Nestle takes aim at Japan market as demand for coffee rises

by

Kyodo

The domestic coffee market hit a record high last year, with consumption reaching 446,392 tons, according to the All Japan Coffee Association.

“Coffee was originally thought a social drink to be consumed at coffee shops,” said Toyohide Nishino, the association’s executive director. “But the trend is changing as Japan’s food culture becomes more Westernized.”

Even convenience store chains are getting in on the brewing action.

In January of last year, convenience store chain Seven-Eleven Japan Co. launched cups of filter coffee for ¥100 and sold more than 450 million cups within two months. Rivals followed suit with similar ¥100 brews.

Swiss food giant Nestle is trying to capitalize on the growing demand with a machine that lets users produce high-grade coffee at home, targeting consumers whose tastes are becoming more refined. It’s a good time for the company to build on its market presence in Japan, said Diane Duperret, a spokeswoman at Nestle Nespresso SA, based in Lausanne, Switzerland.

The company was founded in 1986 and entered the Japanese market the same year. It currently markets capsule-type coffees in 59 countries worldwide, and says it’s eyeing business opportunities in Asia and North America.

The capsules used in its Nespresso machines are manufactured in Switzerland. They are billed as producing a high-quality drink that meets strict standards. The company said it carries out more than 40 quality-control checks on the product.

The checks include tasting green coffee beans and checking the finished product to ensure consistency, the company said.

“We know that Japanese consumers value high-quality products, so this is, I think, where we can play a key role in the coffee market,” Duperret said, adding that the company plans to boost advertising, focusing on how green beans are sourced and turned into the finished product.

In Japan, Nestle sells five models of its Nespresso machine, with prices ranging from about ¥13,000 to ¥49,000. The capsules, sold at an average price of about ¥75, can only be purchased through Nespresso networks. This ensures their freshness, the company said.

Mayu Muto, a 37-year-old office worker, offers Nespresso coffee to visitors to her home, which she serves with treats such as cake.

“The taste of the coffee is definitely good,” she said. “I also drink coffee at coffee shops and restaurants, but I often feel coffee made by machine tastes better than that served at these places,” she said.

Instant coffee began to spread in Japan during the country’s rapid economic growth in the 1960s, as people began brewing the drink at home, the All Japan Coffee Association’s Nishino said. Now that chains like Starbucks have become popular, people have started to pursue tasty coffees at more affordable prices, he said.

In addition, experts say the taste of coffee in Japan has evolved dramatically after McDonald’s Japan launched “premium roast coffee” for ¥100 a cup in February 2008, promoting its use of high-grade Arabica beans from selected areas and brewing the drink with a newly developed coffee machine.

It was a hit. The chain sold 30 million cups of coffee in the first five weeks after the launch, equivalent to a quarter of its entire annual coffee sales in 2007.

“The taste was totally different and at a higher level compared with coffee served at other fast food chains and restaurants, prompting them to improve the taste of their coffee,” Nishino said, adding that coffee shops were also likely to be affected by the move.

The competition by convenience stores for budget-priced cups of coffee is “very positive” for Nespresso, said Takayuki Ichikawa, marketing and PR director for the company’s Japanese unit.

“General consumer interest toward coffee has certainly been enhanced,” Ichikawa said. “Coffee consumed at convenience stores would become a benchmark and provide an opportunity” to taste other types of coffee.

“The market for capsule-type coffee is not yet mainstream in Japan,” he said.

Ichikawa believes the company has a lot of potential to expand in the country, as the culture of enjoying coffee using capsules has begun to catch on quickly.