STiR coffee and tea magazine

14 STiR coffee and tea | 2024 Issue 1 (February / March) T he Russian tea and coffee market is undergoing major structural changes following the exodus of global players, range reduction, and increased market share by dominant local firms. Global brands have changed their approach to working in Russia after February 24, 2022, sometimes adopting opposing strategies. For example, Paulig Group sold its plant to one of its local partners, where they began producing the local Poetti brand following the imposition of broad market sanctions that limit trade with European and Western suppliers. The Finnish company became one of the first Western companies to sell its Russian business, including its plant in the Tver region. On May 5, 2022, it sold its Russian assets to a local Milfoods company, which resumed coffee production under the Paulig brand in September 2022. Lavazza officially announced its withdrawal from the Russian market in April 2022. Julius Meinl continues to supply the Russian market from facto- ries in Italy and Austria and their local roasting partners in Russia. The most noticeable changes have occurred in the coffee capsule market. The largest players, Nespresso and Starbucks, left Russia, and their shares began to be distributed among other companies. New players have appeared in the Dolce Gusto capsule segment. In an interview with JM Coffee Lab, one of Russia's leading coffee communities, Alexandra Smirnova, Marketing Director of Julius Meinl, explained that rising coffee prices globally, coupled with high volatility in financial markets and complex logistics for manufacturers, increased the cost of coffee by 50%. The Dutch company JDE Peet's, which owns the coffee brands Jacobs, L'Or, Tassimo, and Douwe Egberts, confirmed it stopped selling foreign coffee and tea brands on the Russian market before the end of 2023. Only local brands will be presented in Russia. The company announced this in their financial report for the first half of 2023. Rebranding Russian Tea and Coffee Keks is one of the largest coffee chains in Southern Russia. JDE also lowered its profit target for the year due to uncertainty amid a switch to local brands in the Russian market. JDE c.e.o. Fabien Simon said, "In the first half of 2023, we transitioned from a multi-channel organization in Europe to a local portfolio in Russia. In parallel, we will ex- pand our reach to global consumers with plans to acquire the Marat coffee & tea platform in Brazil and launch L'OR Barista in the US." As Simon added, JDE is not going to leave Russia completely. He noted that the company's work on the Russian market does not contradict the sanctions. According to him, the Russian com- pany division employs more than 900 people. The suspension of supplies will affect the company's brands, including Tassimo and Moc- cona, and new products for the global Jacobs brand, which will be sold on the Russian market as Monarch. It's unclear whether JDE will continue selling other international brands, such as Maxwell House, in Russia. Speaking about Monarch, Simon, in an inter- view with the US Wall Street Journal, said that the brand will use colors and fonts similar to Jacobs to make the products easier for customers to recog- nize. Coffee will be produced at the same plant in St. Petersburg. JDE Peet's didn't withdrawal from Russia after the beginning of the war in Ukraine, which led to criticism of the company. According to the Wall Street Journal, the Dutch authorities had demand- ed that Simon answer why the company did not follow the example of the American Starbucks. He said at the time that the American chain was more of a luxury item, unlike the everyday JDE Peet's packaged coffee. According to Simon, the company maintains a working relationship with Russian authorities: "Because we have been very transparent, it has re- moved a lot of unnecessary tension." He empha- sized that JDE Peet's complies with all sanctions imposed against Russia. The head of the company said that his prior- ity now is to protect business in Russia to limit any reputational damage caused to its brands in other countries. Speaking about the localization of Russian business, he said that managers in Russia will make operational and commercial decisions, develop advertising plans for local brands, and se- lect suppliers to use. Previously, the company said it would refuse to sell some international brands in Russia, and it was also reported that Jacobs would be renamed. JDE estimated losses from rebranding for Russia in the first half of 2023 at $202.8 million. Overall, the Russian coffee and tea market has significantly suffered from the reduction of range caused by the exodus of many Western play- ers. This is confirmed by the latest statistics from By Eugene Gerden

• Cover