Nescafé frappé: May 2010

How Nescafe frappe swept the Greek market.

http://www.allbusiness.com/manufacturing/food-manufacturing-food-coffee-tea/681448-1.html

By Butler, Reg
Publication: Tea & Coffee Trade Journal
Date: Friday, May 1 1998

For many years, I traveled frequently to Greece, but then had a 10-year gap. So, on a recent return to Athens, I refreshed old impressions by becoming a Sunday morning tourist. The sun was remarkably warm for late November, and fellow tourists were casting off coats and sweaters as we toiled up the Acropolis hill.

After another hour or two spent sweltering on the Parthenon circuit, the need for refreshment was compelling. That meant more walking, but downhill through the Plaka district. There were plenty of open-air cafes, but just about every table was occupied by local Athenians.

Walking past cafe after cafe, I noticed something curious. In the past, virtually every customer would have been sitting with a tiny cup of traditional Greek coffee (which is how Greeks describe Turkish coffee) served with an accompanying glass of cold water, which is intended to be drunk first in order to cleanse the palate. Instead, most people were sipping a coffee-colored beverage in a tall glass with a drinking straw. Only the elderly clients were sitting with the traditional Greek coffee cup or maybe an espresso. Finally, I found a vacant table, and asked the waiter what everyone was drinking. "Nescafe Frappe," he said.

Nescafe Frappe starts with two cubes of ice in a blender, two heaping teaspoons of soluble powdered coffee, sugar, milk to taste, and cold water. The mixture emerges as a long iced coffee topped with foam. A drinking straw completes the serving, together with the traditional glass of cold water on the side.

A morning's observation in a sophisticated area of Athens is no way to generalize trends in Greek coffee-drinking habits. The volume of coffee consumed in Greece is estimated between 23,000-25,000 tons. Of this total, about one half is consumed by the traditional Greek coffee sector, between 30-35% goes into soluble, and the remainder is slated for filter coffees, espresso, etc.

Out of the total soluble market, of which Nescafe has a 90% share, Nescafe Frappe represents about 60%. For a country which formerly was drinking coffee almost entirely in traditional Greek style, Frappe represents a major shift in consumer taste. The secret lies largely in the power of advertising.

To get the story, I traveled to Maroussi on the outskirts of Athens, where Nescafe Hellas S.A. has operated since 1993 from the offices of Loumidis S.A., which the Swiss company acquired in 1987.

There, I asked Konstantinos Koutsas, the group brand manager, how Nestle Frappe started. He said, "It began quite by chance in 1956, during the September Trade Exhibition held every year in Salonica. At that time, Nestle was not on the spot in Greece, but was represented with a stand operated by the exclusive importer and distributor of Nestle products.

"They were promoting a drink for kids with a shaker, milk, and water. One of the employees made up a beverage using Nescafe, with a shaker and cold water. The result was a cool and refreshing drink, with a special foam. He said, 'My God, it's good!' That's how the first-ever Nescafe Frappe was born in Greece."

The idea began to spread, but slowly. Then, in 1975, Nestle began advertising on Greek television with a series of black and white commercials. The objective of the initial campaign was to create awareness of hot instant coffee, its invigorating qualities, and the easy and fast way of making it.

The big leap forward came in 1979. Nescafe expanded promotion of the soluble product from hot to cold - an innovation that launched the major change in Greek habits of coffee consumption. At that stage, the product was given the separate name of Nescafe Frappe. This name has remained ever since ... to the point that when a Greek consumer today wants to drink cold or iced coffee, he simply asks for a Frappe.

In the early 1980s, with consumption increasing, it was decided to differentiate the advertising between what was increasingly seen as two distinct products. Nescafe Frappe belonged to a world of freshness, youth, and pleasure. The hot Nescafe, now named Nescafe Classic, took its own route to create an atmosphere of tasteful coffee pleasure, warm and friendly.

In 1985, the advertising was expanded during the winter period, with the objective of widening consumption year-round to overcome the winter seasonal dip compared with the rest of Europe.

To match the personality of the product, advertising for the past 10 years has concentrated on the present television theme of "the magic world of endless pleasure" precisely targeted to the core target audience aged 17-30. Clever visuals are used to show a transformation into a happy and trendy world of parties and dancing with everything going well. The campaign offers stylish living for the younger generation.

At the same time, Nescafe Classic - with its separate advertising - has acquired its own separate identity, aimed at the target audience aged 25 and older. With a musical theme and beautiful Greek landscape, the concepts promoted are of warmth, sharing moments, and real coffee pleasure. The positioning statement is "... to be in company with taste." Socially speaking, that's a very friendly concept in Greece.

