The Black Pearl of Turkey
The Italians have a penchant for doing frivolous things seriously and serious things frivolously*. Coffee and its culture, for instance, are such a big deal in Italy that if you order a cappuccino after 11:00 am, you better explain your reasons for doing so.
The Italians did not invent coffee, yet the passion they have for it makes the rest of the world believe that they discovered it. Italy is not a coffee grower, as the plant requires a tropical climate to grow. Nor is it the highest consumer of the drink – it is the North Europeans, namely Finnish, Norwegian, Danish, and Dutch, who consume the most coffee, with an annual consumption per capita of over 8 kgs.
Yet, the Italians’ excitement over coffee has not worn off since the drink entered their territory in the 17th century. Today, the country is the world’s third largest importer of green coffee beans, which are then turned into 564thousand tonnes of processed coffee. Approximately 57% of this locally processed coffee is consumed within Italy, creating a local market worth $5 billion. The remaining 43% is exported, generating a revenue of $1.6 billion. However, coffee exports from Italy, a country that is almost identified with it and commands the global coffee terminology, constitute a mere 5% of the global coffee export market. Wouldn’t you expect to see a more favourable outlook or, in other words, a higher worldwide presence of Italian coffee?
The fact is that competition in the global coffee market is incredibly fierce. Consumption patterns have been undergoing change in favour of coffee in emerging markets, such as Asia, where growth is at approximately 6% per annum, as compared to the 2% growth rate for the whole world. The largest exporter in Europe has always been Germany, thanks to the country’s historic role as a hub for coffee re-exports. Germany’s success may also include some elements of taste, because German coffee is lightly roasted as compared to Italian coffee and, as a result, tastes different. Switzerland is the second largest European coffee exporter, and its case is worth mentioning because even though the volume of Swiss exports is approximately 70% less than that of Italian exports, they generate 50% higher revenue. When we talk about Swiss coffee, we are obviously talking predominantly about Nestlè and the successful Nespresso coffee capsules. All in all, European coffee exporters are running a big race to capture value both in mature and developing markets. To compete better, Italian roasters are obliged to invest more time, energy and capital, especially in emerging markets.
In the meantime, what is the story of Turkish coffee?
The history of coffee starts with an Ottoman governor, Ozdemir Pasha, stationed in Yemen at the beginning of the 16th century who fell in love with this drink and decided to introduce it to Sultan Suleiman the Magnificent in Istanbul. Coffee first made an impact and was widely consumed by the residents of the Ottoman Palace. Around 1544, the very first coffeehouse, named ‘Kiva Han’, was opened in Istanbul, after which coffee became a part of the Ottoman culture, spreading rapidly to all regions of the Empire. These coffeehouses became meeting points for gathering with friends, and the drink came to be called ‘the black pearl’. It became so embedded in the Turkish culture that the word ‘breakfast’ in Turkish means ‘kahvalti’, which literally translates to ‘before coffee’. In the beginning of the 17th century, Venetian merchants brought coffee beans to Venice from Istanbul for the first time. Despite appeals to ban this ‘Muslim drink’, Pope Clement VIII approved its consumption, which accelerated its spread across Europe.
In time, the Turks loosened the old ties with coffee. Throughout the 20th century, tea took a dominant position in the Turkish hot drinks culture, and today, an average Turk consumes 3.2 kgs of tea per annum, becoming the world’s largest tea consumer. The rise of the prevalence of tea in Turkish territory makes a lot of sense, as it is the world’s third largest producer of tea, producing 310 thousand tonnes per annum.
However, the Turks are rediscovering their old ties with coffee. Over the last five years, per capita coffee consumption increased by 13.2% in Turkey to an average as high as 1 kg per person per annum in 2018. In comparison with Italy’s 5.9 kgs per capita consumption, Turkey may seem like a small coffee market. To add to that are the population dynamics of the country --50% of the population is aged below 30 years and the new generation increasingly prefers coffee to tea-- and structural changes as a result of big coffee outlet investments made by the American Starbucks, Caribou Coffee, Australian Gloria Jeans, British Caffè Nero, German Tchibo, and the local Kahve Dunyasi. You will better understand why the Turks are rekindling their old love story with the drink and the coffeehouses. Coffee chain investments enlarged the overall Turkish market, increased per capita consumption, and more importantly, brought about a change in habits. In addition to drinking traditional Turkish coffee, which is served with coffee grounds inside the cup, Turks now drink a Starbucks-type of coffee served with a lot of milk.
Trend should be our friend in any industry. We know that after spending some time to improve their palate, consumers usually turn away from mass-market brands. We see this trend in mature coffee markets such as the UK or the USA, where consumers are now increasingly interested in gourmet coffee and creativity and innovation are at the front stage. Even Starbucks recently invested €70 million into a gourmet experience by opening its biggest roastery to serve specialty coffee in Milan, the heart of the Italian coffee market.
At the end of the day, when it comes to coffee, it seems like the Italians got it right this time as well. Coffee adds longevity to our days and lives. I, personally, cannot start my day without a cup of Lavazza Gold. When it comes to Turkey, a country in close proximity with Italy, the market is growing at a rate 6 times higher than that of Italy, as consumer tastes are improving in favour of coffee. Where the population and culture are historically tied to coffee, would it not make sense for Italian coffee roasters to put more energy and resources into this market?
*18th century philosopher Montesquieu observed that the French have a penchant for doing frivolous things seriously and serious things frivolously. Ours is an interpretation by analogy.
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