| SAO PAULO/BOGOTA
SAO PAULO/BOGOTA Oct 27 Enticed by espresso and
lured by lattes, more Brazilian and Colombian consumers are
waking up to the aroma of top notch coffees their farmers have
traditionally produced for the cafés and grocery shops of
Trendy chains like Starbucks Corp, brands like Juan
Valdez that represents Colombian growers and in-home espresso
machines marketed by Nestle SA are some of the
pioneers transforming the coffee consumption habits of the two
countries' combined populations of nearly a quarter billion
Their more demanding and experimental consumers are adopting
lifestyle habits of developed countries, after a decade of
economic prosperity in the two countries that grow 40 percent of
the world's coffee and most of the best beans.
As Latin American consumers climb up a rung of the global
coffee ladder, they are expanding the market for beans that earn
farmers more at a time when prices for the undifferentiated bulk
commodity are foundering to four-and-a-half-year lows.
Even though it does not open until 10 a.m., Isabela
Raposeiras' Coffee Lab café in the trendy Vila Madelena
neighborhood of Sao Paulo is nonetheless packed only minutes
after opening, with customers jockeying to sample the latest in
"I really liked a coffee I tried last week, so I did some
research on it and in the end didn't buy it (for my customers)
because I didn't like the place it came from," Raposeiras said
referring to high standards that are winning her new clients.
Populous developing countries in general -- even traditional
tea drinking nations in Asia -- are expected to continue driving
demand growth, the head of the International Coffee
Organization, Roberio Silva, told Reuters. Their consumption
rose 80 percent from 2000 to 2012, versus just 11 percent in
established markets like North America and Europe.
While rising coffee consumption in Asia is mainly instant
coffee made from cheaper robusta beans, consumers in these two
countries where coffee drinking is longer-established, are now
buying a bigger share of the cream of their own crops.
Brazil's out-of-home coffee consumption is rising more than
20 percent a year and sales of capsules for home espresso
machines like Swiss roaster Nestle's Nespresso and cheaper
Brazilian brands have grown eightfold in four years.
"It's a trend that was imported from the United States and
spread quickly," Nathan Herszkowicz, the executive director of
Brazil's Coffee Industry Association (ABIC), said of a cafe
culture renaissance spilling over into home consumption habits.
Tapping new sources of demand has rarely been more critical
as the coffee market grapples with oversupply in arabica and
prices near four-year lows, prompting governments in both
countries to begin subsidizing their farmers.
Even though drip-filter brews are still the mainstay method
of preparation in both countries, as is the case in the United
States, chic espressos and drinks based on them like cappuccinos
and lattes are both countries' fastest growing segments.
While overall coffee consumption in Brazil, the world's
second biggest coffee drinker, is growing at a steady 2 percent
annually, espresso consumption is expanding at 10 times that
rate, said ABIC's Herszkowicz.
Marketing and coffee experts have branded espresso and other
precision coffee preparation methods as "monocupping", because
only one or two shots are prepared at a time with little waste,
in line with the higher value of the coffee beans used.
"It's a trend that is here to stay, like it or not," coffee
specialists at Ona Consulting, Manuel Diaz.
An espresso uses about double the grams of ground coffee per
serving in drip-filter brews, partially offsetting the fact that
newer recruits to the habit of coffee drinking tend to consume
more efficiently with no left-overs.
"The coffee industry will lose when my father's generation
dies," Judith Ganes, a commodities specialists at J. Ganes
Consulting said, referring to older generations all the way up
to the baby boomer era after the second world war.
"His generation drinks six to eight cups of brewed coffee a
day and throws another four cups down the drain," she said,
estimating it would take about 10 of today's younger, less
wasteful monocuppers to replace her father's consumption.
Higher-end coffees cost more to produce but still pay off
for the grower. While standard commodity grade good or hard cup
Brazilian unroasted arabica sells for between $0.85 to $1.00 a
pound, specialty beans earn growers $2.60 to $9.00 a pound.
And there is always the appeal as a farmer of medaling one's
beans in competition. A recent award-winning Panamanian natural
arabica fetched $300 a pound, Ganes said.
Arabica for December delivery on New York's ICE futures
exchange was sold at 4-1/2-year lows of $1.09 per lb on
Friday, down from $1.65 a year ago.
The ICO estimates that global coffee production expanded 7.6
percent over the past season, while consumption has only
expanded 2.1 percent last year, a worrying imbalance that has in
the past been righted by some growers abandoning crops.
Gourmet coffee sales are still a niche in the world's top
two arabica producers, with just 2 percent of Brazil's total
market and 2.6 percent of Colombia's, but look set to sustain a
run of double-digit growth in both countries for some time.
Brazil, the world's No. 2 coffee consumer after the United
States, consumes mostly lower quality beans dark-roasted and
sweetened to mask astringent flavors. Colombians on the other
hand drink less than a third of what Brazilians consume per
head, highlighting that market's potential for growth.
Rising living standards have helped change coffee habits. A
near-decade long growth spurt in Brazil swept 40 million poor
into a new middle class. Improving security in Colombia, where
guerrillas have fought a civil war for five decades, spurred a
wave of foreign investment.
Growing disposable income in Colombia was likely a decisive
factor in Starbucks' recent move to open its first store in the
Andean nation in 2014 with 50 more scheduled to follow in its
first five years.
"(Coffee chains) are helping train consumers to recognize
the value of the different qualities and to feel ready to pay
more for higher qualities," said Ana Maria Sierra, head of
Colombia's roaster-funded Toma Cafe initiative to promote better
and more profitable coffees.
Before Toma Cafe or "Drink Coffee" initiative began three
years ago, Colombian consumption as a whole had been in decline
for 20 years, a trend roasters say reflects the challenge of
recruiting new consumers when products lack quality.
"We think consumption will grow much more, through education
and specialty coffee," said Amado Alvarez, a Bogota restaurateur
who says he became Colombia's first owner of an exclusive
Marzocco Mistral Italian espresso maker four years ago.
The 15,000 euro ($20,700) chrome-finished angular with a
retro look takes pride of place on the counter as Alvarez talks
at length of how it can churn out a run of espressos with
"consistent froth", without gradually losing pressure or
"There are a lot of good coffees staying in Colombia now,
when before, they were all going abroad," he said, as blenders
and coffee grinders whirred while clients shuffled in and out on
a Friday morning.