2 nd World Coffee Conference, Bahia 23-25 September 25 Lesson emerging from the crisis : New paths for the coffee sector Session 2 : Coffee policies in a market economy Giuseppe Lavazza Source : Intl Coffee Org. US cents/lb 56 54 52 5 48 46 44 42 4 38 36 34 32 3 28 26 24 22 2 18 16 14 12 1 8 6 4 2 Average prices paid to growers in selected countries VS ICO Robustas Indicator Prices 21 22 year Uganda Robusta Indicator prices Brazil rob. India rob. Vietnam Cote d'ivoire Source : Intl Coffee Org. US cents/lb 84 82 8 78 76 74 72 7 68 66 64 62 6 58 56 54 52 5 48 46 44 42 4 38 36 34 32 3 28 26 24 22 2 18 16 14 12 Average prices paid to growers in selected countries VS ICO Other Milds Indicator Prices 21 22 year Other Milds Indicator Prices Kenya Colombia India Brazil nat. Ethiopia El Salvador Tanzania Coffee Production of selected countries as % of Total 1989 199 1996 1997 21 22 Brazil 26,8 % 29,28 % 28,27 % 26,37 % 28,81 % 39,76 % 27,78 % 34,19 % Colombia 13,73 % 15,25 % 1,51 % 12,3 % 11,25 % 9,75 % 1,69 % 1,17 % Costa Rica 2,44 % 2,75 % 2,6 % 2,52 % 2,3 % 1,59 % 1,74 % 1,69 % Cote 5,1 % 3,15 % 4,7 % 4,19 % 3,37 % 2,58 % 2,59 % 1,72 % d'ivoire Ethiopia 3,65 % 3,12 % 3,16 % 2,94 % 3,52 % 3,3 % 3,73 % 4,42 % Guatemala 3,69 % 3,51 % 4,37 % 4,25 % 3,44 % 3,34 % 3,48 % 3,5 % India 1,9 % 3,3 % 3,19 % 4,68% 4,66 % 3,83 % 4,33 % 4,29 % Indonesia 7,31 % 7,97 % 7,46 % 7,55 % 6,41% 5,56 % 6,23 % 5,74 % Mexico 5,37 % 5,1 % 4,94 % 4,84 % 3,94 % 3,28 % 4,39 % 3,42 % Uganda 2,6 % 2,9 % 4,15 % 2,57 % 2,97 % 2,38 % 2,42 % 2,43 % Vietnam 1,7 % 1,49 % 5,51 % 6,96 % 12,31 % 9,48 % 14,68 % 11,5 % Source : Intl Coffee Org. The European* coffee market: Segments weight Source : ACNielsen Competitive advantages as function of : Production costs and Productivity Quality standard Commercial performance Y.e. AM5 Y.e. AM4 Y.e. AM3 mio Euro tons mio Euro tons mio Euro tons Total coffee** 7.61 939.796 7.521 933.698 7.668 94.658 R&G 69.8% 85.% 7.% 85.8% 7.5% 86.5% regular 55.7% 56.2% 56.8% light*** 2.% 2.2% 2.1% dec 6.5% 6.6% 6.7% espr 5.6% 5.1% 4.8% Soluble**** 3.2% 15.% 3.% 14.2% 29.5% 13.5% *Euro 11: B,D,CH,DK,ES,F,GK,IRL,I,NL,UK ** Excluded Greek coffee: (,8 Weight in Value) ***Excluded CH ****Excluded Spain 1
Source : ACNielsen The European* coffee market: Segments Trend (vs previous year) Y.e. AM5 Y.e. AM4 mio Euro tons mio Euro tons Total coffee** 1.1% +.6% -1.9% -1.8% R&G.7% -.4% -2.6% - 2.6% regular.3% -3.% light*** - 8.4% -.% dec -.5% -4.2% espr +11.1% +4.6% Soluble**** +2.% + 7.% -.3% +3.2% 1 1 FRANCE : Coffee Market decreasing in volume Roasted coffee is still decreasing in volume but experiencing a new trend in value sales. 1 197 +1.% 16 1 165 143 133 142 149 19 1996 1997 1998 1999 2 21 22 MAT MAT JULY JULY 4 3 VALUE SALES (Million uros) 166 168 159 156 153 151 144 19 1996 1997 1998 1999 2 21 22 MAT JULY 3-3.3% MAT JULY 34 *Euro 11: B, CH,D,DK,ES,F,GK,IRL,I,NL,UK ** Excluded Greek coffee: (,7 Weight in Value) ***Excluded CH ****Excluded Spain VOLUME SALES (THOUSANDS TONS) FRANCE : Hard Discount Only Hard Discounters are more dynamic during the 2 last years, taking profit from the beginning of Euro in France 7. 