John Naranjo thinks he knows why coffee lost the battle for the taste buds of American drinkers to soft drinks and other beverages.
“If one industry has been handled very lousy, it is the coffee industry by the roasters in the United States,” said Naranjo, commercial policy chief for the Federacion Nacional de Cafeteros (FNC), Colombia’s powerful coffee-growers association.
“The coffee you drink in the United States is very bad,” Naranjo said. “Not because of the raw material-you can buy good raw material-but because of the blends. The way they have prepared coffee, it is not a good product.”
The rest is simple market fact: If consumers don’t like the product, he said, “they change from coffee to other beverages.”
Why would the major U.S. food processors who roast and sell coffee embark on such a losing strategy? Naranjo said they simply paid too much attention to their quarterly bottom line, choosing to bypass more expensive, quality beans for cheaper grades.
That’s where Naranjo locks horns with the U.S. roasters, who through the National Coffee Association provide a variety of other reasons for the decline in coffee drinking-the explosion of soft drinks and beer on the market, for example, as well as health concerns over the caffeine in coffee.
Since it’s his job to sell Colombian coffee, widely regarded as among the finest available, Naranjo’s stake in U.S. public attitudes toward coffee-and the use of better coffees-is a major one.
And from Naranjo’s perspective, the figures look grim.
Statistics show that only 51.4 percent of Americans drank coffee in 1991, compared with 74.7 percent in 1962. Conversely, the 1991 figure for soft drinks stood at 65 percent, but was a mere 33 percent in 1962.
Mugwise, the number of cups per person per day reached a high of 3.12 in 1962, dwindled to 1.67 in 1988, and had climbed back to 1.87 cups in 1993.
Furthermore, business for Naranjo’s FNC and other coffee producers could hardly be worse, as the cost of coffee farming has climbed higher than the money paid for it.
The price of commercial-grade coffee on the New York Coffee, Sugar and Cocoa Exchange, which rose to $2.70 a pound in the mid-1980s, reached a 20-year low of 48 cents last August.
Scott Meyers, a coffee analyst for the Redel Trading Co. in New York, put it in a nutshell:
“Basically, there’s an oversupply of coffee,” he said. “Demand has been down. If there’s more coffee than there are people buying it, prices go down.”
Yet, according to the U.S. National Coffee Association and other experts, there’s hope.
Statistics that have shown a decline in the use of commercial coffees since the 1960s have been leveling off, sales of premium and specialty coffees are climbing steadily and a new industry in iced coffees and cappuccinos shows promise.
Even exchange prices looked better last week. July futures, which closed at 52 cents a pound on April 21, climbed steadily last week and closed Friday at 64 cents.
Sandra Kaul, an analyst for New York’s Shearson Lehman Brothers, attributed the rise to signs that the buildup in inventories is reaching an end.
“Stocks have stopped building, and there is some indication that they are beginning to come down from their record level,” said Kaul. “At the same time, we’re starting to get some background concerns about the supply availability for the next year. The Colombians have had very heavy rains . . . and in Brazil the government is going to issue credit to the farmers early in the crop year for 1993 and 1994, which will allow them to hold their supply back from the market.”
The Food Channel, an industry publication, said changing lifestyles contributed heavily to declining coffee sales over the years. But new products and marketing strategies “offer renewed promise that a younger generation of Americans may rediscover the coffee experience.”
In an interview in his sprawling office atop the federation’s modern office building in central Bogota, Naranjo was quick to lay the blame for coffee’s U.S. decline at the foot of the U.S. roasters. Noting the falloff since the 1950s, he said:
“We’ve been trying to tell the United States roasters, `Don’t use lousy coffees in your product because you are killing your industry.’ And when you see per-capita consumption going so low, it’s because they are offering the consumer lousy products.”
While the short-term profits looked good on quarterly bottom lines, he said, the practice was “short-sighted” because it placed an unacceptable product on U.S. shelves.
Wary over the American downturn, Colombia began to shift its sales effort toward Europe several years ago because of the demand on the continent for better coffee, Naranjo said.
“We started this strategy because we realized that the big roasters in America were looking just for very short forecasting,” he said. “They were looking (at) coffee as a beverage where . . . you buy the cheapest quality and get the most profit; better profits in the short run. . . .
