France: new found gold in its coffee market (French Flavors)

Over the years the French coffee market has changed radically, more so than any other large, established coffee market in the world. Twenty years ago it could fairly easily be defined as an old fashioned R&G market wedded to the blended coffees of former colonies in Africa. The only trend then was a rather tepid acceptance of Arabica as an idea of something premium in coffee--and the vacuum brick pack. Astonishingly, France has since evolved to rank among the most flamboyant of all coffee markets. It can be assumed that now in Europe no other national market has more diversity in coffee drinks on offer commercially, seriously, than France.

Over the years the French coffee market has changed radically, more so than any other large, established coffee market in the world. Twenty years ago it could fairly easily be defined as an old fashioned R&G market wedded to the blended coffees of former colonies in Africa. The only trend then was a rather tepid acceptance of Arabica as an idea of something premium in coffee--and the vacuum brick pack.

Astonishingly, France has since evolved to rank among the most flamboyant of all coffee markets. It can be assumed that now in Europe no other national market has more diversity in coffee drinks on offer commercially, seriously, than France.

What in the past could be described in a paragraph has become complex. The country consumes more than 300,000 tons of coffee per year. Most of this "manufactured" coffee comes from French roasting factories, but a quantity is sourced into the country from other European Union States, principally Belgium and Italy. The Belgian product pertains to the large market needs of one of the two multinationals that together dominate the big store market that in turn represent the great majority of at-home sector purchasing.

France consumes more than 25% of its coffee in instant format. Precise consumption figures are available for France, as few people are more precise than the French, but they are not easily pried loose from private hands. The following gives close accounting of how the sum coffee market is segmented.

100% Arabica blends occupy 36% of the coffee pie, 17% are blends of Robusta and Arabica, 17% of volume is in single-service packages (SSP), more than 10% is of coffee-by-origin, more than 10% is classic "espresso" roast, something more than 6% of total disappearance is of what is known as "Mild Arabica" (not referring to the industry's classification of green coffees but to what consumers here think of as "naturally" low caffeine coffees often a single origin that are thought to be gentler on the stomach). Decaffeinated coffees represent 5.5% of sales. For those pondering the total given of 100.5%, this shows the uncertain aspects of a coffee market in transition, such as France's, plus the economic downtown of past months.

The most important sales channel is the big store in France--super and hypermarkets. Sales from these shelves ring up 1.2 billion Euros a year. Product type value is 75% in roasted coffee brick pack or similar package style--and 25% in SSP.

Within this big store sector, 50.3% of sales last year were in Arabicas, 31.9% were of Robusta (often discount range store brand), 12.4% were of SSP and 5.4% of sales last year where of decaffeinated coffees.

Small specialized stores, often for gourmet or ethnic sectors, report 8.5% of their national sales in roasted coffee products, this being the number one item in their volume.

The HoReCa share of coffee sales is 17% of total consumption. Across the board, 90.9% of French coffee drinkers, at-home and out-of-home, are using classic roasted coffee of one kind or another to widely varying degree. Of this 25.6% is in SSP. However, 9.1% of French coffee consumers are now using SSP exclusively, meaning at-home--the remaining 16.5% of coffee drinkers consuming SSP on occasion are double drinker-types at home or belong in the office-coffee-service sector and in CHR (cafes, hotels, restaurants) where SSP has taken share. In all, 72% of the French people drink coffee every day, and more than 90% of French home kitchens have a coffee maker of some kind.

Tendencies

1 What happened to France, fairly quickly, is that after "discovering" 100% Arabica coffees they then fell for the concept of "terroir," which derives from wine and is therefore a natural part of French culture. In coffee, terroir refers to origins and there are now some 50 origins that the French can have commercial access to regularly. The most popular of these are "moka" Ethiopia and Colombia supreme. Industry professionals can smile at these vague terms but for the French they have become quite important.

As a result, France has one of the largest single-origin markets in Europe and it is growing. Inside this is also the "bio" class and the equitable coffee initiatives, both also growing and with rapidly gaining recognition and demand.

2 Another change has been towards espresso drinks both for out-of-home and at-home segments. The booming sales of Lavazza and Segafredo Zanetti, the store leaders, plus those of numerous small Italian and French roasters clearly attest to this. In brick packs or tins, pods or caps, espresso is chic in France, and this is of inestimable value on this market where fashion rules.

The expanding presence of coffee/espresso bar chains also shows how much the drink now factors in French life. Colombus Cafe, Molongo Boutiques, Berts, Segafredo Zaneti, Lavazza's new ESP coffee bar concept, the advent of McCafes; there are numerous competitors to be found. The much awaited arrival of Starbucks in France a few years ago has not been as successful and seems to continue catering to a tourist oriented market--there are 48 Starbucks in France, fewer than the 50 McCafes which have been on the market only recently.

