Developing Countries Worth a Look

You may be surprised to learn that Brazil produced half of the world's coffee at one point. Although the nation doesn't enjoy this kind of pick-me-up dominance anymore, they still are the key player in the global market, and produce one-third of world's coffee beans. Despite the shear quantity of coffee coming out of Brazil, most consumers are more familiar with  Columbian beans, and Asian and African beans seem to be gaining in popularity. It's said that because of Brazil's large-scale production, the quality suffers. Poor quality controls and an economic crisis in the 80's and 90's led to less local consumption in Brazil. Their best beans were exported while they had the leftovers. I can see why coffee didn't appeal very much to Brazilians. In response to this unfavorable trend, the Brazilian Association of the Coffee Industry initiated a "coffee purity" program that was so succesful that it was expanded to 60 countries. That led to a more than doubling of sales in Brazil. Brazilians now consume more than any other nation with the exception of the United States.

But it doesn't end with just better beans. Many foreign and domestic companies are now investing in gourmet and sustainable coffees in Brazil, two trends that are becoming ever so popular. One company that has realized this is taking advantage. Nestlé has a product called Nespresso, a very pricey espresso drink. They have opened five stores in Sao Paulo alone, comparing that to six in the entire U.S. Having their Nespresso espresso machine is a type of social status for Brazilians, who will dish out two to three times more than an American would for the machine. The Nespresso executives have also realized that the fastest growing segment of their coffee market is the sale of high-end products, and most of that market is women.

Despite the global recession, Nestlé expects to increase sales of it's Nespresso machine by double digits. So why haven't other companies in taken the hint? Many coffee companies seem to be focusing too much on the U.S. and  other developed markets, while ignoring developing countries. Many companies are losing earnings by staying with the strategies they have now. With devloping countries seeming to have more refined tastes, I believe companies should look into investing more in these countries, especially Brazil. It will be hard to break the hold Nestlé already has on the Brazilian market however. They have been smart to not only invest in emerging markets, but for the most part to stay out of the U.S. which has seen declining sales in pricey high-end coffees.