The Coffee Market in Japan

THE AUTHORS Stuart Nakamoto is an associate professor in the Department of Agricultural and Resource Economics, University of Hawaii at Manoa, Honolulu. John Halloran is an associate professor in the same department. Yuichi Kishimoto is a professor in the faculty ofbusiness at St. Andrews University, Osaka, Japan. Hajime Kazumi is a graduate assistant in the same faculty. CONTENTS Page Introduction 1 Japan in the World Coffee Market 1 Green Coffee 1 Other Coffee Products 1 Distribution Channels in Japan 3 Consumer Profile and Perceptions 7 Summary 9 References 9 Appendix: Coffee Imports and Domestic Supplies in Japan 10 Tables 1. Leading importing nations of coffee and coffee products 1 2. Green coffee imports into Japan, by major suppliers, 1983-1986 3 3. Reported prices of green coffee imports into Japan, by supplier 3 4. Consumption of coffee products over time in Japan 7 5. Consumption of coffee products in Japan, by location 7 Al. Green coffee imports into Japan, 1986 10 A2. Coffee imports into Japan, 1960-1987 11 A3. Domestic supplies of regular and instant coffee in Japan 12 Figures 1. Coffee import volume to Japan, by type, 1986 2 2. Coffee imports to Japan, 1959-1986 2 3. Distribution channels of coffee in Japan 4 4. Relative consumption of selected beverages in Japan, 1985 6 5. Consumer image of selected beverages in Japan 8 THE COFFEE MARKET INJAPAN Stuart Nakamoto, John Halloran, Yuichi Kishimoto and Hajime Kazumi INTRODUCTION imports of 596 million lb were an 11+ percent in crease over those for 1986. This report presents available information on Coffee imports have come from 50 countries, the coffee market in Japan. Data are summarized encompassing practically all major producing in the narration or presented in figures and tables nations (Table A2). Average prices ranged from in the text and the appendix. All information. is $1.27Ilb to $4.861lb. Brazil, Colombia, and Indo from the United Coffee Institute in Tokyo, unless nesia account for the majority of supplies. The otherwise cited. market share of these three countries has in creased from 53 percent in 1982 to 57-65 percent in JAPAN IN THE WORLD COFFEE MARKET the following five years (Table 2). The highest priced green coffee in 1984-1986 Japan is the world's fifth-largest importer of was from the United States, reflecting imports of coffee and coffee products (Table 1). In the 1985-86 Kona Coffee (Table 3). Since Jamaica Blue Moun crop year, Japan imported the equivalent of 4.6 tain is generally recognized as having the highest million bags (275,000 metric tons) of green coffee,l quality and consequently, is the most expensive a 10.6 percent increase over the previous year. coffee in the world, the reported figures probably Only the United States, West Germany, France, include the lower grades of High Mountain and and Italy imported more. In 1989, Japan was tied Prime Washed. Both the U.S. and Jamaican im with France as the third-largest consuming ports were priced much higher than the mean for nation (McCabe 1989). all imports, indicative of their higher quality. More than 88 percent of Japan's imports con sisted of green coffee, followed by about 6 percent OtherQ>1fee Products instant (or soluble) coffee and about 0.2 percent In addition to the 1986 green coffee imports of roasted coffee (Figure 1). The remaining 5 percent $1 billion, Japan also imported $115 million of represents coffee extract or concentrate, used other coffee products. These consisted of $78 mainly as a flavoring in processed products. million of instant coffee, $4 million of roasted Of the various coffee products, only green product, $24 million of sweetened coffee extract, coffee has no import tariff. Other coffee products and $8 million of coffee extract without sugar. are charged varying rates of up to 35 percent, Instant coffee imports peaked strongly in 1979 depending on agreements, trade regulations, and with a green coffee equivalent of 55.4 million Ib, the trading status of the exporting nation with but have declined since then at an annual rate of Japan. -2.9 percent (Table A2). Brazil and Colombia Green Coffee Table 1. Leading importing nations of coffee and Japan imported 535 million lb of green coffee coffee products. in 1986, with a value of $1.02 billion (172 billion Country yen at a conversion rate of 168.5 yen/dollar). Ex 1983-84 1984-85 1985-86 cept for recessionary periods, there has been a ------ Bags (x 1000) ------ steady increase in green coffee imports since 1959 (Figure 2 and Table Al). Imports from 1979 to 1987 