In reality, the two age groups overlap. Additionally, there is no longer such a clear distinction between hot and cold consumers as there was 15 years ago, when Frappe users were teenagers. Today, even people in their 50s drink Frappe.

But the overall success of the dual approach is demonstrated by Nestle's dominant market share of the soluble market, with iced Frappe taking twice the volume of the hot version.

Koutsas explained, "Nescafe Frappe has been tried in some other markets but nowhere has (it) been so successful as in Greece. Nestle thinks globally and acts locally, and as a result there's a big degree of decentralization. Even for a strategic worldwide brand like Nescafe, there's room to take an initiative, of which the Nescafe Frappe concept is a good example. Frappe was never in the guidelines of corporate headquarters. Even the positioning of Frappe is different from the corporate way."

The curiosity is that Nestle Frappe and Nestle Classic are precisely the same coffee - 100% Robustas either in granules or powder. The catering packs are in powder for practical reasons, because a spoonful of powder will always be the same quantity.

Packing is done in the Loumidis factory, located at Inolyta, about 30 miles north of Athens along the National Road to Salonica. In that factory, the company also roasts traditional Greek coffee under the Loumidis banner. Loumidis is the long-established market leader in packet coffee, with Bravo as its main rival.

For distribution throughout Greece, the Loumidis/Nestle company sells direct to the principal supermarket chains and also uses 28 wholesale distributors who have exclusive territories for Nestle products and sell no competitive products. These wholesalers usually distribute to the medium and small supermarkets and to cafes. Cafeterias buy from distributors or supermarkets. Packaging is in choice of 50 gm. format, or 100, 200, and 750 gm. in granulated form. A foodservice format of 2.5 kg. is in powder. Although Nestle dominates the soluble sector, there is no lack of ongoing competition. In 1997, the market declined 2%, but it has now levelled off.

The past year saw the launching of 10 different brands of soluble coffee, aimed at either the hot or frappe area. Jacobs launched one last September. A new brand came from Bravo, backed by the expertise of its mother company, Douwe Egberts. Three or four other small brands were launched, and four private labels.

Koutsas noted, "In the Loumidis company, there is no packaging of own-label coffees and there's no strategy to encourage it. On the contrary, our company exists because of its strong brand names. Making own-label products would be shooting ourselves in the foot."

Number two in the Greek market is Bravo, acquired in 1994 by Douwe Egberts. The company's strength is in its packaging of traditional Greek coffee. But the company also operates in other coffee segments such as filter and instant, produced in cooperation with the mother company.

Bravo's import/export manager, Christos Lanitis, explained that because Bravo's name is so well-known in Greek circles, the company exports successfully worldwide, wherever there are Greek communities - such as in the U.S., Canada, Australia, and in Europe itself.

Bravo is in competition, of course, with roasters in the U.S., etc., who are also pitching for this market. But most of Bravo's customers overseas are familiar with the Bravo brand name, and they prefer the original. Apart from these markets, Bravo also sells to ship suppliers.

Lanitis said, "We are now looking for new markets, especially in former Yugoslavia and eastern European countries which have a tradition of Turkish coffee. But sales there are still quite small."

Bravo's marketing manager, George Gavras, explained that they shared information and knowledge with Douwe Egberts, and used their expertise for instant coffee and for product development to the extent that it happens in all multinational companies. Otherwise, in Greece, they have continued with their own advertising and marketing of the Bravo brand name for their traditional Greek product.

For an importer's view of the market, I traveled to Salonica, the country's second largest city and the major shipping center for northern Greece and the neighboring Balkan countries.

Leonidis A. Kouidis is president of Kouidis S.A., a family owned company which handles about 33% of total imports of green coffee for the Greek market. As a trading company, Kouidis also exports throughout the Balkans, especially to Bulgaria and Serbia, where subsidiary companies were established in 1993 and 1994.

The bulk of his coffee is sold green to hundreds of the estimated 2,000 roasters all over Greece. A network of salesmen covers the country. About 99% of the roasters are supplying the traditional Greek coffee, which is mostly Rios. The blend which Kouidis recommends is comprised of 70% Brazilian Arabica, around 20% Robusta, and 10% Ethiopian.

"Something I learned from my father is that good Greek coffee must include some Ethiopian. These coffees are acidic, and they give the cream. We need some acidity, because the Brazilian Arabica is mild. We could also use Kenya A, but it's too expensive. Ethiopian coffees are much cheaper," Kouidis explained.

