Issue 2/2016: Olam instant coffee centres on growth in Asia, Europe
Although world demand for coffee has been growing at 1-2% for the last decade, there are market segments growing at a rate several times higher than the world demand growth. For example, consumption of soluble coffee is rising at a rate of 4% per annum.
Olam made the first adjacent move into instant coffee in 2007 when it began to shift its growth strategy towards integrating its supply chains into midstream and upstream activities selectively.
In this second issue of Olam Insights for 2016, our Soluble Coffee team relates how the business has been growing both organically and inorganically and shares how Asia and Europe will underpin future growth as Olam aspires to become a leading independent supplier of soluble coffee globally.
Entry into soluble coffee: more than a one-step adjacency
Vivek Verma, Managing Director & CEO, Coffee and Asset Management
Our entry into soluble coffee was not only a one-step adjacency; we were moving into a space that is equivalent to one-third of the profit pool in the bean supply chain. More importantly, we are extracting the full potential value from our capabilities in Robustas, the key ingredient in instant coffee, and scaling up where we have been able to differentiate our offering.
Making strategic choices: where we choose to play in soluble coffee
Arun Sharma, Senior Vice President, Soluble Coffee
We built our competencies around strategic locations – Vietnam, which has a comparative advantage of producing cheaper and better soluble coffee, and Spain for higher value-added processing where we can access the private label market in Europe. The output from our factories cater to the large markets in Asia, Middle East, East and Central Europe – markets which are experiencing much higher growth in coffee consumption than the developed markets.
Operations: competitiveness through cost savings and efficiency
Shankar Rao, Senior Vice President, Manufacturing & Technical Services
We have invested significantly into our strategically located plants in Vietnam and Spain to continually improve and optimise production. Through the collective efforts of our 530 colleagues at the 2 plants, we are able to operate at best-in-class efficiencies, as well as improve yields and reduce energy consumption in a meaningful manner.
Driving product innovation and customer engagement
Marcos do Espirito Santo, Product Development Manager, Soluble Coffee
Our Product Development team supports our growth in soluble coffee through products that anticipate and meet our customers’ requirements across markets. We engage and cooperate closely with them from start to finish – with our team in Vietnam working closely with Asian customers and our team in Spain engaging closely with European retailers.