The Argentinian tea and coffee markets are steadily growing this year thanks to generally improving economic situation in the region and stable domestic demand.

Argentina has rich traditions of tea and coffee drinking. While the Covid-19 pandemic and serious financial problems of the country had resulted in a serious drop of consumption of both drinks, the market has almost completely recovered, although the rise of coffee prices by almost 150 percent in the last year put a serious pressure on the market.

For many global coffee majors, the expansion into Argentina along with Brazil, is a priority due to the potential, which is associated with the Latin American region and the exodus of business from the markets of Russia and Ukraine — once the most important emerging markets for them.

With the population of more than 47 million people and a status of the second largest country in the Latin American region, Argentina has always been under the radar of some major tea and coffee producers.

Emanuele Uccellini, the Caribbean and Latin America BU Director for Lavazza Group BU Americas told T&CTJ in an exclusive interview, that Lavazza has been present in the Argentina for many years, and that the market represents a top priority within the Latin America region for two main reasons:

1. The growing interest of consumers in high-quality coffee brands. The demand for specialty coffees has been increasing significantly, especially during the pandemic, and we’ve seen the trend keep growing, mostly among younger consumers.
2. The relevant presence of people with Italian roots: they always feel at home when they sip a good Lavazza cup of coffee.

The Argentinian coffee market has always been of interest to other global majors as well.

One of them is JDE Peet’s, which in recent years has significantly strengthened its positions in the local market. A spokesperson for JDE Peet’s, said, “JDE Peet’s does sell a range of products across our brand portfolio in Argentina including NCC capsules. We anticipate that the demand for coffee and tea will only continue to grow globally. We recently signed an agreement to acquire Marata’s coffee and tea business in Brazil, and South America in general is an area in which demand for coffee and tea is increasing.”

The Argentinian market also attracts the interest of global coffee chains, many of which are considering accelerating expansion in the local market in years to come, which is primarily done through the expansion of the existing portfolio. One example is Starbucks, which considers the local market as a priority for its growth.

A Starbucks’ spokesperson told T&CTJ, “Starbucks entered Argentina in 2008 with our first store in Buenos Aires. Today, the brand operates over 130 stores in the market, providing employment opportunities to over 1,700 green apron partners,” noting that earlier this year, Starbucks celebrated its 15^th anniversary in Argentina, together with its licensed business operator, Alsea.

In April 2023, the spokesperson said that Argentina took a significant step toward a more sustainable future by certifying its first two Starbucks Greener Stores. “This is part of Starbucks global vision to have 3,500 Greener Store-certified locations worldwide, aiming to cut our climate, water, and waste footprints in half by 2030. Starbucks Argentina also continues to expand its plant-based menu offerings in an effort to deliver increased options for our customers.”

Furthermore, in collaboration with Alsea, Starbucks announced plans to operate 2,000 Starbucks stores in the 12 markets where Alsea operates the brand globally by the end of 2025.

Starbucks and other leading Western coffee chains operating in the country have faced strong competition with local players. An example of this is Café Martinez chain, a local chain that has almost doubled the number of its outlets within Argentina the last few years and which plans to continue its active expansion in years to come.

Coffee consumption is growing

A senior researcher at Euromonitor International said that in 2022, the total volume sale of coffee in Argentina is set to post a third consecutive year of growth, following a decline during the outbreak of Covid-19. “For the current year and beyond even though consumers have returned to pre-pandemic habits, total volume consumption is forecast to grow much slower. This is due to the long-term unstable economy, increased poverty, and high inflation, which is diminishing the purchasing power of middle and low-income consumers.”

However, coffee is set to post the highest total volume and current retail value growth in hot drinks, driven by the widening use of instant coffee, which began seeing consumption growth in 2021 and 2022. Instant coffee benefits from being affordable, while offering a widening variety of coffee mixes. New coffee consumers tend to start with lighter options, with less coffee flavour and with more milk content, with the inclusion of chocolate and other ingredients.