United States 19,629 19,527 21,090 grew at an annual rate of 5.6 percent, and 1987 West Germany 9,209 9,006 9,491 France 5,696 5,832 5,477 1 "Green coffee" refers to the commonly traded product form. Italy 3,790 4,497 4,663 The pulp is removed from coffee berries (or cherry coffee), and Japan 4,287 4,130 4,569 the remaining bean is dried to get· parchment coffee. Parchment coffee is further processed to remove the hull from the bean, at which stage the product is called green coffee. Total 65,527 64,142 66,874 Green coffee is then roasted and ground before being brewed to get the final cup of coffee. "Regular coffee" refers to the ground, Note: Includes green coffee, roasted beans, instant coffee, roasted product, as opposed to instant coffee. and concentrate in green coffee equivalents. 1 Concentrate (5.0%) Roasted beans (0.21010) Green coffee (88.3010) o Green coffee • Roasted beans mB Instant coffee II Concentrate Percentages are in green coffee equivalents. Figure 1. Coffee import volume to Japan, by type, 1986. VOLUME (million fbs) 700 TO 0 - 0 - - 0 - - 0 - - 00 - 00 - 0 - 000.00 ------0_--- - • - _. -. - __ - - - _ - __ -. I Total 600 --------------------------------------------------- -' --------------------- 500 400 ~ 300 __ __ o _ Green coffee 200 100 O-+----+----l~...,...__+_-;---t---+--+___+____+-+__+____+-_+____+____+-_+____t____1-...;___+-t___t____t_-+___+____; '59 '61 '63 '65 '67 '69 '71 '73 75 '79 '81 '83 'SS YEAR Figure 2. Coffee imports to Japan, 1959-1986. 2 Table 2. Green coffee imports into Japan, by major suppliers, 1983-1986. ----1983---- ----1984---- ----1985---- ----1986---- ----1987--- Supplier Volume Supplier Volume Supplier Volume Supplier Volume Supplier Volume (million Ib) (million lb) (million Ib) (million lb) (million Ib) Brazil 138.3 Brazil 147.5 Brazil 165.6 Indonesia 109.1 Indonesia 136.5 Indonesia 67.8 Indonesia 85.2 Indonesia 96.2 Brazil 107.2 Brazil 124.1 Colombia 60.5 Colombia 62.1 Colombia 68.7 Colombia 88.4 Colombia 94.5 India 28.6 Honduras 32.5 Honduras 28.8 Honduras 42.2 Honduras 35.9 Ivory Coast 26.7 EI Salvador 22.9 Peru 27.2 Peru 33.7 Peru 24.6 Honduras 23.2 India 21.3 Guatemala 19.1 Guatemala 19.0 Ethiopia 23.3 Jamaica 1.57 Jamaica 2.49 Jamaica 1.83 Jamaica 1.92 Jamaica 1.78 Yemen 0.66 Yemen 0.51 Yemen 0.71 Yemen 0.73 Yemen 0.66 USA 0.15 USA 0.18 USA 0.06 USA 0.09 USA 0.02 Other 102.4 Other 117.2 Other 101.6 Other 132.4 Other 154.4 Table 3. Reported prices ofgreen coffee imports into Japan, by supplier. ----1986---- ----1985---- ----1984---- Top Five USA $4.86 USA $4.18 USA $3.93 Bolivia $4.44 Jamaica $3.54 Jamaica $3.19 Venezuela $4.35 Yemen $2.22 Yemen $2.15 Jamaica $4.04 Switzerland $2.15 Cuba $1.61 Central African Rep. $3.32 Cuba $2.08 Kenya $1.61 Selected Brazil $2.23 Brazil $1.23 Brazil $1.36 Colombia $2.05 Colombia $1.43 Colombia $1.46 Honduras $2.09 Honduras $1.43 Honduras $1.44 Indonesia $1.43 Indonesia $1.18 Indonesia $1.27 Mean $1.91 Mean $1.33 Mean $1.39 Note: Prices are in dollars per pound. Reported prices vary from computed prices in Table 2 for Bolivia and Venezuela. accounted for 60 percent ofthe 15 million lb (actual creased more than 2.5-fold, to 5.1 million lb and product weight) imported in 1986. Ecuador and the 10.7 million lb, respectively. No figures were United States together contributed 18 percent, or 2.9 reported for sweetened extract. million lb. Instant coffee from the United States was highest priced at an average of $9.24/lb, DISTRmUTION CHANNELS IN JAPAN compared to $3.68/lb, $4.08Ilb, and $4.60Ilb for the other major supplying countries. As indicated above, imports of instant coffee In terms of other coffee products, more than into Japan have declined over time. However, 75 percent of the 1.1 million lb of roasted coffee consumption of both ground and instant coffee, as imported in 1986 came from the United States. evidenced by domestic supply, has increased Brazil consistently supplies more than 90 percent steadily (Table A3). The total supply of ground of the sweetened extract, and nearly 90 percent of coffee in Japan has grown at an annual rate of 8.3 the coffee extract without sugar. percent, and instant coffee has grown by The Tea and Coffee Trade Journal (1988) 6 percent. Processing in Japan, therefore, ac reported that 1987 imports of instant coffee de counts for practically all the net supply of ground clined from 1986 by 1.3 percent, to 14.8 million lb, coffee and about 85 percent of the net supply of while roasted beans and sugarless extract in- instant coffee.

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