6. Growth without integrating stores which are closing and opening Total Sales Value of French Distribution 6. 6. Prices continue to decrease! ROESTKAFFEE average price per kg 6.81 6.86 6.66 6.81 6.61 GERMANY: Roast and Ground Average Price ( /kg)( grocery w/o Aldi + drugstores M191KD14 5. 4. 3. 2. 1. 4.2 4.2 3.6 3.4 3. 2.9 2.6 2.4 2.3 2.2 2. 2. 2. 1.9 1.8 1.2 2.7 2.6 2.5 2. 2.1 1.7 1.7 6.58 6.59 6.59 6.51 6.48 6.47 6.38 6.45 6.4 6.39 6.24 6.31 6.31 6.28 6.27 6.29 6.26 6.19 6.24 6.24 6.1 6.13. -1. -2. 1998 1999 2 21 22-1. -1. Total France Hypermarchés 25m2 ( > ) Supermarchés( 4-25m2 ) Hard Discounters Stores<4m2 JAN2(5) MAR2(4) MAI2(4) JUL2(5) SEP2(4) NOV2(4) JAN3(5) MAR3(4) MAI3(4) JUL3(5) SEP3(4) NOV3(4) JAN4(5) MAR4(4) FEB2(4) APR2(5) JUN2(4) AUG2(4) OKT2(5) DEZ2(4) FEB3(4) APR3(5) JUN3(4) AUG3(4) OKT3(5) DEZ3(4) FEB4(4) APR4(5) Copyright ACNielsen 6.2 GERMANY: Espresso Price ( /kg)( ITALY: Roast and Ground Price ( /kg)( PRICE NO PROMO price promo Lineare (price promo) 14, 6,4 13,8 13,6 13,6 13,4 13,2 13, 12,8 12,6 12,4 12,2 12,46 6,2 6,2 6,11 6,3 6,1 6,1 5,96 5,9 7 5, 6, 5,92 5,93 5,8 6 5,85 5,8 5,78 5,8 5,7 5,7 5,7 5,6 6 5,6 7 5,6 8 5,6 6 5,6 5,61 5,57 5,55 5,6 5,4 8 5,4 6 5,4 5 5,41 5,3 6 5,4 5,3 3 5,2 12, Jun2 Sep2 Dec2 mar-3 Jun3 Sep3 Dec3 mar-4 Jun4 Sep4 nov-4 feb-5 May5 5, gen-3 mar-3 mag-3 lug-3 set-3 nov-3 gen-4 mar-4 mag-4 lug-4 set-4 nov-4 gen-5 mar-5 mag-5 lug-5 2
PROMOTIONAL INTENSITY INDEX PROMOTIONAL INTENSITY INDEX ITALY FRANCE 47, 37, 35,9 35,7 35,2 45, 43, 41, 39, 4,4 39 39 39 44,6 44,3 43,9 43,6 43,7 43,6 43,7 43,3 43 42,7 42,5 42,2 41,7 41,4 4,3 4,3 38,9 38,9 39 38,3 4,9 35, 33, 32,332,4 32,3 31,4 3,8 31, 3 29, 33,4 32,4 32,5 31,7 31,5 31 3,5 29,7 29,3 28,8 34,5 34 33,6 33,3 33,4 33,1 32,7 32,5 32 3,3 29,7 37,5 37,1 37,9 37,6 37,3 27,2 37, 35,9 27, 35, gen-3 mar-3 mag-3 lug-3 set -3 nov-3 gen-4 mar-4 mag-4 lug-4 set-4 nov-4 gen-5 mar-5 mag-5 lug-5 25, gen-3 mar-3 mag-3 lug-3 set-3 nov-3 gen-4 mar-4 mag-4 lug-4 set-4 nov-4 gen-5 mar-5 mag-5 lug-5 15, 13, 11, 9, 7, 5, 3, 1, -1, 22 22:+6.3 % ITALY Sales Total Grocery Value changes vs previous years :+7.7 % :+1.6 % a.t.apr5 25:+2.1% -3, gen-2 giu-2 ott-2 feb-3 lug-3 nov-3 mar-4 lug-4 nov-4 mar-5 11,5 12, 6,6 6,4 12, 12, 21,4 2,7 19,1 18,3 14,6 14,7 7,4 8,1 ITALY Variation of price scale Total Grocery % share on price index range 12,1 6,4 11,7 2 18,1 15,5 7,3 7,8 7,9 < 5 Progressivo MAG 25 Total share of products with prices 2% below average 29.3% 32.5% 8,2 > 126-111 - 96-81 - 66-8 51-65 Souce: ACNielsen Trade*Mis Source: ACNielsen Trade*Mis * = media categoria I accept higher prices for higher quality buying food I look out for price promotions. quality of brands higher than that of private labels. Source: ACNielsen Haushaltspanel GERMANY: Consumers and Price Share of agreeing households in % 42 43 49 6 62 69 89 87 92 22 21 Federal Republic of Germany Percentage distribution of not-decaffeinated Green coffee net imports by main sources - in % - Countries of origin Brazil 3,63 27,19 Vietnam 13,21 18,59 Columbia 11,8 8,74 Indonesia 6,88 6,5 Peru 5,21 5,74 Honduras 4,26 4,9 Ethiopia 4,16 4,58 Papua New Guinea 4,31 3,47 El Salvador 2,33 3,11 India 1,86 1,89 Guatemala 2,45 1,71 Kenya 1,84 1,67 Uganda 1,85 1,61 Costa Rica 1,8 1,56 Mexico 1,27 1,42 Nicaragua,62,96 Tanzania 1,75,96 Rwanda,29,76 Burundi,69,76 China,61,74 Others 2,9 3,14 Total,, Source: Statistisches Bundesamt 3