The coffee industry has suffered a major world price hike due to drought conditions in Brazil, which led to considerably lower production and higher freight costs. Coffee pod consumption rocketed as consumers prioritised high-quality coffee with a desire to replicate foodservice experiences at home. The coffee pod category was also stimulated by a continuous entry of new brands, including La Morenita, La Virginia, Jacobs, L’Or, Viaggio, and Nestlé Argentina’s latest novelty with Starbucks. Sales of coffee pods were fueled by the growth of ecommerce, the fastest-growing channel in the hots drinks industry in 2022.

According to Euromonitor’s spokesman, retail value sales of coffee in Argentina increased by 67 percent in current terms in 2022 to ARS 80.3 billion The instant coffee mix category was the best performing one in 2022, with retail value sales rising by 75 percent in current terms to ARS 5.4 billion. Retail sales in 2022 had a CAGR of 59 percent, hitting ARS 811 billion (CAGR of 15 percent over the forecast period 2022-2027).

Coffee does grow in Argentina; however, it is produced in only a single plantation in the Yungas — a bioregion of a narrow band of forest along the eastern slope of the Andes Mountains from Peru and Bolivia. It emerged in the early 1970s under the name of Café Baritú when authorities in the province launched an ambitious plan to make Northern Argentina a coffee-producing area.

Graciela Ortiz, the owner of Café Baritú in an interview with the Argentinian iProfesional business paper said that the coffee produced on the Salta farm is Arabica. “It is actually a mixture of two Arabicas, one Colombian and the other Brazilian,” he specifies. “It has a very subtle flavour, with fruity, perfumed notes.”

As for coffee, although Argentina is still far from countries like Norway, Finland or the United States in terms of coffee consumption – being stagnant for years at a per capita consumption of only one kilo per year – the sector has shown sustained growth recently, which is mainly due to the rise of popularity of coffee among local customers.

According to a study conducted by the Argentine Coffee Chamber in collaboration with the firm The Brand Bean, today, coffee in Argentina represents 45 percent of the beverages chosen compared to all other beverages and is consumed mostly by people between 25 and 44 years old.

Most local citizens prefer milder coffees instead of stronger roasts as in many European countries. According to some media reports, an average of one kilo of coffee per capita is consumed annually (208 cups) in the country, with the instant variety being the most consumed. Nine out of 10 Argentines prepare it at home and approximately 50 percent of consumers add milk.

Regarding the most chosen varieties, young people seek to customise it and choose to consume cold and instant coffees. On the other hand, those over 35 years of age choose the capsule format.

According to experts of La Nacion, local consumers are increasingly interested in knowing everything about the product: who makes it, what differential attributes it has, what extraction method enhances it, what the differences are between varietals and what the different types of filtering are like. In addition to choosing coffees from more exotic origins, such as Kenya, the Dominican Republic, Honduras or Haiti, they also turn to cold brew when the temperature rises.

Tea-growing & consuming are strong

In the case of tea, retail value sales grew by 62 percent in current terms in 2022 to ARS 21.3 billion. Green tea was the best performing category in 2022, with retail value sales rising by 73 percent in current terms to ARS131 million.

Retail tea sales had a CAGR of 41 percent in 2022, reaching ARS 118 billion (constant value CAGR of 2% over the forecast period).

Tea sales saw growth in total retail volume terms in 2022; resulting from the increasingly positive perception of tea as a healthy option. Argentinian consumers have always been very health conscious, but the outbreak of Covid-19 increased this, with consumers discussing and looking for ways to boost their immune systems. Greater interest has been given to specific functional benefits offered by different tea varieties, particularly those claiming to strengthen the immune system or provide a calming effect. Thus, green tea and herbal/fruit tea have seen strong growth, driven by their functional fortified options.

Argentina has a more robust tea production than that of coffee. According to Argentinian Mitre Y Elcampo business paper, tea production is in the southernmost part of Argentina, located between 26° and 28° South latitude, there are about 6,800 producers with an area of 40,500 hectares. About 94 percent of them are located in the province of Misiones, and the remaining 6 percent are in Corrientes. A characteristic of Argentine tea is its high concentration of polyphenols.

