2015, the price of quality coffee beans increased by 400%.
The cost of raw materials in the market is influenced by:
- the purchase price of raw materials (especially bean and ground coffee);
- price spikes on the world market;
- the quantity of goods being procured;
- crop levels and currency exchange rates.
The wholesale price of coffee (which is constantly increasing) is also affected by climate change. Even with high harvests and a slight decrease in the price of coffee on world markets, this usually has no effect on the final price of the product in Ukraine. Brazil reports that The 2016-2017 harvest will be a record crop of more than 50.5 million bags (3.53 million tons).
The price of raw materials accounts for 50% of the cost of the final product. In 2015, the cost of coffee at retail increased by an average of 40% (but it had increased before that in 2014).
Ukrainian coffee market: analysis of the main players and peculiarities of their positioning
The most popular brands are (by segment):
- instant coffee – Jacobs and Nescafe;
- bean and ground coffee – Lavazza and Jacobs;
- coffee drinks – MacCoffe, Jacobs, Nescafe.
Nescafe
Nescafe is owned by NESTLÉ Corporation. In Ukraine, Nescafe coffee is produced at Svitoch confectionery factory in Lviv. In 2015, the company received net profit in the amount of UAH 271 mln. . Объемы реализации кофе в 2015 году увеличились почти в 2,3 раза до 1,365 млрд. UAH. (which amounted to 58.9% of the total sales volume of all factory products).
The name of the brand comes from combining the root NES – and the word “café” (umbrella brand). NESTLÉ’s philosophy is to support national producers, but it is not possible to grow coffee in Ukraine. Coffee beans are purchased and the granules are produced in Ukraine. Nescafe are the creators of instant coffee.
According to legend, there was too much coffee in Brazil, and the country’s government asked Nestlé to find a way out for the excess coffee. After 8 years of development, the first instant coffee was presented (opinions on the discovery of instant coffee differ, but one can definitely say that Nescafe is the first product with mass popularity). Nescafe slogans – “Time for Nescafe”, “All the power of taste and aroma”.
To create an advertising slogan, develop a positioning and legend or comprehensive branding work, contact KOLORO.
Jacobs
The Ukrainian division of Jacobs has not been doing very well lately. Net profit in 2014 almost halved compared to 2013 and amounted to 276.25 mln. UAH. In 2015, the indicator continued to fall. Net profit amounted to 121.9 mln. UAH. which is 2.3 times less than in 2014. Also, the brand has changed owners, now it belongs not to Mondelez, but to the Dutch company Jacobs Douwe Egberts (Charger OpCo B.V.) – a world-renowned coffee corporation.
The Jacobs brand was born in 1895, in Bremen, founded by Johan Jacobs. Legend has it that while studying colonial trade at a trade school, a teacher noticed Jacobs’ special interest in coffee. He advised him to specialize in this product. The corporate identity includes the image of a steaming cup on the brand logo – this image is constantly present in commercials as well. The company’s first slogan was “Incredible pleasure… to the very last drop”. Later there were others, one of the most popular was the slogan “Jacobs. A fragrance that brings you closer together.”
Natural coffee market: Lavazza is the segment leader
Lavazza’s global revenue reached €1.4 billion in 2015. The company is 7th in the capitalization ranking of coffee companies. At the beginning of 2016 Lavazza bought the French brand Carte Noire (for 700 million euros). It is planned to increase revenue to 2 billion euros by 2020. Lavazza is a family brand. Today it is run by the fourth generation – the great-grandchildren of founder Luigi Lavazza
The brand was born in Turin, in 1894. At first it was a grocery store, some of the goods were produced by Luigi himself (soap, alcohol, oil, spices and, of course, coffee). Then they (together with a cousin) also started delivering groceries. The specialty of the company, which helped it to develop, was blends – no one else in Italy was doing this (Luigi studied chemistry – the knowledge helped him to mix varieties and find flavors). The first advertising campaign took place in 1950 and was built around the slogan “Paradise in a coffee cup”. Later there were other campaigns with the slogans “Coffee is a pleasure, and if it’s not good coffee, what’s the pleasure?” and “Oh, it’s Lavazza. … The less in the mug, the better the mood …”.