United Kingdom Percentage distribution of green coffee non-decaffeinated imports by main origin - in % - Countries of origin Vietnam 25,5 34,2 Brazil 2,3 2,7 Colombia 14,2 11,8 Indonesia 13,1 8,4 Peru 3,8 4,4 Nicaragua 3,7 3,9 Honduras 4, 3,8 Kenya 3, 3, El Salvador 1,5 1,6 Ethiopia 1, 1,5 Costa Rica 1,6 1,3 India,6,9 Uganda 1,4,9 Guatemala 1,8,9 Mexico 1,6,4 Tanzania,2,3 Papua New Guinea,3,2 Others 1,8 1,8 Total,, Source: Coffee Trade Federation Ltd Federal Republic of Germany: Retail prices of roasted coffee 197- Year Eur/5 gr 197 4,24 1975 4,1 198 4,94 1985 5,46 199 3,7 1991 3,57 1992 3,55 1993 3,43 1994 3,82 19 4,8 1996 3,58 1997 3,97 1998 4,2 1999 3,56 2 3,43 21 3,27 22 3,6 3, 2,91 average consumer price of not-decaffeinated roasted coffee Source: German Coffee Association Sweden: Retail prices roasted ground coffee 1993 - Year SEK/kg 1993 44,8 1994 64, 19 76,2 1996 58,6 1997 73,4 1998 77,2 1999 63,8 2 61, 21 57,6 22 54,6 52,3 49,9 Source: Statistics Sw eden 85 1985 var% 199 1.1 2.2 1991.7 3.3 199 1992.4 1.5 Consumption Macrotrends in Italy 1985= 19 1999 2 21 22 25 26 27 28 1993 1994 19 1996 29-1.3-1.2-1.6 -.8 1.6.8. 2..5.7.4-1.1 -.1.5.5.4.4-2.9 3. 2.9 1.2 3.5 3.5 2.9 3.3.7 -.1 1.1 1.6 1.3 1.8 1.6 1.5 1.8 29 Source:Istat, elaborazioni ACNielsen Relative Price Macrotrends in Italy 1985= European Roast & Ground coffee: competitors value shares Euro 11* Y.e. AM5 Y.e. AM4 Y.e. AM3 Total Roast & ground.%.%.% 5.32 mio 5.267 mio 5.47 mio 9 85 8 1985 var% prezzi Source :Istat, elaborazioni ACNielsen 199 19 2 21 22 25 26 27 28 199 1991 1992 19931994 19 1996 29 5.8 5.9 4.8 1.6 3.9 6. 4.4 -.1.9.8 1.6 3.9 3.4 2.7 2.9 1.1 1.2 1.8 1.3 1.9 6.7 7.3 5.9 5.8 5.1 5.9 4.6 2.6 2.3 2.3 2.9 2.6 3.1 2.6 2.2 2.3 2. 2.3 2.2 2.3 29 KJS 21.2% 22.1% 22.5% Private Label (Inc.Aldi+Migros) 19.5% 19.3% 19.2% Sara Lee 13.8% 13.6% 13.2% Lavazza 9.6% 9.8% 9.9% Tchibo 6.9% 7.% 7.% Nestlè 4.7% 4. 6% 4.6% Melitta 4.1% 4.3% 4.5% Segafredo 1.7% 1.9% 2.% *B,CH,D,DK,ES,F,GK,IRL,I,NL,UK Source : ACNielsen 4
PODS IN EUROPE (I, F, D, UK, A, CH) Macro Area Total Coffee Market Tons 12. 1. RETAIL: 18,5% 11,% 8. 18,8% 1,% 6. 4. 2. 25 Volumes (Tons) 25. 2... Values ( x1.) +83% 7,8% 6,8% Asia Pacific Australasia Africa and Middle East Western Europe Eastern Europe 5. 36,2% North America Latin America 25 on IMIS Euromonitor data Macro Area Retail Market (1) Macro Area Retail Market (2) Africa Mid. East 62 % Asia Pacific 61 % Latin America 3 % Australasia 29 % Macro Area Retail Market (3) U.K. Coffee Shops Growth Trend 22 2 197 2 Eastern Europe 38 % North America 36 % Outlet number 8 6 557 914 1226 13 1527 1681 U.K. 4 419 Western Europe 3 % 2 233 1997 1998 1999 2 21 22 25 26 5
Macro Area A.F.H. Market (1) Macro Area A.F.H. Market (2) North America 69 % Australasia 76 % Asia Pacific 55 % Eastern Europe 7 % Western Europe 26 % Macro Area A.F.H. Market (3) Latin America 39 % Africa Mid. East 33 % Product innovation Market with growth potential New segments (in mature markets) Attract young consumers Thanks for your attention Giuseppe Lavazza 6