Approximately 90 percent of Argentine tea production is destined for foreign markets and its volume represents almost 2 percent of world consumption. The main destination is the United States, with 70 percent of the production. Currently, Argentina is the main exporter of tea to the United States of America. Other important destinations are Chile, Poland, Russia, Germany; followed by the United Kingdom, India, Malaysia and 30 other countries

The annual volume of tea exports from Argentina are varied in range of 70,000-75,000 tonnes mostly black tea for about USD $75 – $83 million in value terms. Nearly 64 percent of the cultivated area is certified with the RAS Standard (Sustainable Agriculture Network, triple impact).

Tea consumption in Argentina has been steadily growing with the biggest demand being observed in case of gourmet tea. This has even stimulated the development of tea tourism in the region, with the province of Misiones, which is located in the northeastern corner of the country in the Mesopotamia region, at forefront of this.

• Eugene Gerden is an international freelance writer, who specialises in covering the global coffee, tea and agricultural industries. He worked for several industry titles and may be reached at gerden.eug@gmail.com.

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Black tea still leads in terms of global production volume, but green tea has seen a slight but gradual gain in share over the last 10 years. According to the London-based International Tea Committee (ITC), the share of green tea production has increased from about 30 percent to 33 percent. Estimates put the world’s total green tea production at 2.1 million metric tonnes (mmt) in 2021.

China drives green tea production, contributing over 1.8 mmt. This makes the Middle Kingdom the provider of over 85 percent of the world’s green tea. In relation to its own production, however, green tea comprises about 60 percent of its total annual production. Green tea holds the largest share in terms of China’s output, with black tea being the next closest at about 14 percent of annual China production. It is worth noting, however, that China’s classification system for teas distinguishes between green tea and flower tea. Because of this, all forms of jasmine green tea – from specialty jasmine green pearl teas to jasmine green tea fannings – are not counted towards the green tea totals but are designated as flower teas. Depending on interpretation, this can serve to under-report the actual amount of green tea produced.

Japan is the next best-known home of green tea production, contributing about 0.8 mmt of green tea per year. The majority of Japan’s green tea comes in two forms. Sencha accounts for a little over one half, and bancha makes up more than a third. Matcha (tencha) and gyokuro each contribute less than 4 percent of the total volume but their average value in USD per kg is more than double that of sencha.

Other well-known tea-producing countries, including India, Argentina, Indonesia, Sri Lanka, Turkey, and Vietnam either do not parse out green tea production from black, or mainly focus on reporting green tea exports.

China leads in exports

As may be expected, China also dominates in green tea exports. China’s 2021 green tea exports totaled 0.31 MMT, or nearly 85 percent of China’s total exports. Value-wise, however, green tea exports represent roughly 60 percent of China’s exports. China’s average annual export rates reached USD $5.55/kg, with green tea averaging $4.44/kg compared to black tea at $10.25/kg. China’s main export partner has remained Morocco for several years now, as the country has relatively high per-capita tea consumption and a longstanding tradition of drinking green tea (eg Moroccan mint tea).

Vietnam appears to be one of the next largest green tea exporters, though nowhere close to China’s volume. In 2021, Vietnam exported 62,000 mt of green tea, or just shy of half of the nation’s total exports. Vietnam’s top tea export destinations include Pakistan, The Republic of China (ROC), and Russia. It is unclear as to the share of green tea exports among these countries, especially when Pakistan and Russia are known for purchasing significantly more black tea than green.

Japan, on the other hand, exported over 6,000 mt of predominantly green tea. As mentioned above, Japan’s production is largely divided between sencha and bancha. About one-third of Japan’s green tea exports went to the US.

Indonesia, Sri Lanka and India each exported between 5,500 and 3,000 mt of green tea. Indonesia’s major tea export partners include Malaysia, Russia, and the US. Sri Lanka’s top export destinations include Iraq, Turkey, and Russia. India’s three largest tea export countries include Russia, Iran, and the United Arab Emirates (UAE)

US imports of green tea grows

Of the world’s top three tea-importing countries (Pakistan, Russia, and the US), the US provides the clearest picture of green tea imports. Of Russia’s 135,000 mt of imported tea, at least 85 percent of it is black tea. Similarly, tea imports into the US in 2022 showed about 14 percent, or 16,618 mt was green tea. Of that total, nearly 7,000 mt originated from China. A further dissection of US green tea imports reveals that 1,800 mt was organic green tea, of which about 1,000 mt came from China.