3 The corresponding sales in both professional and home espresso machines have also jumped.

With the professional market finding growth in the expanding fast food and coffee bar chains, the at-home market now sees sales of 1.5 million espresso machines per year in France, almost all in dosed system pod or cap units. In 2008 this meant espresso machines represented one-third of French coffee machine sales.

Also, the Nespresso phenomenon in France cannot be understated in understanding the popular draw of this expensive espresso development (machine plus the significant added price of pods and most especially of caps). The George Clooney ads have electrified the coffee market here like nothing in coffee marketing history. No wonder it turns out that they were created by the Paris McCann bureau (as some know or will soon, Clooney has dropped out and Sharon Stone is his replacement).

4 Despite impressive dynamism in the market, due to strong interest in single origins, in espresso, in SSP and espresso machines, the whole bean market has also seen new life and sales of home grinders are up.

5 Office coffee service and vending too have expanded in France. OCS in particular has been a growth market. So far it is dominated by Lavazza Point. Last year Lavazza sold 220 million caps for its Lavazza Point machines. In France, 75-80% of cups sold from hot beverage vending machines are of coffee--regular, espresso, roasted, flesh ground or instant.

Growth in vending is predicated on major changes in the coffee menus offered. Single origins, flavored coffees, Italian espresso, cappuccinos, decaf and more are now on the menus. New placements figure too, such as in gas stations and rest stops on France's numerous autoroutes.

Nevertheless, this expanding segment has not meant much change in the volume of coffee consumed in France. Rather they have become dynamic sectors that feed off other sectors. Big store sales have come under some pressure, for example, their coffee sales have regressed by 1.8% in volume last year, even while coffee value to the stores has risen with a more upscale (i.e. expensive) offering in single origins and SSR The latter in particular while amounting to 10% of big store coffee sales mean 20% of overall coffee value.

6 So long to the French Cafe? Not really but the true classic cafes are dwindling in number. More now focus on quick food (sandwiches). Coffee in cafes has been stressed by McDonalds, by coffee bars, by the image of cafes as offering a poor quality cup.

Bits N' Pieces

The French market is still controlled at large by multinationals and Italian espresso companies. An important leader, Malongo, is a subsidiary of Rombouts. Kraft's brand families lead in sales followed in fierce competition by those produced by Sara Lee's Douwe Egbert's french brand families.

Kraft and Sara Lee together hold the majority of all coffee sales. They are followed by the Italian companies Segafredo Zanetti and Lavazza. There are some 500 roasters in France. Cafe Meo is one French-owned company that has attained wide recognition and competes in all market sectors.

New now in France is Kraft's new Tassimo model (a Kraft-Braun cooperative project) launched at the end of last year with "T-Disks" dedicated caps. The Tassimo is priced at a surprisingly low 130 Euros per unit, with the T-Disks also very competitive at 4.45 Euros for the 18-20 T-Disks packs. In addition to espresso and chocolate drink caps, Tassimo also can serve Twinings Tea caps.

For its part, Nestle's Nespresso has celebrated the one millionth sale of its machine in France.

New from Sara Lee, which first electrified the French market with its Senseo machine and non-espresso pods, is another impressive innovation that has taken four years of research before release. This is called Pepites d'Arome in French. The new unique product is a bean shaped pellet, chocolate colored, made of compressed roasted coffee. Each pellet comes in a vacuum in strands. The pellet(s) needed are simply popped out of the strand and dropped into the standard paper filter holder that are used around the world in filter coffee makers. Why do great ideas once achieved seem so simple?

There is no end to what is changing and new in this amazing new French coffee market. All major players are bringing in their own contributions.

But one cannot leave France without reference to McDonalds, or McDo, as is its household term everywhere in French. There are 1,134 McDonalds in France, and more are built each year. One great contribution to French culture wrought by McDonald's is the habit of take away food and beverages, and specifically of beverages including coffee in paper cups. Take-away and paper were barriers one never imagined the French could cross. But with their passion for McDonalds it has been cleared.

This has brought several other chains and cafes a bonanza. With the ban on smoking in cafes, a shock wave in France and one that has seriously hurt the business of thousands of cafe, Lavazza has jumped in, for one example, with a takeaway espresso product in a cup with a jaunty cap that cafes can offer all clients, and which without saying so is a warm comfort to cold smokers.

The power of McDo now builds in the coffee sector too in France. The French like coffee at McDonalds, more so then customers in most other countries. Based on this, there are already more than 50 McCafes in operation plus 100 more being placed this year. The company's goal based on demand analyses is to have about 300 McCafes in France as soon as possible.

McCafes are popular with McDonalds France because the company has seen that a unit is adding some 6% to the outlet's established revenue. Vive la France.