Tata Coffee eyes Russia

August 9, 2007
Tata Coffee is exploring the possibility of a joint venture in Russia and CIS countries for soluble coffee.

Analysts predict that the market for coffee in Russia will grow to become as big as western Europe and the US.

Spain's Seda Solubles and Switzerland's Alma Foods already have tieups with local companies in Russia.

Tata Coffee is on the look-out for joint venture partners in eastern Europe but for mature markets such as western Europe and the US, it will take the acquisition route.

"In Russia and CIS countries, our largest export market, we are exploring joint venture tieups. However, we are yet to start talking to potential partners.

"Creating a coffee brand for Russia will take a year or two. We are yet to decide on the mode. With the Russian economy doing so well, any coffee brand from India will be successful in the lower end of the market," M.H. Ashraff, managing director of Tata Coffee, told The Telegraph.

Tata Coffee also plans to move up the value chain in the Russian coffee market by producing and processing higher grades of coffee. Global majors such as Seda Solubles and Alma Foods have tie-ups with local partners for packaging and logistics. Seda sells coffee in glass bottles, while Alma uses cans and sachets.

Last year, Kraft Foods built a $100-million freeze dried soluble coffee plant in Russia. Tata Coffee would also export freeze dried coffee to Russia from its new plant, which was inaugurated in March this year. Nestle also has a coffee processing plant in Russia.

Ashraff feels that for developing markets like Russia and eastern Europe, joint ventures work well but for more mature markets, the acquisition route is the best. Tata Coffee had acquired the Eight 'Clock coffee brand in the US.

The Russian coffee market rose 4 per cent in volume to 108,000 tonnes in 2005. Demand for natural coffee grew 9 per cent. Soluble or instant coffee and coffee mixtures rose 3 per cent in volume in 2005.