Producing countries consume the most tea

Considering that the world’s top two producing countries (China and India) generally keep about 85 percent of their produced tea within their borders, these countries hold sway over global green tea consumption. China’s domestic sales of green tea reached 1.3 mmt. During that period, China only imported about 4,300 mt of green tea.

India’s green tea volumes also remained available for the domestic market. As with China, at least 85 percent of India’s total tea production volume didn’t leave the country. This proportion held true for green tea as well. About 15 percent of India’s green production was exported, leaving about 85 percent within its borders.

The US also held relatively steady in an 85/15 split of black-to-green tea consumption, with more emphasis placed on iced tea.

In relation to per capita consumption of tea, some of the major countries increased their consumption over the past ten years. Most notably was Morocco, a major green tea consumer, which increased an estimated 15 percent per head. China’s per capita also saw a significant rise from just shy of 1 kg per head to roughly 1.75 kg.

The outlook for green tea is positive

Compared to black tea, green tea consumption still appears modest but with positive signs for the future. The UK has seen declines in black tea consumption, while green tea has remained relatively steady. Green tea in the US also holds promise, as consumers are attracted to the reported health benefits of green tea.

The Japanese tea industry still sees potential for the further expansion of matcha exports, with matcha being viewed by international markets as a more premium and health-forward tea option. The nation has seen decreases in production of leaf tea and increases in powdered teas and teas used for RTD. The Japanese government has established initiatives to upgrade tea farms, modernize tea harvesting and processing, and promote Japanese teas in the US, Europe, and Asia Pacific.

China’s expansion of new tea fields also indicates a continued trend toward steady production of green teas. China’s internal estimates classify about one third of the nation’s current tea plants as over 30 years old and recommend removing or replacing these less-productive bushes. A gradual phasing out of old fields and the advent of new fields coming online will help keep China on top as a green tea powerhouse.

• Jason Walker is marketing director of Firsd Tea North America. Prior to his work with Firsd Tea, Walker served in a variety of roles in tea and beverage business capacities. His experience includes business services for small tea companies, a top-ranked online destination for tea consumer education and co-founding a coffee business. His insights draw upon his diverse range of experience in sales, operations and management in the tea world. He may be reached at: jason.walker@firsdtea.com.

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With more than 80 million people involved in tea production, Covid-19 certainly affected the industry. Once countries began closing their borders in March, for example, international buyers stopped visiting origins. When air traffic was halted, shipments of tea (and numerous other commodities) were interrupted. Perhaps most impacted, however, were tea origins, John Snell, founder of the consulting firm, NMteaB, noted in his presentation, although some regions were affected much more than others.

In China, which overtook India in terms of tea production in 2006, Snell said the strict restrictions imposed by the government on citizens to control the outbreak impacted production somewhat, but they mainly affected domestic sales and speed of exports. While the spring harvest was heavily reduced due to lack of the labour caused by the virus, summer and autumn productions were not affected much. However, many farmers have reduced the production because they are not optimistic about the market/consumption. Interestingly, despite international trade being blocked and shaky logistics at the beginning of 2020, Snell said that China’s tea exports were only slightly reduced — about 1.65%.

India, on the other hand, has not faired as well. Lockdowns in the country began on 24 March. While the easing of some restrictions in April enabled some first flush production and preparation for the second flush in Darjeeling, the first flush in Assam was completely eradicated due to widespread closures across the country. Snell noted that the second flush was very good quality but lower on volume. An unexpected positive result of the halt in production in India has been the increase in green leaf prices for the bought leaf sector. “Previously 12Rs/Kg these farmers were on the brink of collapse,” he said. “Now green leaf is fetching 40 50Rs/Kg.”

