Argentinian tea and coffee markets show growth potential

The Argentinian tea and coffee markets have shown generally good dynamics the past few years and have good prospects for growth at the end of the current year and in 2024. By Eugene Gerden

The Argentinian tea and coffee markets are steadily growing this year thanks to generally improving economic situation in the region and stable domestic demand.

Argentina has rich traditions of tea and coffee drinking. While the Covid-19 pandemic and serious financial problems of the country had resulted in a serious drop of consumption of both drinks, the market has almost completely recovered, although the rise of coffee prices by almost 150 percent in the last year put a serious pressure on the market.

For many global coffee majors, the expansion into Argentina along with Brazil, is a priority due to the potential, which is associated with the Latin American region and the exodus of business from the markets of Russia and Ukraine — once the most important emerging markets for them.

With the population of more than 47 million people and a status of the second largest country in the Latin American region, Argentina has always been under the radar of some major tea and coffee producers.

Emanuele Uccellini, the Caribbean and Latin America BU Director for Lavazza Group BU Americas told T&CTJ in an exclusive interview, that Lavazza has been present in the Argentina for many years, and that the market represents a top priority within the Latin America region for two main reasons:

  1. The growing interest of consumers in high-quality coffee brands. The demand for specialty coffees has been increasing significantly, especially during the pandemic, and we’ve seen the trend keep growing, mostly among younger consumers.
  2. The relevant presence of people with Italian roots: they always feel at home when they sip a good Lavazza cup of coffee.

The Argentinian coffee market has always been of interest to other global majors as well.

One of them is JDE Peet’s, which in recent years has significantly strengthened its positions in the local market. A spokesperson for JDE Peet’s, said, “JDE Peet’s does sell a range of products across our brand portfolio in Argentina including NCC capsules. We anticipate that the demand for coffee and tea will only continue to grow globally. We recently signed an agreement to acquire Marata’s coffee and tea business in Brazil, and South America in general is an area in which demand for coffee and tea is increasing.”

The Argentinian market also attracts the interest of global coffee chains, many of which are considering accelerating expansion in the local market in years to come, which is primarily done through the expansion of the existing portfolio. One example is Starbucks, which considers the local market as a priority for its growth.

A Starbucks’ spokesperson told T&CTJ, “Starbucks entered Argentina in 2008 with our first store in Buenos Aires. Today, the brand operates over 130 stores in the market, providing employment opportunities to over 1,700 green apron partners,” noting that earlier this year, Starbucks celebrated its 15th anniversary in Argentina, together with its licensed business operator, Alsea.

In April 2023, the spokesperson said that Argentina took a significant step toward a more sustainable future by certifying its first two Starbucks Greener Stores. “This is part of Starbucks global vision to have 3,500 Greener Store-certified locations worldwide, aiming to cut our climate, water, and waste footprints in half by 2030. Starbucks Argentina also continues to expand its plant-based menu offerings in an effort to deliver increased options for our customers.”

Furthermore, in collaboration with Alsea, Starbucks announced plans to operate 2,000 Starbucks stores in the 12 markets where Alsea operates the brand globally by the end of 2025.

Starbucks and other leading Western coffee chains operating in the country have faced strong competition with local players. An example of this is Café Martinez chain, a local chain that has almost doubled the number of its outlets within Argentina the last few years and which plans to continue its active expansion in years to come.

Coffee consumption is growing

A senior researcher at Euromonitor International said that in 2022, the total volume sale of coffee in Argentina is set to post a third consecutive year of growth, following a decline during the outbreak of Covid-19. “For the current year and beyond even though consumers have returned to pre-pandemic habits, total volume consumption is forecast to grow much slower. This is due to the long-term unstable economy, increased poverty, and high inflation, which is diminishing the purchasing power of middle and low-income consumers.”

However, coffee is set to post the highest total volume and current retail value growth in hot drinks, driven by the widening use of instant coffee, which began seeing consumption growth in 2021 and 2022. Instant coffee benefits from being affordable, while offering a widening variety of coffee mixes. New coffee consumers tend to start with lighter options, with less coffee flavour and with more milk content, with the inclusion of chocolate and other ingredients.

The coffee industry has suffered a major world price hike due to drought conditions in Brazil, which led to considerably lower production and higher freight costs. Coffee pod consumption rocketed as consumers prioritised high-quality coffee with a desire to replicate foodservice experiences at home. The coffee pod category was also stimulated by a continuous entry of new brands, including La Morenita, La Virginia, Jacobs, L’Or, Viaggio, and Nestlé Argentina’s latest novelty with Starbucks. Sales of coffee pods were fueled by the growth of ecommerce, the fastest-growing channel in the hots drinks industry in 2022.

