DUBAI, UAE – Dubai Chamber of Commerce and Industry, in a recently published study, has identified six important potential markets for UAE coffee traders to increase their re-exports.
Qatar, Kazakhstan, Greenland, Lithuania, Latvia and Austria saw growth in the value of coffee imported from the world between 2006 and 2011.
According to the study, they were also markets where importers on average paid a more lucrative price for coffee compared to importers in other countries.
The study suggests that these markets have significant potential for UAE coffee traders because they are those where the annual value of imports is worth millions of dollars and they are located in Central and Northern Europe, which according to the International Coffee Organisation (ICO) have high per capita consumption of coffee.
The colder climates of these countries, coupled with the affluence of their populations is suggested as one reason why there is a high need to import coffee and also a willingness to pay relatively higher prices.
Consumers in these markets may also want better quality brands of coffee and interested re-exporters of coffee from the UAE should conduct further market research in these target markets, to secure potentially lucrative re-export opportunities, the study proposes.
Selected potential coffee re-exports markets – Source: Trademap.org (click to enlarge)
The countries highlighted in the table (above) are some examples of potential markets. In fact much of the growth in coffee consumption has been in emerging markets.
For example, according to the ICO from 1990 to 2011, the consumption of coffee has increased the most in emerging markets, growing by a total of about 118% during this period. Growing populations coupled with increasing incomes are some of the reasons for this increased demand, the study finds.
Opportunities for the UAE Coffee industry
Targeting wealthy consumers with sales of differentiated coffee brands could also help UAE business increase their sales, while better prices could improve profit margins, the study suggests.
Furthermore, selling coffee sourced from sustainable sources could also help increase sales, as customers become more socially responsible.
Vertical integration, by setting up outlets selling coffee and related products in countries with growing demand, could also help UAE businesses increase their share of these markets, the study proposes, adding that these measures could help the UAE become the hub for coffee trading for the emerging markets of the Middle East and North Africa region, South Asia and Africa.
Challenges for the UAE Coffee industry
However, the increased demand for coffee also causes some challenges.
For example, as demand has continued to increase, the price of coffee has also generally increased from around the year 2002 to present. Rising international prices of coffee can be a challenge for businesses.
Furthermore, coffee prices can sometimes be volatile and can also experience falls.
This happens from time-to-time and occurred recently. For example, according to the ICO, the average monthly price of Robusta coffee has fallen from about 121.98 US cents per pound in May 2011 to about 106.88 US cent per pound in May 2012.
While UAE business should do their own analysis, locking into low prices using long-term supply contracts at times when coffee prices register large falls can potentially be one way to mitigate the impact of a period of rising international coffee prices, the study suggests.
Because of the different kind of coffee types, there is also a need to maintain quality control to ensure the purchase of high quality coffee. Sourcing quality blends could also give UAE businesses an advantage as the quality of the blend impacts taste and therefore a customer’s willingness to pay.
Another challenge includes customer awareness both in domestic and foreign markets about the need to buy coffee from sources using sustainable farming practices.
UAE businesses could turn this to their advantage by importing coffee from sustainable sources and thereby differentiating their products, the study suggests.
UAE Coffee Industry overview
Coffee traders wanting to re-export to other markets in the MENA region have historically used the UAE as a re-export hub. The UAE has therefore emerged as an important re-exporter of coffee to markets that are geographically close.
According to the UAE Ministry of Foreign Trade, the UAE has been one of the major five coffee re-exporting countries in the world during the period 2005 to 2008.