In Sri Lanka, the lockdown was in place from the second week of March through the end of May. Tea was declared an essential service, so production was maintained. According to Snell, the biggest impact was to value-added trade, where access to packaging materials and labour restrictions bit hard. He added that the loss of hard currency from visitors and overseas workers is having the biggest impact.

In East Africa, tea crops were unaffected. Snell said that by all accounts, the majority of tea produced in Argentina (whose leading export market is the United States) was sold by the time the pandemic was announced, but he noted that “the Argentine tea crop of 2019-20 was unspectacular.”

Live tea auctions were cancelled so several countries such as India, Indonesia and Sri Lanka held online auctions, which were successful according to several reports.

However, exporting tea is still a problem as customs in many countries have been slow to process exports due to Covid-19 restrictions on staff. “Demand for certain goods has been slower, globally, as industry has slowed and PPE shipments taking space,” shared Snell. He further explained that shipments have been affected because the flow of vessels and containers has been upset and they are sitting in the wrong spots, while shipping companies have pulled sailing schedules, pooled sailings with other lines and have disregarded freight contracts.

Despite the burdens incurred by Covid-19, the prognosis for the global tea industry seems to be good. “The likelihood is for some short-term pain with respect to logistics — time to market and costs. [However,] there is no significant long-term effect on supply and demand,” said Snell.

• Vanessa L Facenda, editor, Tea & Coffee Trade Journal.
  Keep in touch via email: vanessa@bellpublishing.com
  Twitter: @TCTradeJournal or LinkedIn: Tea & Coffee Trade Journal.

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India:

• All tea gardens are under lockdown and not operational
• For more information, visit: http://www.teaboard.gov.in/HOME

Sri Lanka:

• Continuing under safety precautions within the curfew period
• People can engage in the agricultural sector including the tea sector
• Government directive that tea production must continue still stands
• For more information, visit: http://www.srilankateaboard.lk/

Kenya:

• Kenya now has 28 confirmed cases of coronavirus, the second highest in the region after Rwanda that has 41
• “Social distancing is now our new norm, it is our new way of life,” President Kenyatta said on 25 March. He also announced a nationwide nighttime curfew.
• Exempted are organisations rendering critical and essential services which include food dealers and transporters of farm produce
• Tea producers have taken it that they are exempt as well and are currently seeking further clarification from the government
• For more information, visit: https://agricultureauthority.go.ke/

China:

• China reported no new domestic cases of coronavirus for three consecutive days (18-20 March) and has resumed work and production in every sector
• Tea production is at full capacity
• Foreign airlines have been limited to one flight per week as of 22 March
• Government is beginning to allow internal travel and a return to work in light of several days of no new cases

Argentina:

• On 20 March, the Argentine government announced a lockdown through 31 March
• For more information, visit: https://bit.ly/2WKvbV3

The Tea Association of the USA will continue to share updates on tea origins, and tea industry overall, as information is available.

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With two of the top five coffee producers in the world – Brazil and Colombia – South America maintains its relevance not only as an exporter, but also for its current consumption standards. According to new data published by Euromonitor International, it is among the top regions in the world for total volume sales in 2019, with more than 1.3 million tonnes, only after Asia Pacific and Middle East & Africa.

Over the last five years, the region increased total volume sales by a three percent compound annual growth rate (CAGR) – among the fastest-growing regional markets in the world. Such a positive performance, however, is not expected to slow down. South American coffee sales should grow at a four percent CAGR between 2019 and 2024, per Euromonitor.

This may sound counter-intuitive at first, since the market is already so mature, coffee is so traditional and South American economies have struggled with recent economic and political crises. So, where is growth coming from?

Proposing a New Understanding Model

While a common denomination to refer to countries’ coffee development level is waves, ranging from those with incipient consumption to those in which it is omnipresent. These definitions are not always clear or even consistent enough for companies to base their strategic planning. Especially in South America, where social inequality is such a big issue, classifying a coffee market based on trends mostly present in urban areas is likely to discredit important social and economic movements in peripheral regions.