According to Euromonitor’s spokesman, retail value sales of coffee in Argentina increased by 67 percent in current terms in 2022 to ARS 80.3 billion The instant coffee mix category was the best performing one in 2022, with retail value sales rising by 75 percent in current terms to ARS 5.4 billion. Retail sales in 2022 had a CAGR of 59 percent, hitting ARS 811 billion (CAGR of 15 percent over the forecast period 2022-2027).

Coffee does grow in Argentina; however, it is produced in only a single plantation in the Yungas — a bioregion of a narrow band of forest along the eastern slope of the Andes Mountains from Peru and Bolivia. It emerged in the early 1970s under the name of Café Baritú when authorities in the province launched an ambitious plan to make Northern Argentina a coffee-producing area.

Graciela Ortiz, the owner of Café Baritú in an interview with the Argentinian iProfesional business paper said that the coffee produced on the Salta farm is Arabica. “It is actually a mixture of two Arabicas, one Colombian and the other Brazilian,” he specifies. “It has a very subtle flavour, with fruity, perfumed notes.”

As for coffee, although Argentina is still far from countries like Norway, Finland or the United States in terms of coffee consumption – being stagnant for years at a per capita consumption of only one kilo per year – the sector has shown sustained growth recently, which is mainly due to the rise of popularity of coffee among local customers.

According to a study conducted by the Argentine Coffee Chamber in collaboration with the firm The Brand Bean, today, coffee in Argentina represents 45 percent of the beverages chosen compared to all other beverages and is consumed mostly by people between 25 and 44 years old.

Most local citizens prefer milder coffees instead of stronger roasts as in many European countries. According to some media reports, an average of one kilo of coffee per capita is consumed annually (208 cups) in the country, with the instant variety being the most consumed. Nine out of 10 Argentines prepare it at home and approximately 50 percent of consumers add milk.

Regarding the most chosen varieties, young people seek to customise it and choose to consume cold and instant coffees. On the other hand, those over 35 years of age choose the capsule format.

According to experts of La Nacion, local consumers are increasingly interested in knowing everything about the product: who makes it, what differential attributes it has, what extraction method enhances it, what the differences are between varietals and what the different types of filtering are like. In addition to choosing coffees from more exotic origins, such as Kenya, the Dominican Republic, Honduras or Haiti, they also turn to cold brew when the temperature rises.

Tea-growing & consuming are strong

In the case of tea, retail value sales grew by 62 percent in current terms in 2022 to ARS 21.3 billion. Green tea was the best performing category in 2022, with retail value sales rising by 73 percent in current terms to ARS131 million.

Retail tea sales had a CAGR of 41 percent in 2022, reaching ARS 118 billion (constant value CAGR of 2% over the forecast period).

Tea sales saw growth in total retail volume terms in 2022; resulting from the increasingly positive perception of tea as a healthy option. Argentinian consumers have always been very health conscious, but the outbreak of Covid-19 increased this, with consumers discussing and looking for ways to boost their immune systems. Greater interest has been given to specific functional benefits offered by different tea varieties, particularly those claiming to strengthen the immune system or provide a calming effect. Thus, green tea and herbal/fruit tea have seen strong growth, driven by their functional fortified options.

Argentina has a more robust tea production than that of coffee. According to Argentinian Mitre Y Elcampo business paper, tea production is in the southernmost part of Argentina, located between 26° and 28° South latitude, there are about 6,800 producers with an area of 40,500 hectares. About 94 percent of them are located in the province of Misiones, and the remaining 6 percent are in Corrientes. A characteristic of Argentine tea is its high concentration of polyphenols.

Approximately 90 percent of Argentine tea production is destined for foreign markets and its volume represents almost 2 percent of world consumption. The main destination is the United States, with 70 percent of the production. Currently, Argentina is the main exporter of tea to the United States of America. Other important destinations are Chile, Poland, Russia, Germany; followed by the United Kingdom, India, Malaysia and 30 other countries

The annual volume of tea exports from Argentina are varied in range of 70,000-75,000 tonnes mostly black tea for about USD $75 – $83 million in value terms. Nearly 64 percent of the cultivated area is certified with the RAS Standard (Sustainable Agriculture Network, triple impact).

Tea consumption in Argentina has been steadily growing with the biggest demand being observed in case of gourmet tea. This has even stimulated the development of tea tourism in the region, with the province of Misiones, which is located in the northeastern corner of the country in the Mesopotamia region, at forefront of this.

  • Eugene Gerden is an international freelance writer, who specialises in covering the global coffee, tea and agricultural industries. He worked for several industry titles and may be reached at [email protected].

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