The style of making Greek coffee has not changed, except in the heating method. About 30-40 years ago, old-time cafe owners used a bed of sand heated from below. The traditional long-handled metal coffee pot, with its mixture of ultra-fine ground coffee, sugar to taste, and water, was immersed in the hot sand. Each time the brew came to the boil, a little was poured off into the waiting cup. At the third boiling, the remaining contents, with its 'cream,' were poured into the cup.

Today, nobody can spend so much time on a cup of coffee so it's made very quickly over a gas flame. But everyone still uses the long-handled metal containers (which also are a popular purchase by tourists who enjoy the Greek coffee experience). Connoisseurs insist that the coffee must be as sweet as love, hot as hell, and with a surface froth so thick that a man in boots can walk across it. Customers order according to their preferred level of sweetness: sugary, medium, little sugar, or plain without sugar.

The brewing technique is identical throughout the Balkan countries - a heritage of Turkish occupation during the time of the Ottoman Empire. The Turkish style of coffee drinking still remains supreme. But in Turkey, itself, the most popular hot beverage today is tea.

For domestic use, Greek consumers buy their Greek-blend coffee ready ground. For filter coffee, they buy the various European blends available in the supermarkets. In the frappe sector, Kouidis is trying to market a similar blend to Nestle's, using, instead, a blend from Tanzania and Mexico. He also sells to roasters who are preparing espresso blends in competition with the excellent brand imports from Italy. In Greece, espresso is gaining ground. Filter coffee is stable, not increasing its market share.

Reflecting all these trends, Kouidis - as a trading company for Greece and the Balkans - imports 35 varieties of coffee, held in stock ready for shipment from the Salonica warehouse; they also import four or five types of soluble.

In recent years, imports were split as thus: 70% Arabicas, 20% Robustas, and 10% from Central America. Now, due to price changes, the Robustas have increased their share, so that current proportions are 50% Brazilian Arabicas, 40% Robustas, and 10% from Central America. The Robustas are imported from India, Indonesia, Cote d'Ivoire, Uganda, and (of late) Vietnam.

In exports to Serbia and Bulgaria, Kouidis ships approximately 120,000 bags. Serbia is basically a market for Arabica; Bulgaria is a market for Robusta. In both these countries, 95% is sold to consumers as roasted beans - very little is sold ground. In Greece, it's the exact opposite, with about 99% sold finely ground.

The explanation is that the Greek standard of living is much higher. Consumers buy coffee for use within a week; or they even buy twice a week. In neighboring countries - where the living standard is lower - they buy roasted beans and grind at home whenever they want it.

Kouidis said, "We also have good economic relations with roasters in the Republic of Macedonia. Until 1990, the border truly was a border. But now things are different. The economy there is as good as here, and things can flourish. All these countries have problems, but slowly they will overcome them. We've had quite a few setbacks. The books are not yet written on how to make the transition from socialism to capitalism."

About 15% of the company sales are roasted in a plant located 12 km. outside Salonica because of smoke regulations. The company operates two Probat machines, 250 kg. each, roasting one ton an hour. And there's another machine with a smaller capacity.

"We used to roast much more," said Kouidis. "But in the Balkan countries, they have their own roasting machines. So they buy green coffee and roast it themselves. But their roasting is not at the same quality level."

Another company in the Kouidis group does roasting in Piraeus. The entire business is wholesale, with no labels marketed themselves. I asked whether tea accounts for significant sales. In fact, Greek consumption is extremely small, despite promotional efforts for Lipton and Pickwick tea. The beverage is mostly regarded as something helpful for people recovering from illness. You rarely see anyone in cafeterias drinking tea, though it exists on the menu. In hotels, breakfast teabags are available, most of it imported from Sri Lanka.

However, in recent years, iced Nestea has been launched. In that area, the market seems more promising than for hot tea.

Loumidis S.A., 4 Patroklou Street, 151 25 Paradissos, Maroussi, Greece. Tel: (30)(1) 688 4111. Fax: (30)(1) 684 3402.

Bravo A.E., 100 Kifissou Ave., Gr-122 41 Athens, Greece. Tel: (30)(1) 561 2027. Fax: (30)(1) 562 3773.

Kouidis S.A., Terma 26 Oktovriou St., (SFAGIA), Thessaloniki 54627, Greece. Tel: (30)(31) 526 103; Fax: (30)(31) 531 266.

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