Business World

When Coffee Speaks
Tea & Coffee's Business Classifieds!
Free Ukers Guide!
Festival Kawi
Coffee Tea Business Mag


German Coffee Market:
Prices and Speculation Soar

By Manfred Körner

For the second time this year, Germany’s coffee lovers are faced with a considerable price hike for their favorite beverage, after years of very low consumer prices. The consumer price, averaging 4.50 Euro per 500 gram pack, has reached its highest level in the last six years. Albert Darboven, a coffee roaster from Hamburg, expects this trend to continue. “Actually, we pay $110 per 50 kilograms. About 25 years earlier, we had to pay $380 for the same quantity. You cannot doubt that we will reach such heights again, since there is a lot of volatility in the coffee market these days.” Tchibo is equally convinced that consumer prices will keep on rising because of the continuing increase of raw coffee prices, confirms the company’s speaker Joachim Klähn.

“The main reason for this is speculation,” explains the German Coffee Association in Hamburg. Investment and hedge funds have discovered coffee to be a most attractive and profitable commodity besides mineral oil. Their increased hoarding of green beans has driven the raw coffee prices on the New York and London trading places to new heights. “We were really surprised by this startling development,” comments Darboven. Until a few years ago, only speculators had traded some 15% of the world coffee harvest. Today, this percentage has risen to an estimated 40%. To keep the coffee supply steady, importers need to refill their limited stocks. When running out of coffee, prices are dictated by speculation. The chief of the buying department from the Hamburg Coffee Company states: “We don’t know who those speculators are. We don’t know what they are planning, but they do hit us time and again in spite of all our expertise and knowledge of the coffee market.” Of course, these price increases are passed on to the consumers. This has been possible due to major discounters, which had to bow to the convulsions of the world market and increase their prices respectively. However, with a cup costing little more than 6 Euro cents at actual pack prices, “Nobody is forced to live without coffee,” soothes the Coffee Association.

There are still other reasons for the current development of coffee prices, such as the increase in transportation costs. Oil prices have risen to around $60 per barrel. The other is an expected lower bean harvest in 2005 due to bad weather conditions in major coffee growing areas. While Albert Darboven disagrees with such negative assessment, the German Coffee Association foresees a gap of some seven million bags as compared to world demand. “The days of abundance are gone. In Vietnam, production has decreased by 16%, and in Brazil by 20%,” says Winfried Tigges, c.e.o. of the Association. Both countries have turned into major coffee suppliers for the German market, overtaking traditional exporting countries from South and Latin America as well as from East Africa.

Coffee consumption in 2004 has been rather stable in Germany with sales amounting to 525,930 tons of coffee products. This volume represents only a minor loss of 1% as compared to 2003. Of the total, some 2,750 tons were sold as coffee pads, marking a steep increase in sales of these innovative products. The industry’s earnings went down from 3.5 bn to 3.4 bn Euros.

While consumers might be unhappy with the recent price hikes, the trading organization, Transfair, is not. Consumer prices of fair traded coffees are averaging around 5.00 Euro per 500 grams. They have now become more competitive to established brands of the big roasters, even more so as Transfair coffee prices did not follow the general increases. In fact, prices under the Transfair scheme are fixed and guaranteed by long-term direct agreement with the growers. Since these coffees are not traded at the international commodity exchanges, they are not vulnerable to speculation.

According to Transfair speaker Dieter Overath, some 800,000 participating cooperatives in Mexico, Peru, Bolivia, and Colombia, as well as in Tanzania and Uganda, are shipping their beans into the German market. They get 1.26 Euro per lb (454 grams) for ordinary and 1.41 Euro for biologically grown coffee. The latter makes up for 40% of all Transfair coffee imports into Germany. The money goes directly to the cooperatives. After having deducted their cost of living and housing, they invest the rest in communal projects like schools etc. Overath explains: “Only sufficient prices and earnings can maintain healthy social and farming structures, and the quality of the crop, as well as guarantee the survival of thousands of growers and their families. Otherwise, farmers will either give up or turn to growing dangerous cash crops.”

With some 151 liters per head, coffee remained the number one beverage in 2004, followed by water (123 liters) and beer (114 liters). Roasted coffee accounted for 407,000 tons, while soluble coffee once more increased its sales volume to 16,000 tons. The sale of non-household packs climbed to 56,000 tons, an increase of 1.8%. Within the roasted coffee segment, mildly-treated varieties held its market share of 20%, whereas natural milds lost slightly (-1%), its share going down to 18%. Roasted decaf coffee gained a little to account now for 10% of the market. However, the lions’ share of 52% rested with roasted caffeine-containing coffee. Espresso’s popularity continued its growth among German coffee drinkers. More than 15,000 tons was sold to its aficionados. Cappuccino, in its different varieties, was the foremost soluble coffee specialty sold. Its market share accounted for 87% of this segment.

