Brazil is an important player in the international coffee market being the largest producer and a major consumer. This article will outline the new trends of the market and the investment possibilities to launch a business in the coffee sector in Brazil.
Coffee arrived in Brazil through French Guiana in the eighteenth century. With different climates and altitudes, the grains have adapted very well to Brazil and plantations spread throughout the country. Time has passed and now it is the second most consumed beverage in the country, only behind water. The country occupies an important place in the global market. The cultivated area of coffee is about 2.2 million hectares, spanning across 11 states.
The National Supply Company – also known as Conab – reported that, in 2012, the country harvested a record crop of 50.83 million 60kg sacks of coffee. Brazil is the largest producer of this commodity and responsible for 33% of the global production.
The Consumption of Coffee in Brazil
According to data published by Brazilian Association of Coffee – also known as ABIC – not only the domestic consumption of traditional coffee grew in the last years, the consumption outside the home of specialty and gourmet coffee has also increased. The growth shows that normal coffee is not enough anymore and consumers also want to know how to appreciate quality and distinctive flavors.
Evolution in the internal consumption of coffee in Brazil
|Year|| Millions of Coffee Sacks |
| 2008 || 17.7 |
| 2009 || 18.4 |
| 2010 || 19.1 |
| 2011 || 19.7 |
| 2012 || 20.3 |
In the last crop year – between November 2011 and October 2012 – ABIC recorded consumption of 20.33 million sacks, an increase of 3.09% over the previous period. On average, a Brazilian consumed 6.23 kg of raw coffee beans or 4.98 kg of roasted coffee, almost 83 liters per capita per year. The figure corresponds to an increase of 2.10% over the previous period.
According to the association, Brazilians are also diversifying the ways they prepare the beverage, in addition to the filtered coffee consumed at home, espressos, cappuccinos and other combinations with milk are becoming more common. For 2013, ABIC predicts a continuous increase in coffee consumption outside of the home in places such as coffee houses and restaurants offering higher quality products.
Since 2004, consumption outside the home grew more than 350%. The increase was followed by trend: preparation the coffee in single servings – for a single cup – as espresso, coffee sachets and capsules. Or by preparation services in strainers and filters, to make a single cup of freshly-made filtered coffee. A habit imported from the USA, which has spread rapidly in Brazilian coffee houses.
Gourmet Market in Expansion
In developed markets like the U.S., Japan and the European Union (EU), the demand for gourmet coffee has grown significantly, reaching retail prices levels superior to 200% of conventional coffee prices. In Brazil, this is also a trend; traders have promoted the consumption of gourmet coffee to differentiate product offerings with higher added value.
The Brazilian demand for gourmet coffee is real and consumers are seeking a product with better quality, even for the lowest social classes. Studies show that coffee roasted and ground recorded a rise in prices equal to 18% in 2012. The value is much greater than the one related to soluble coffee and cappuccino, but this was no hindrance to the growth of consumption in 2012. The growth figure show that the product cost is outdated, not significantly influencing the monthly household budget.
Coffee Exposure and Price in Brazil
|Category||Consumption|| Average Price (BRL/kg) |
| Traditional || 83% || 11.72 |
| Superior || 5% || 18.90 |
| Gourmet || 12% || 43.46 |
Exportation: positive for Brazil
Gourmet coffee has grown significantly in terms of export volume, having 90% destined for foreign markets. This proves that there is great opportunity for companies in this sector. The international culture of this product is strong and traditional and is now spreading in Brazil as well.
Besides the sales volume that this product represents, another factor that makes companies observe gourmet coffee with investor’s eyes is the embedded value for quality. A coffee producer that enters in the sector will contribute to shifting Brazil’s status as a commodities exporter, to an exporter of industrialized quality products.
Exportation of gourmet coffee is a possibility of increased earnings. For entrepreneurs, with strategic market vision, there is more than just the profit increase, the exportation of gourmet coffee offers possibility of globalization of their own company.
Quality and Certification
Quality improvement is the engine of consumption. ABIC found that 16% of consumers have experienced at home premium, gourmet or superior coffees. The importance of this lies in the fact that the ABIC launched the Program Purity Seal in 1989, announcing the intention to reverse the decline in coffee consumption – that had existed during that time – through the provision of better quality to consumers.
The Purity Seal was the first industry program of quality assurance for food in Brazil. The program currently certifies 1,099 brands of coffee and has performed over 58,000 laboratory analyses in these 23 years of existence. Since its release the consumption of coffee is growing in Brazil.
In 2004, ABIC created the Coffee Quality Program – also known as PQC – which today is the largest program of quality and certification for roasted coffee in the world. The PQC certifies and monitors many brands of coffee, including gourmet, high quality and greater value coffees.
Coffee Houses as Investments
In Brazil, the consumption of gourmet coffee has been expanding making coffee houses a more appealing investment in the country. There are 59 stores of the franchise Starbucks in Brazil, in a booming market. The marketing manager of Starbucks Brazil, Renato Greek evaluates 2013 as a year of growth. According to Greek, the coffee market in the country is expanding and that there is certainly plenty of room to grow in Brazil. Today the Starbucks stores are largely concentrated in Rio de Janeiro and São Paulo.
The fact that Brazil is the largest producer of coffee and a major consumer in the world contributes to the success of companies selling specialty coffee. The Brazilian market has many opportunities for Starbucks. Geek also said that in Brazil, coffee is consumed at different times and in different ways, such as the standard espresso after lunch and filtered coffee, pure or with milk, in the morning.
The Brazilian competitor of Starbucks, is the franchise Fran's Café. The franchise expects to end 2013 with 185 units. Currently, there are 148 stores. According to José Henrique Ribeiro Ramos, managing partner of Fran's Café, there is a natural growth in domestic consumption presenting at least 20 promising years ahead.
The Coffee Capsule Market
The coffee market for single dose (capsules) is growing rapidly and is one of the promising bets for Brazil. It is a great opportunity for the market, since the process of espresso coffee capsule is an innovative project in the Brazilian market. The proposal will add value to the various establishments that provide the product in the cup, providing standardization and ease of handling in the preparation of the beverage.
The company Leonardi is the first Brazilian company to produce biodegradable capsules for the Brazilian roasters in the country. The company's proposal is outsourcing manufacturing of coffee roasters in the capsule, with the goal of providing product diversification from those already offered to its customers.
In the last ten years, the specialty coffee market has grown considerably. Many producers of green coffee have entered the roasted coffee segment with their products. The coffee market is constantly changing and the development of coffee capsules in Brazil could be a great and profitable investment possibility.