“Quarter after quarter they were showing in their profit statements that they were . . . buying lousy and very cheap coffees. What they were doing in the short run probably was to put a profit higher quarter after quarter. But after many, many years, what they have been doing is killing the industry . . . They have destroyed consumption. . . .
“You cannot say that they are winners, the roasters. You cannot say they handled the industry very efficiently. They cannot show results. They cannot say they have done a good job.”
Ted Lingle, executive director of the Specialty Coffee Association, which represents roasters, growers and retailers who deal in premium-quality Arabian coffees, said he agrees with Naranjo.
“That’s exactly why there is a specialty-coffee industry today,” Lingle said. “And that’s exactly why we continue to grow so rapidly.”
Lingle cited statistics that indicate 8 percent of coffee drinkers now consume only specialty coffee, while 33 percent use both specialty and commercial coffees and the balance use only commercial coffee.
“Each year what’s happening is that the special users are growing, the number of people using both is growing and the (number of) people using commercial coffees continues to shrink.”
In a major study on coffees two years ago, Consumer Reports magazine said coffee companies have been known to enhance the image of a run-of-the-mill product by blending in a soupcon of a classic coffee, and then advertising the fact.
“But, no matter how clever the blender may be, using the cheapest available beans needed to maintain flavor inevitably compromises a brand’s potential for excellence,” the magazine said.
George Boecklin, president of the National Coffee Association, a trade group representing coffee roasters, brokers and importers, said studies indicate that coffee consumption generally has been stable during the last six years.
“It has not gone up to any appreciable amount, but it has held firm,” he said.
Naranjo was wrong to blame the U.S. coffee companies for the decline in its usage, Boecklin said.
“Consumption peaked in the mid-1960s,” he said. “That was the top of the mountain and it was achieved by a set of circumstances quite outside the U.S. coffee industry’s control.”
The beverage was heavily consumed during World War II and the Korean conflict when as many as 12 million Americans were in uniform.
“The choices available to those mostly young people were very, very limited,” Boecklin said. “They didn’t have 88 different kinds of soft drinks to choose from. A population of people in the military were converted into coffee drinkers.”
In the years since then, however, soft drinks and beer have cut heavily into coffee sales. Massive advertising and marketing campaigns benefited the other beverages-and they caught on with the young. Then came the diet craze.
“There also was the public health movement and pure food ideas and healthy eating,” Boecklin said. “Coffee was probably put in the category on the back side for reasons that I think since then have been refuted.
“Nevertheless,” he said, “there were health concerns regarding caffeine that were raised. That scared away some people, particularly young people, who had not yet started to drink coffee.”
Andrea Cook, spokeswoman for the Nestle Beverage Company, said U.S. consumers are “getting a much better cup of coffee on average than consumers in other countries . . . Major manufacturers such as Hills Bros. (owned by Nestle) often blend together coffee beans of various origins to ensure a perfect cup.”
In 1991 and 1992, she said, 78 percent of the coffee beans imported into the U.S. were Arabian coffees as compared to worldwide consumption of 70 percent Arabian coffee.
“Americans today are smarter than ever about their coffee,” Cook said. “Coffee drinkers know what they want and expect the highest quality. Increased consumer education about the many types and origins of coffee beans available has fueled new demand for coffee options, and the U.S. coffee industry has responded with an amazing variety of high-quality products.”
Nan Redmond, spokeswoman for General Foods USA, said:
“It’s no secret to the American consumer that there’s a wonderful variety of coffees available to them to purchase if they choose. The suggestion that we are depressing the market by not offering Colombian products . . . really doesn’t hold up.
Two General Foods USA brands, Maxwell House and Colombian Supreme, both use 100 percent Colombian beans.
“There is a very wide array of Colombian products available to consumers who wish to buy them,” Redmond said.
Naranjo said the growth in sales of specialty coffees “probably is going to change the trend of consumption in the U.S.”
“However,” he said, “right now specialty coffees (compose) a small share of the total market. But it is growing, and probably that would give more thought to the big roasters . . . to change the stragegy if they want to keep being alive in the coffee business.”
