As the third largest importer of coffee, Japan is also the seventh largest coffee retail market in the world, snapping at the heels of more traditional coffee lovers, including the Italians, according to global market analyst Euromonitor.

Starbucks: the fresh coffee educator

Japan has seen the number of coffee shops mushroom in recent years. Different types of coffee shops have also been developing rapidly. Apart from the no-frills local coffee shops, chain coffee operators from America and Europe are filtering into urban areas at a fast pace.

Although suffering from intensified competition from players such as Doutor Coffee and Tully’s Coffee over recent months, Starbucks has played a key role in shaping coffee demand through both on-trade and indirectly off-trade channels also. The company’s new coffee concept and espresso culture has been effectively capturing Japanese consumers’ imagination since the late 1990s: Japan is the company’s first and best performing overseas market outside North America and the number of outlets there was expected to reach 500 in 2004.

Females are Japan’s main coffee consumers and many have learned about the variety of fresh coffee from their experience with Starbucks. Indeed, the desire to repeat the ‘real’ coffee experience at home has helped boost retail sales of coffee and coffee accessories over the past few years, with the trend expected to continue.

Continued growth may be limited

Whether the growth of chained coffee shops and the popularity of ‘real’ coffee can further drive retail coffee sales over the next few years is in doubt, and multinationals have started to target China in an attempt to emulate Japan’s love affair with coffee.

China’s domestic coffee production has boomed over the past few years, with Nestlé and Kraft investing in plantations, both of which have seen profits grow. As is the case with Japan, speciality coffee shops have been springing up across China, as a middle class emerges. Starbucks is at the forefront of this development, having arrived in China in 1998 and totalling 50 outlets by 2002.

Although per capita consumption in China is still extremely low, industry sources quote the 15-20 years of promotional activities coffee companies undertook in Japan before its coffee per capita rose to present levels, and claim the potential in emulating the same scenario as in Japan is huge.

Source: Adapted from Euromonitor Article - 'Japan: a nation of coffee lovers' - 12 Aug 2003