Latte lovers from Moscow driving coffeechain boom
WHEN the founders of Poland’s Green Caffe Nero opened the first store nearly 15 years ago, the global ‘Starbucks- on- everycorner’ coffee- chain explosion had yet to reach the eastern European country.
As the only cafe in the neighbourhood and lacking the expertise to whip up lattes and cappuccinos, the partners had to order an instructional video from the US, said President and Co-Founder Adam Ringer.
“We went to Milan to a coffee expo and found a supplier,’’ Ringer said in an interview in the chain’s busy branch in central Warsaw. “It was a virgin market.’’
Today couldn’t be more different. The coffee chain, now majority owned by the UK’s Caffe Nero, serves 800,000 customers a month at its 58 stores and plans to open at least another 12 every year.
Market researcher Allegra Strategies estimates the number of branded cafes in Poland is up 14 per cent in the 12 months through October, nearly double the continental average this year. It’s not just Poland that’s seeing growth, as new Starbucks and McDonald’s McCafe outlets spring up across eastern Europe from Prague to Bucharest. Of course, coffee traditions vary and the drink has been present in parts of the region for centuries, especially in smaller southeastern states. But when it comes to branded coffee chains, most countries are still playing catch-up to western counterparts. The eastern European market for coffee, which is dominated by Russia and Poland, grew 5.3 per cent last year to US$ 7.45 billion ( RM31 billion), compared with 1.8 per cent in western Europe, according to Euromonitor International. It remains about a third smaller.
The growth in outlets and demand means eastern Europe has developed into a relatively bright spot against a backdrop of tepid global demand growth for
We went to Milan to a coffee expo and found a supplier. It was a virgin market. Adam Ringer, Green Caffe Nero president and co-Founder
coffee and stagnating markets in the west. Expanding economies and rising wages are buoying consumer spending, creating opportunities for coffee chains like Green Caffe Nero and its international rivals.
Starbucks will add about 40 new stores across six eastern European countries, an increase of about a quarter, according to AmRest Holdings SE, which operates the brand’s outlets in the region.
The Czech Republic and Hungary are strong markets for the Seattle-based chain and the company has just entered Slovakia, Adam Mularuk, Starbucks Central Europe president at AmRest, said in an interview in Warsaw.
“We’re very happy with the growth everywhere,” he said. “Saturation of coffee shops per inhabitant is much lower in eastern Europe than it is in western Europe. So consequently that dynamic is going to be stronger.”
Rising demand in the region is helping lift growth in the European Union, the world’s top market for the beverage. Consumption of green coffee, the beans that are yet to be roasted, grew at a double- digit rate in Poland, Russia and the Czech Republic last year, compared with 4.2 per cent in the EU, according to the International Coffee Organization that counts producing countries for its members.
To be sure, eastern Europe is far from uniform and each country has developed its own tastes over centuries. In Poland, coffee- drinking traditions were eroded by four decades of communist rule, when cafes were typically reserved as a luxury for the elite and a good- quality coffee was hard to find. Today, lattes are the top- selling type of coffee. Hungarians, largely influenced by the Vienna coffeehouse culture, have traditionally gone black.
Further east, Russia, the world’s largest market for black tea, is also enjoying a growth in coffee culture. Middle classes are expanding and incomes rising again after a recession spurred by an oil-price plunge and sanctions.
Russia added about 1,000 coffee shops in the five years through 2016, the seventh-most globally, according to Euromonitor.
However, incomes may be barriers to even faster growth. Coffee is still more expensive in the region compared with western Europe. An hourly minimum wage in Poland will buy one cappuccino, compared with at least two in the UK. — WP-Bloomberg