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Southeastern Europe: A Traditional Fresh Coffee Market with Instant Coffee Opportunities

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Although Southeastern Europe – the countries located on or near the Balkan Peninsula including Bosnia-Herzegovina, Croatia, Macedonia, Serbia, and Slovenia – is renowned for its rich coffee heritage, since 2007 the region has experienced an increase in instant coffee consumption. In fact, between 2011 and 2012, Southeastern Europe’s instant coffee market outpaced Asia-Pacific, the leading region for instant coffee, in terms of ready-to-drink volume growth, increasing by 7%. While convenience is certainly a major factor driving this shift, another is the perception, especially amongst younger demographics, of instant coffee as fashionable and versatile upgrade from traditional fresh coffee.

Fresh Coffee Dominates

Drinking coffee in Southeastern Europe is not simply about the taste or caffeine intake, but is an integral part of the social fabric as expressions like “let’s go for coffee” or “come over for coffee” are
synonymous with socialising with friends and family. Indeed, in 2012, the total coffee market in the region exceeded US$ 883 million.  Traditionally, the preparation of coffee in the Balkans – most often done in a manner similar to Turkish coffee, involving a multi-step boiling process to produce a thick foam on top and sunken grounds on the bottom – was equally important as the dialogue and fraternisation that accompanied its consumption. The particulars of the coffee ritual in Southeastern Europe help to explain why international specialist coffee shop chains like Starbucks and Costa Coffee have had difficulty penetrating the region. Even in Serbia, which ranks eighth globally in terms of total cups of coffee drunk per capita, ahead of Brazil and Italy, the impact of specialist coffee shops, although increasing, remains marginal.

Change in Time, Change in Cuppa

In spite of the region’s strong coffee traditions, there are signs that the coffee landscape in Southeastern Europe is changing. Over the last five years instant coffee has continued to grow in popularity, taking away significant share from fresh coffee.  In 2007, instant coffee accounted for 18% of the market, in terms of total RTD volume; however, as of 2012, instant coffee had jumped over ten basis points, accounting for 29% of the total coffee market in Southeastern Europe. One reason for this evolution is convenience. As consumers develop busier and busier lifestyles, the time required to cook a traditional cup of fresh coffee is increasingly harder to find. While coffee continues to play a central social role in the Balkans, the preparation ritual is becoming less and less critical: as long as there is coffee on the table, it doesn’t matter how it got there, or what its style is.

In addition to its ease and accessibility, instant coffee is increasingly appealing to the younger generations of Bosnians, Croats, Macedonians, Serbs and Slovenes, as the more fashionable coffee
alternative. While instant coffee is perceived as modern and innovative with countless flavours and variations, fresh coffee is seen as traditional and monolithic. Indeed, nearly 50% of the instant coffee market in Southeastern Europe is derived from instant coffee 2-in-1 or 3-in-1 blends (mixes that have a combination of milk and/or sweetener) or instant Italian specialty coffees that seek to replicate espresso-based drinks like cappuccinos and lattes.  Atlantic Grupa’s Grand Kafa instant coffee, one of the leading instant coffee brands in Bosnia-Herzegovina, Macedonia, and Serbia, does not even have standard instant coffee option, but instead offers only mixes packaged in easy-to-prepare single-serve sachets.

Instant Coffee, Here to Stay

Although fresh coffee still dominates the overall market in Southeastern Europe, instant coffee is continuing to attract more and more consumers. According to Euromonitor International’s most recent findings, in 2013, Serbia, the region’s largest coffee market, will experience a decline in the retail volume of fresh coffee, while its instant coffee market which will continue to increase. In contrast to the Balkans’ saturated fresh coffee market, the region’s instant coffee market offers promising potential for coffee manufactures, which also has an average unit price of nearly three times that of fresh coffee. The fact that the new audience for instant coffee stems from the younger generations may suggest not only that this trend is here to stay, but also that it may even expand in years to come.

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