Southeast Asian Coffee Buzz Creates Growth Potential for Suntory and Nestlé

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(Nikkei Asia) – Some of the world’s largest beverage groups are sensing new growth opportunities in Southeast Asia, where health-conscious consumers are moving away from the usual sweet teas for low-sugar or sugar-free coffees .

Japanese company Suntory Beverage & Food introduced its Boss coffee brand – known in Japan for ads featuring American actor Tommy Lee Jones – in Thailand this month, featuring three flavors, including black.

Their price range reflects the rise of the region’s burgeoning middle class. Boss coffee sells for between 25 baht and 35 baht ($ 0.77 to $ 1.07) a bottle, a premium of around 20% over typical canned coffee in Thailand.

The brand is aimed at “white-collar workers and others who enjoy high-end drinks,” said a spokesperson for the Suntory Holdings soda unit.

Thailand is an important market for Suntory Beverage & Food. Beverage sales there and in Vietnam generated half of its Asia-Pacific revenue of 215 billion yen ($ 1.88 billion) for the January-September period, up 11% on the year.

The Japanese company will use the tea distribution network that it has developed through joint ventures since the 2010s with local partners as well as PepsiCo. Possible actions in the future include having coffee drinks elsewhere in the region.

The increased income in the region gives its coffee market growth potential.

The middle class of the 10 member states of the Association of Southeast Asian Nations will reach 350 million people in 2030, more than double the total of 135 million in 2015, according to a 2021 report from the East-West. Hawaii-based Center and other researchers. . Middle-income people are expected to make up 51% of the total population of these countries that year.

Consumer behavior is also changing. Sweet teas have long found favor in an area known for its hot, humid climate and spicy foods. But in recent years, consumers, especially city dwellers, have turned to black coffee and other sugar-free or low-sugar alternatives. Growing health awareness during the Covid-19 pandemic has accelerated this trend.

“I avoid sugary and flavored drinks, so I drink pure black coffee,” said a 35-year-old Bangkok office worker, who says she drinks a cup a day.

The introduction of alleged sugar taxes on sugary drinks also played a role. These levies implemented between 2017 and 2019 in Thailand, the Philippines and Malaysia have “helped push consumers towards coffee without or low in sugar,” an industry source said.

Nestlé, the world’s largest food and beverage group, is set to bring bottled and canned Starbucks drinks to Southeast Asia next year that have been popular in other parts of the world. The Swiss giant will sell Doubleshot, Frappuccino and other drinks in supermarkets and online retailers, using both its own bottling plants and local producers.

The company “will benefit from new growth opportunities” in the ready-to-drink sector which “attracts new and younger consumers,” he said in a statement.

Suntory’s Japanese rival Asahi Group Holdings is expanding its Wonda coffee brand in the region, launching instant coffee – the company’s first – in Malaysia in October, with halal certification for the predominantly Muslim market. The company, which sells Wonda products in Singapore and Brunei, will also consider selling instant coffee in other markets.

Demand for coffee is expected to continue growing in the region, which is home to the major coffee bean exporters, Vietnam and Indonesia. The market of eight Southeast Asian economies is on track to reach $ 8.1 billion in 2026, up 14% from 2020 levels, according to research firm Euromonitor.

For multinationals eyeing the region’s coffee drinkers, “the biggest challenge is the price,” according to an Asahi Group Holdings official.

Lower prices than in Japan or Western markets make it “difficult to make a profit,” the person added.

Additional reporting by Rintaro Hosokawa in Vienna.

This story was first published in Nikkei Asia.

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