Espresso bars and coffee shops are mushrooming in Germany. Currently, there are some 600 of them. Numerous outlets in bakeries and fast food chains, as well as Tchibo coffee corners are not included. “Coffee to Go” has become fashionable, particularly among young people. “The number of those coffee shops could well double during the next five years,” says the German Coffee Association. This new trend has produced a new type of coffee professional to deal with the customers, called ‘barista’ after its Italian example. There are some 50 to 100 professionals at the moment who have acquired the whole range of professional knowledge around coffee and the art of its consumption. Steffen Schwarz, c.e.o. of Coffee Stores Ltd. in Mannheim, is determined to train many more of them. He is confident that within the next five years, the ‘barista’ will get the status of an officially recognized profession in Germany to the benefit of the coffee industry.

Take One Cup and You Won’t Stop

When the trader Herrmann Schirmer opened a grocer’s shop in Leipzig in 1854, nobody would have imagined that some 150 years later it would turn out to be one of Germany’s most modern and efficient large-scale coffee roasting houses. But the smell of coffee was in the air just 20 years after the Leipzig opening. Under new ownership, the site was reconstructed to host a small coffee roasting facility. After the War, the company settled first in Bavaria and afterwards in Bochum in the heart of the Rhine-Ruhr area. In 1965, the company took over the renowned Dortmund roasting plant KA-I-RO and made that city the company’s headquarters. The Leipzig branch, left on socialist grounds in the former German Democratic Republic, had placed under state control and ownership, but was later privatized again when both German states reunited in 1990. Two years later, Schirmer Kaffee became part of the Swiss trading giant, Valora Holding AG. In 2002, the company saw the commissioning and construction of a completely new production premises in Dortmund, to be followed by the introduction of an integrated management system, according to DIN EN ISO 9001:2000, HACCP and IFS. Currently, the Schirmer Kaffee GmbH has around 74 employees and produces over 9,000 tons of coffee per year for domestic consumption and exports worldwide.

In the years before the construction of the new facility, Schirmer’s roasting capacities in the old Dortmund plant were by far exhausted and the coffee had to be roasted externally. The idea was born that a new processing plant should be constructed on virgin soil in the outskirts of the city. Roasting machines and plant manufacturer Probat was involved in the planning process from the beginning, and presented the first theoretical concept as early as mid-1995. Having lost some of its dynamics of the early days the project got a new push when the city administration, after lengthy talks, offered the company two attractive construction sites. In 2000, Probat presented a layout of a tailor-made state-of-the-art production plant including traditional Probat machines and tried and tested batch roasters (RZ-4000) and continuous roasters (RC 750). For packaging, Schirmer wanted ICA machines with proven and reliable quality. The problem was that the layout had to be made on a “turn-key-basis” without knowing the dimensions of the new building. Only one thing was clear: Schirmer wanted to start production in December 2001. In November 2000, Probat was given the job by the Schirmer and Valora management. Construction started in early May 2001 and was finished right on schedule, in December.

Motivated employees with specialists in all fields -- from purchasing to delivery and export -- ensure that all aspects of production run smoothly and professionally. High-quality raw coffees are processed flexibly to produce superior products. Schirmer produces for partner brands as well as for its own brands in the catering, food retail and export fields. With its competence and experience in purchasing and processing raw coffee, the company offers its customers an optimal combination of quality, delivery time and service, and makes it the right partner for national and international cooperation. Schirmer’s own branded products range from whole beans in valve-sealed bags of up to 1,000 grams, to ground coffee either in packets or vacuum-packed to tins in quantities of 250 and 500 grams. Others are hot drinks which include tea, chocolate, cappuccino, freeze-dried coffee, convenience products like biscuits, sugar, and milk, as well as serviettes, doilies and other service articles.

Tea & Coffee - November/December, 2005
Modern Process Equipment


Tea & Coffee Trade Journal is published monthly by Lockwood Publications, Inc., 3743 Crescent St., 2nd Floor, Long Island City, NY 11101 U.S.A., Tel: (212) 391-2060. Fax: (1)(212) 827-0945. HTML production and Copyright © 2000 - 2013 by Keys Technologies and Tea & Coffee Trade Journal.

Terms and Conditions of Website Use.         Privacy Policy.

HTML Copyright © 2005 by Keys Technologies and Tea & Coffee Trade Journal. All rights reserved.