in the minds of consumers in marketplaces that have faced political change and the ensuing financial difficulties is no small task. However, the Central and Eastern areas of Europe are places where tradition along with growing modern trends have created a consumer base to be tapped. Finland’s leading roaster, Gustav Paulig Ltd, continues to entrench its position in the coffee markets of Russia and the Baltic states. Tiit Nuudi, Paulig Baltic’s managing director, comments, “The Baltic states are drawing closer to Western Europe. Estonia, Latvia and Lithuania aim to be in the next wave of countries to join the EU. For this reason, inward investment in the Baltic states has also increased appreciably. Scandinavia’s major retail chains have arrived in the Baltic states and interest can also be expected from continental Europe.”
Presently, the four strongest principals are Paulig, Kraft, Douwe Egberts and Tchibo/Eduscho. However, the range of brands is still very wide, with about 150 brands of coffee on the market.
Estonia is the most prosperous of the Baltic states, and, before the war, could rival Finland in the per capita volume of its coffee drinking. But there’s still a long way to go before that level will again be reached. Contributing to that are the Estonian’s new shopping habits. With Estonia’s large increase in two-income families, convenience shopping has experienced increased popularity. Large self-service centers are well established in the largest cities. Supermarkets have become more influential than small-scale businesses, especially in the suburbs. Here, Paulig Baltic has used sponsorship as a part of its marketing strategy, which has been spending about 5% of the turnover on marketing, with between 5% to 8% of that amount allocated to sponsorship. For several years, Paulig has been a major sponsor of Estonia’s largest annual event, the summertime Song Festival, which attracts over 100,000 attendees.
In Poland, the market leader in the soluble coffee sector is Nestlé, with a 42% share of all pure soluble sales, while taking a 65% volume market share in the main stream segment, with Nescafé Classic as the most popular instant coffee in Poland. Nescafé Gold is a leading product in the premium segment and has seen substantial growth of sales in 2000. Nestlé’s most recent offer, and an absolute novelty on the Polish market, is Nescafé Espresso.
A Nestlé spokesman in Warsaw said, “The number of instant coffee drinkers is still growing very rapidly, and the instant coffee market is continuing to attract consumers from other beverages, most notably tea. Coffee habits are changing and coffee has become affordable.
“Nescafé’s composition has been carefully adjusted to best reflect the tastes of Polish consumers who like their coffee to be rather strong. We are also striving to offer new products, to provide a wider choice and to attract new consumers. We are continuing to invest heavily in our brand through advertising and sampling of our three main products.”
Broad availability of instant coffee, not only in shops but also at offices, schools, trains and public places, and its convenience of preparation and good price stimulate market development both through increased consumption by coffee drinkers, as well as attracting new consumers. Out-of-home consumption has experienced dynamic development and has contributed to an increased coffee culture mainly through the establishment of new coffeehouses and installation of vending machines. The company recently opened a Café Nescafé in a fashionable Warsaw shopping mall, and plans to open more.
Nescafé is also a major supplier of branded coffee vending machines across the country. The away-from-home team of Kraft Jacobs has likewise moved into that sector, featuring the Jacobs 100 series machines, which are either sold or leased. For the Kraft group, Maxwell House is marketed as their principal instant product. The expanding workplace sector is targeted with the Jacobs Krönung brand.
In the roast-and-ground sector, the multinationals account for some 50% of the Polish market, with Tchibo in the lead followed by Kraft and Douwe Egberts. Overall, Poland continues to be the most attractive coffee market in Central Europe.
After the big political changes in eastern and central Europe a decade ago, and the opening of the market, Tchibo immediately became active in the region. Despite difficult and unfamiliar market conditions, Tchibo soon established a foothold and reached a powerful market position.
One of the basic facts to consider about Poland is that it has such high import duties on roasted coffee. Multinationals that wanted to develop significant market share were impelled to manufacture locally - either by buying into an existing roasting plant or by building one. Likewise, the prospect of ultimate integration with the European Union required adjustments of the local food processing industry to meet western quality, technology, sanitation and ecological standards.
