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Japanese Coffee Market


Japan's young waking up to taste of coffee

Tokyo's teenagers and twentysomethings, it seems, are hooked. Hip, informal and noisy, U.S. specialty coffee shops have persuaded the young that coffee can be every bit as trendy as a soft drink like Coke.

As the trend drives up coffee consumption, some of Japan's small domestic roasters see their future in the specialty coffee market.

And that could be good news for Third World producers -- particularly the small-scale farmers at the bottom of the marketing ladder.

U.S. coffee chain Starbucks Corp set the ball rolling by stylishly serving up espresso coffees.

"Starbucks has introduced to Japan coffee with a new taste. It has appealed to young consumers who don't drink traditional coffee," says Masao Yamashita, executive director of All Japan Coffee Association, a coffee roasters' organization.

"They have expanded coffee drinkers in Japan and contributed to the growth of the whole Japanese coffee market."

Japan is the world's third largest importer of coffee, after the United States and Germany, but, notes Yamashita, it ranked 18th in per capita consumption in 1999 at 3.01 kg (6.63 pound), lagging behind Finland's 11.42 kg (25.17 pound) and Norway's 10.63 kg (23.43 pound).

Japan's green coffee imports rose 5.4 percent in 2000 to a record 382,230 tones from a year earlier. Brazil was the largest supplier with 90,104 tones, followed by Colombia with 70,450 tones and Indonesia with 69,906 tones.

Yamashita says that with imports of roasted coffee, instant coffee and other coffee products included, Japan's coffee demand is seen to have reached a record 416,090 tones on a green coffee basis last year, up 5.5 percent from 1999.


Instant coffee is estimated to represent about 40 percent of the market, regular coffee accounts for over 30 percent and canned/bottled coffee most of the remainder, he adds, predicting that small per capita consumption means demand should grow.

Mary Williams, senior vice president of Starbucks, says the specialty coffee market was almost non-existent in Japan before the company opened its first shop in Tokyo in 1996.

"I think that Starbucks and Japanese people are making an effort together to increase specialty coffee awareness," Williams adds.

"Starbucks will grow more in the Japanese market. I think there are many people in Japan who don't drink coffee yet ... who will become coffee connoisseurs and coffee buyers," she predicts.

There were 227 Starbucks outlets in Japan by the end of March, and the company plans to expand this to more than 500 stores by March 2004.

Experts say specialty coffee is made from arabica beans that have attractive traits arising from a unique micro-climate, tree variety and cherry maturity at harvest.

Coffee growers, fed up with historically low prices for commodity coffee, are keen to enter this niche market as specialty coffee sells at a premium.


"As people begin more and more to demand higher quality coffee, the premiums paid to the farmers for the higher quality coffee will increase," Williams said. "I think from that point of view it's a very important aspect of the coffee industry as a whole worldwide."

Starbucks does not disclose the volume of specialty coffee it sells in Japan. Traders estimate the bulk of Japan's roasted coffee imports from the United States, which reached 1,552 tones last year, came from Starbucks' roasting facility in Seattle.

Traders say specialty coffee now represents less than one percent of Japan's overall coffee consumption. One trader said premiums Japanese buyers paid for specialty coffee vary from around 10 cents per pound to 250 cents, depending on origins.

On New York's Coffee, Sugar and Cocoa Exchange (CSCE), the May arabica coffee futures set its life-of-contract low of 59.00 cents a lb on April 2.


Tokyo-based Toa Coffee Co is among the rare Japanese roasters who put specialty coffee at the core of their business.

Impressed by a booming market in the United States, the company began switching from commercial coffee to specialty coffee in 1997.

Toa Coffee Director Masahisa Asano says specialty coffee represented about 90 percent of all the coffee beans purchased by the company last year, or 100 tones.

"Competition is toughening in Japan's coffee market as specialty coffee retailers are coming from overseas," Asano adds.

"Major Japanese roasters can manage by mass-marketing of commercial coffee. But for a smaller roaster like us to survive, there are no other ways but to adopt specialty coffee," he says.

Asano says Toa buys specialty coffee either by direct negotiation with coffee farms or through an Internet auction.

The company bought a total of 228 60-kg bags at an Internet auction by the Brazil Specialty Coffee Association last December.

Toa bid at $1.75 per pound for 79 bags of coffee from Serra das Cabecas farms, $1.25 per pound for 49 bags of coffee from Sitio Primavera farms, and $1.00 per pound for 100 bags of coffee from Santa Clara farms.

Toa also plans to join Guatemala's first specialty coffee Internet auction scheduled for June, Asano says.

Toa also has contacts with specialty coffee farms in Brazil, Bolivia, Papua New Guinea and Zambia. Asano says its price negotiations depend on the quality of beans, not the New York coffee futures market.

"We understand we must pay for costs that are necessary for sustainable production of specialty coffee," Asano adds. "From our experience, it is impossible to buy specialty coffee at less than $1 per pound."



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