Maccoffee
The brand belongs to Food Empire Corporation (more than 200 types of instant products, head office in Singapore), and is the sales leader among manufacturers of instant coffee 3 in 1 in Ukraine in its price segment. In 2012 the factory “Fez-Ukr” (Zolotonosha, Cherkassy region) was opened to produce coffee under the brands “MacCoffee” and “Petrovskaya Sloboda”. Capacity – 25 tons of products per day.
Everyone in Ukraine remembers the campaign for the 10th anniversary of the brand – “It’s time to let the eagles go free!”. It was launched simultaneously with the redesign of the sachet – the eagle and the American flag disappeared from the package, and only the coffee cup remained. The video starred Svetlana Loboda, who woke up and drank her first cup of coffee while watching the eagles fly away from the city.
Maccoffee positions itself as a brand for active people, and one of its slogans is “In the rhythm of life”. This is evidenced by the advertising campaigns (for example, “don’t oversleep in the summer”) and the overall brand positioning. In addition, Maccoffee commercials and advertising campaigns often exploit the theme of sexuality. Today, Maccoffee’s slogan is “For those who don’t want to chekati” (in Russia – For those who want more).
Galka
The Ukrainian-English company “Galka Ltd” is located in Lviv. Galka purchases raw materials for coffee from Indonesia, Brazil, Guatemala, Ecuador, Ethiopia, India, Kenya, Colombia, Mexico, Guinea, El Salvador, Tanzania and Uganda. The company’s most popular product is low- and mid-price segment coffee (25% of all instant coffee, 17% of bean and ground coffee, and 67% of coffee products). Net profit in 2015 amounted to 37.65 mln. UAH. This is 2.2 times more than in 2014.
Trends in coffee packaging design
We wrote about candy packaging design and packaging design for limited edition products in our previous articles. Coffee design trends are in line with the global packaging trends of 2016. The main trends are:
- the use of simple patterns;
- white color;
- handmade imitation;
- Essentialism or emphasis on the essence of the product;
- retro motifs;
- geometric patterns;
- small patterns that look like stamps.
1. Example of using white color (both) and essentialism (right) in coffee packaging design
2. Example of using geometric patterns in coffee packaging design
3. Example of using patterns and stamp prints in coffee packaging
4. Example of coffee packaging made in the essentialist technique
5. Example of handmade packaging (left) and retro patterns (right)
6. Example of using 70s patterns and bright colors in coffee packaging design
7. Example of using patterns in coffee packaging design
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Coffee market forecast
1. Increasing coffee awareness and consumption of coffee beans and ground coffee. If you raise awareness of the product, its benefits, you can influence the level of sales. Today, many brands have a separate section with coffee recipes on their websites. Also coffee producers are often sponsors of various events. It is recommended to use these platforms to promote your product and develop a culture of consumption of the beverage.
2. The EU-Ukraine Free Trade Area Treaty has led to lower duties (and in some cases zero duties) on imports of European goods into Ukraine. This has the effect of intensifying competition between brands, which means that there will be:
- improve the quality of Ukrainian products;
- improve logistics (to lower the price);
- to develop a more sophisticated advertising strategy.
3. Demand continues to grow, this applies both worldwide and in Ukraine. Both producers and statistics show that the level of coffee consumption in the country will continue to grow. And provided the ATO is over and the hryvnia exchange rate stabilizes, consumers will quickly return to more expensive brands.
4. Increase in raw material prices. Recent years have been characterized by an increase in demand for coffee and environmental crises, which have the effect of lowering production levels. This means that the price of the final product will continue to rise unless we can expand the geography of coffee bean cultivation (which requires innovative technological solutions). Simply put, the world needs another Brazil.
Growing demand for coffee and consumer interest in coffee culture stimulate the emergence of new players. To successfully launch a brand, you will need information about the market and competitors. You can order an analysis of the coffee market, by contacting KOLORO. Let’s develop together!