During the past decade, the domestic production of coffee processing equipment could not meet these requirements, and the majority of coffee equipment has been imported. Thus, following the foundation of Tchibo Warsaw in 1992, Neuhaus Neotec was commissioned to install a complete turnkey production plant in Marki, near Warsaw. Rated as the largest and most modern coffee roasting plant in the former Soviet-dominated bloc, the factory came on stream in 1994 operating to the same quality rules as Tchibo’s plant in Germany. In 1995 deliveries were started to Russia.
In fact, following several years of ongoing testing of the equipment for issues of quality, versatility and environmental safety, Tchibo decided to replace its existing roasting equipment in Hamburg and Vienna with the same line of Neuhaus Neotec roasters. This trend has likewise been followed in Romania, where last September Neotec’s RFB 300 roaster came on stream at the plant of Israeli-owned Elite, which claims around 42% of the Romanian coffee market.
The past decade in Central and Eastern Europe has seen a total swing to more sophisticated western styles of marketing. Thus, according to Joachim Klaehn, the spokesman for Tchibo’s International Marketing Division, “Our strategy in Poland focused last year on two major nationwide promotions. To support the company’s existing market-leader position in the roast-and-ground sector, the aim was to develop Tchibo’s instant brands. Around 30,000 coffee mugs were distributed to consumers, with slogans supporting the complete range of Tchibo products. Promotion through TV, radio, poster sites and on the coffee packaging itself was backed by gifts in exchange for pack labels, linked to a draw for the top 25 prizes of holidays in Brazil. The slogan was ‘Tchibo, Brazil and You.’ The huge success of the campaign led to its extension through February 2001.
A parallel campaign was featured in the neighboring Baltic states of Latvia and Lithuania, to promote the complete Tchibo range. The slogan was ‘Double pleasure - Tchibo coffee in a Tchibo cup.’ Towards the year’s end, Tchibo Exclusive was backed by the slogan ‘Prolong the Christmas atmosphere.’”
Klaehn continued, “On the international scene, Tchibo can look back on a very successful year 2000. In all the central and east European countries, Tchibo has reached a leading market position or has consolidated its existing leading position. Integrated advertising of Tchibo and Eduscho/Gala has enabled the company to carry out numerous promotions and has contributed to sales.
“The Hungarian marketing team focused on a summer campaign based on vouchers from Tchibo’s Gala and Dupla brands in exchange for gifts ranging from porcelain coffee cups to vacuum flasks. Typically this raised sales of the Eduscho brand by 1.5 percent. A traditional Christmas promotion was likewise successful, based on Tchibo Exclusive brands. This campaign aimed to support Tchibo’s position in the premium sector of the market.
“In neighboring Slovakia, the company concentrated on the wholesale trade. Tchibo’s marketing team aimed at building up Tchibo and Eduscho’s market share from respectively six and eleven percent. The policy succeeded, despite increased competition brought in by international retail chains.
“In the Czech Republic, the year 2000 was likewise successful in many respects. The main marketing objective was the design relaunch of products of the Jihlavanka brand. The aim was to update this traditional local brand with a new image. It was newly positioned as ‘Honest Coffee’, and through the introduction of a variant in the instant sector, Jihlavanka rose to number one on the local market.”
Since February, Tchibo has adopted a new strategy for marketing of the Gala brand in Poland. Joachim Klaehn explains, “The key word is ‘localization’, with a characteristic Polish design. We have noticed that international brands are having a harder time in the market, with a trend in favor of traditional local branding with more aggressive pricing. Gala is positioned in the middle or lower price sector, with packaging now entirely in the Polish language and has dropped the former company name of Eduscho. Thirty-second spots on all the important TV channels are shown with typically Polish locations in a festive or gala atmosphere.”