For that reason, Euromonitor International proposes a new way of understanding differences between markets and anticipating opportunities to further growth: premiumisation, income, population and soft driver markets. Premiumisation-led growth markets are those in which consumers are increasingly interested in products with higher added value, through greater understanding of products or even unique experiences. Income-led markets refer mostly to those where coffee is not perceived as essential, therefore more attached to available income. Usually, these markets tend to prefer other beverages, for example, yerba mate for countries like Argentina and Uruguay.

Population-led markets have growing market potential as the key driver, despite the possible competition with other beverages. With so many new consumers trying the beverage, the need to beat competitors and conquer share of throat is lower. Finally, soft-drivers-led markets are the ones in which most important factors are not related to macroeconomic or social-demographic factors, but on how the industry responds to new market movements. These are the markets in which companies have the highest power of influence, therefore less subject to market volatility.

While the waves model is mostly focused on the stages of development for the coffee market per se, the new rationale on the current growth model proposed by Euromonitor not only can be replicated to many other types of consumer goods, but also helps understand the local dynamics, new political, economic, demographic or even market scenarios that can accelerate or regress development.

No General Growth Roadmap for Sales

Looking at South America’s coffee volume sales outlook in the next five years, the most dominant growth drivers are still soft ones. On a regional level, this is particularly interesting, as many countries have been, currently are or will soon be in challenging economic and political scenarios. According to Euromonitor International’s Industry Forecast Model, the way the industry responds to market movements and new trends will be a key success factor in the future, potentially offsetting or at least smoothing negative impacts of other drivers.

A closer look into key coffee markets, however, is welcomed to help companies better adjust their growing strategies in the region. Brazil alone accounts for 72 percent of total volume sales in the region in 2019, per Euromonitor. While the country struggles to resume economic growth, coffee sales suffered only a light deceleration in 2016, quickly recovering since. The main reason being the industry’s fast reaction with new launches, focus on communication and advantage of non-fulfilled consumption occasions to grow in per capita consumption – soft drivers led growth. Even though trends might differ between urban and peripheral areas, many players were able to accommodate in their portfolio brands ranging from the most affordable to the most premium.

Colombia is the second largest coffee consumer in the region, with more than 82,000 tonnes in total volume in 2019, per Euromonitor. Despite being an important coffee producer and exporter, Colombia presents a hybrid future growth-led movement; volume sales should be boosted both by income and soft drivers. Demand for high-quality and premium coffees continues to rise with companies like Juan Valdez and follower brands. This is directly related to consumers’ available income; although more expensive, these offerings are in line with the quality level expected.

The third largest market in the region, Argentina, is registering 30,000 tonnes in 2019. As the country’s economy still faces instability, many consumers are resistant to spending money eating out and are more interested in at-home social experiences because of committed available incomes. Argentina has a high penetration of yerba mate as a significant hot beverage, which forces companies to have even more creative strategies to engage consumers.

Apart from the momentary relevance of prices level to final consumers, the industry’s response – the soft drivers – is the key growth driver to smooth retraction in volume sales. Investments in high-quality instant coffee and pods to help consumers replicate the foodservice establishment experience at home, as well as price incentives for new entrants in the category, have been an important strategy adopted by major players and should continue to be.

A Safer Approach to Business Plans

Brazil, Colombia and Argentina represent a significant portion of South American coffee and similar characteristics in market development. Such similarities, however, are not enough to explain growth movements in the future, as the drivers are different in each of them. The generalisation of these factors could result in misleading interpretations of opportunities to grow in the future.

Although the waves classification still provides significant value for the coffee industry to map the biggest coffee market changes at a global level, other rationales can be used to help stakeholders better anticipate future demand. A model that allows growth decomposition can bring more actionable insights, especially for such an unstable, dynamic – and fantastic – market, like coffee in South America.

In this article, the South American region includes: Argentina, Brazil, Bolivia, Chile, Colombia, Ecuador, Peru, Paraguay, Uruguay, and Venezuela.

• Angelica Salado is research manager at London-based market intelligence firm, Euromonitor International. She is based in the Chicago, Illinois office.

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