ESPRESSO WARS

Although Lebanese coffee remains king in Lebanon, the industry’s players have diversified their offerings in the last 20 years by introducing the emblematic espresso shot in a bid to increase their brand visibility, boost profit margins and adapt to a fas

Lebanon’s coffee market is valued at more than USD 220 million, divided between producers and roasters. With an annual consumption of 5.8 kg of coffee per capita, Lebanon ranks among the world’s top 20 importers, according to the International Coffee Organization, making it a lucrative and globally indispensable market.

“More than 70 percent of the coffee is consumed the Lebanese way,” explained Roy Daniel, CEO of Barista, sister company of Café Daniel. Apart from instant coffee, which is entirely imported, production is divided between espresso (20 percent) and filtered coffee (10 percent). In 2015, revenues generated by Lebanese coffee alone reached USD 130 million.

Despite the fact that 100 roasters are in operation, the local market is dominated by just a handful of industry players, who collectively hold 80 percent of business. The manufacturing process remains the same for all producers, with the green beans usually arriving through Beirut’s harbor, primarily from Brazil, but also from Colombia, Ethiopia, Vietnam and Indonesia, before they are sent to the roasting plants. They are then grounded, packed and

distributed or re-exported. “The Lebanese retail coffee market consumes about 10,000 tons annually, valued at USD 90 million,” Nadim Dahan, managing director of Café Super Brasil said. “You also need to factor in the amount of sales, unaccounted for, made by the country’s small local shops who offer little, if any, data in that regard.”

A USD 10 million espresso cup

According to Georges Najjar, president of Najjar SAL, “The target audience of the local coffee market is the adult consumer, not young workers who have developed other habits.”

Dahan added that Café Super Brasil’s customers were used to consuming coffee the Lebanese way, which, from a processing point of view, was “quite demanding” as it required significant time to prepare. “Today, however, society is evolving and everything is becoming more instant, with consumers wanting things immediately,” he acknowledged.

The espresso bean has taken root in Lebanon, in line with global trends, since the end of the 1990s, and continued to gain widespread popularity. From Café Najjar, Super Brasil and Abi Nasr to Café Daniel, local roasters have dedicated a part of their production to the espresso and created their own label. Accordingly, they have equipped themselves with specific machinery, capable of transforming the green coffee bean into grain, pods and capsules.

Meanwhile, international firms, such as Nespresso, Lavazza, Illy and Kimbo, have also imported their products into Lebanon, mainly through F&B and local hospitality distribution companies. According to some of the industry’s players, the espresso market in 2015 was valued at USD 10 million. “With a kilo worth around USD 40, margins are three times higher than with Lebanese coffees,” noted Nizar Lababki, former HORECA head for Café Najjar. Since its launch in 1986, Nespresso has taken great strides and revolutionized the coffee industry. In Lebanon, the operating unit of the Swiss company, which is part of the Nestlé Group, assigned the Dima Group to handle its business in the year 2000. According to our 2015 estimates, it achieved a USD 4.2million in turnover, selling 6 million capsules. “It is hard to compete with Nespresso, which has its niche and a flawless marketing strategy,” Walid Hachem, distributer of the Italian brand Kimbo in Lebanon, said. The Italian company’s revenue stands at USD 1 million. “But, now that they have lost patents on some of their machines, many companies have launched their own Nespressocompatible pods on the market,” he added. “This can entice consumers to look for a cheaper option like ours, which is 30-40 percent less expensive.”

Let’s take the shot outside

While traditional Lebanese coffee remains associated with family gatherings and cozy living rooms, the espresso shot has established itself as the most common brew requested in public. When it comes to Lebanon, the beverage is mainly consumed in hotels, restaurants, offices, shops and banks. This trend makes it easier for the brands to reach a large audience and promote themselves. Some use their espresso offering to sell additional products, such as alcohol and varieties of nuts. To gain market share, local producers and importers have also developed different ordering systems, with some, such as Nespresso and Illy, even opening their own shops. They have also started selling a large number of espresso machines. “Most of our sales come from machines we supply on a consignment basis,” explained Daniel. “You run an office, we loan you a machine and in exchange you commit to drinking a certain amount of coffee each month. It requires a significant investment, since you have to take into account the purchase of the machines and a rigorous maintenance and after-sales service fee.”

He added that his company employed more people for maintenance than for sales. Simultaneously, the industry is still targeting households, which is Nespresso pod system’s main market. “Capsules and pods help us enter homes where Lebanese coffee still has the upper hand,” said Daniel who, through his Barista brand, sells Nespresso-compatible products. “These products meet today’s fast-paced society. They are available in supermarkets and require very little preparation.”

Hachem acknowledged that making an espresso at home necessitated a small investment for a machine. “You can find one for about USD 100, which may not be affordable for all, but it tends to become cheaper with more competitive pricing,” he noted.

The espresso trend has gained momentum over the last 10 years, with production on the rise for local roasters and higher imports for distributors. However, industry players dismiss the idea that espresso will eclipse demand for traditional Lebanese coffee. “Demand for espresso is growing and new players are trying to enter the market every year,” Firas Abi Nasr, managing director of the Abi Nasr group acknowledged. “We have managed to earn a reputation thanks to espresso. But Lebanese people also like the tradition associated with drinking Lebanese coffee, which has, over many generations, become part of our society’s DNA. Trying the espresso doesn’t mean you’ll love it!”