One of the most positive developments in the coffee market in recent years'has been the rise in Asian consumption generally, but particularly in the region's newly industrializing countries (NICs). These are traditionally taken to be Hong Kong, South Korea, Singapore and Taiwan, in all of which (except Hong Kong) demand for coffee has grown far faster than the population over the past ten years.

Although growth in Asia's emergent coffee consumer markets has been rapid, especially in the past five years, as local economies have recovered from the continent-wide financial problems of the late 1990s and wholesale prices have been low, the scope for further advances is considerable. This is because of low annual per capita levels - particularly so in China. Its figure is less than one grain per person per year, with the corresponding rates for Singapore, Korea, Taiwan and HongKong respectively 1.9 kg, 1.7 kg, 1.3 kg and 0.8 kg, based on latest consumer surveys.

Last year, however, the EU recorded an average 5.21 kg, with Finland well on top with 11.99 kg, and the USA 4.26 kg, according to data from the International coffee Organization (ICO).

Moreover, compared with the rest of the world, in nearly all Far Eastern countries per capita coffee consumption is low in relation to GDP. This is particularly true of Hong Kong, but also of Japan, as its rate - 3.35 kg a head in 2004, which was the region's best showing - still compares unfavourably with many other markets.

But as well as in Asia's net coffee importing countries (which all the NICs are), consumption of the commodity is also on an up-trend in the continent's net exporting ones, such as India, Indonesia, Thailand and Vietnam. But the most dynamic market of all is the Chinese, so probably keeping the country a net importer, despite rising domestic production. The trend is also upward in the Philippines, once a big net exporter of coffee but today a substantial net importer, while another growth market is Malaysia, which exports in processed form substantially more coffee than it actually grows.

Two of the world's strongest consumption markets, sucking in coffee at record levels nearly every year, are South Korea and Taiwan, both predominantly tea-drinking countries, like most of the rest of Asia. (The exception among the region's NICs is Singapore, where coffee is preferred.) Awareness of the beverage in these two "Asian Tigers", as in Japan, only began to develop after World War II, when coffee-drinking US troops were stationed on their territories. Similarly in South Korea and Taiwan, as well as nearly everywhere else in Asia, the factors that played such a big part in spurring the huge rise in Japanese demand (a six-fold or more increase between the start of the 1960s and the end of the 1980s) are also at work. They include rapidly developing economies - Hong Kong's real GD, for instance, rose by 8.1% in 2004 - and the consequent rise in disposable income levels, which history shows is the single biggest stimulus to coffee consumption in the less mature markets. The reason for this is that, in these, the product is seen as a luxury - and an expensive one at that, compared with the cost of its competitors. In India, for instance, a cup of tea from a street vendor costs a fraction of that of an espresso in an up-market coffee bar, with the differences having widened considerably over the past year - not just there, but also elsewhere in Asia, as wholesale prices have climbed from their historic lows at the start of the decade. In India, for example, a cup of coffee now costs nearly 50% more than a year ago, according to a recent USDA report.

One of the spurs to demand in Asia and in other immature markets, such as Russia, in the late 1990s and early 2000s, when the wholesale cost of coffee hit a 30-year low in nominal terms and possibly its lowest ever in real ones, was the product's cheapness. There is thus some concern that growth will slow now that the market is on the rise again. A further factor behind rising demand in Asia is the so-called '`westernisation" of tastes. Throughout the region young, affluent professionals are drinking coffee, partly, surveys show, in order to make a fashion statement - often a slightly rebellious one against the customs of the older tea-drinking generation. Everywhere, too, another stimulus to increasing demand is the advance of the branded coffee bar concept, which was introduced by the big multinationals, invariably led by Starbucks, who were then followed - often, it appears, less successfully - by local imitators. The growth of vending machines selling coffee - a big factor in keeping Japanese demand on the rise in the 1990s - is another positive factor by enhancing awareness and availability of the beverage.

Arriving in Asia only in the late 1990s, branded coffee bars have since expanded in number at a phenomenal rate. South Korea, where the country's first such shop opened in Seoul in 1999, now has perhaps 1,000, while some estimates put the number of outlets in Taiwan - where the first one opened in 1998 - at perhaps 10,000. But, it seems, in some Asian countries, a large proportion of customers at these new coffee shops are ex-pat workers or tourists, with these two categories, for instance, possibly accounting for 30% of their trade in the main Chinese cities, according to some estimates. Moreover, surveys show that it is not necessarily the coffee that brings the locals through the doors of these chic new cafes, but the relaxing ambiance that they offer - one that women in particular find very attractive.

In China, in fact, "let's have a coffee" is another way of saying "let's sit somewhere comfortable for a chat", which is true mostly elsewhere in the region, particularly Korea, helping to explain why the takeaway trade (with the exception of Taiwan) is catching on so slowly. What is more, branded coffee bar customers - who invariably want something to eat as well - are just as likely to drink a tea or a soft drink as a coffee.

There are many similarities between Asia's emerging coffee consumption markets, both as regard their development - which everywhere has also been encouraged by heavy promotion by the big multinationals - and as far as local preferences go. For instance, throughout the region - as in Japan when growth was at its strongest - instant dominates home demand, which is understandable. Its preparation for tea-drinkers is much the same and no special equipment needs to be bought. Estimates put soluble's share of most markets in Asia at over 90% (even in the Philippines, where coffee is a much more staple household product than elsewhere in the region), with a common feature throughout the growing popularity of 3-in-I coffeesugar-creamer mixes. This is a positive development for demand if it attracts new drinkers to the beverage, but less so if drinkers of regular instant change over to these products, as many contain very little coffee, sometimes under 10% by weight.

Based on industry data, annual coffee consumption in Korea is running at around 1.30-1.35 min bags, green bean equivalent (gbe) a year, roughly 40% higher than ten years ago, with annual sales value estimated by the USDA at close to US$1 bin. Unlike Asia's other NICs, Taiwan is also a producer of coffee - albeit a negligible amount accounting for no more than 1% of local consumption, which, based on the ICO's data for net imports, hit a record high of 459,000 bags in 2003. That was more than ten times higher than 1993, according to the consumption data for that year published by UNCTAD. With net imports in the first six months of 2004 running well ahead of the previous year - 294,400 bags, against 215,700 bags - final figures for the year seem almost certain to show a new record level for demand was reached.

Actual consumption in Singapore is hard to gauge, as the published annual data often show the country re-exporting considerably more coffee in total than it officially imports - 2.1 min bags (gbe) and ]min bags (gbe) respectively in 2003, according to the ICO. The UN Food and Agriculture Organization (FAO), meanwhile, reports that the country imported 1.04 mlb bags of green beans that year, but exported 1.13 min.

However, industry sources suggest that actual consumption is running at around 135,000 bags, with the growth rate in recent years somewhat lagging that of either Korea or Taiwan. The explanation seems to be that, compared with these two NICs, Singapore is a relatively mature - a fact, analysts say, that is also likely to make for slower growth in the future. However, the consumption trend remains upward, with branded coffee bar chains playing a key role in this.

Similarly the actual level of consumption in Hong Kong is hard to assess, but recent surveys suggest that it is growing at about 2% a year. This is roughly the same rate that analysts estimate for Singapore and thus 1 % better than the world average figure for importing countries over the past five years. The business information consultancy, Datamonitor; projects annual average growth of 1.6% to 2009 and Euromonitor sees the beverage as the "main driver" in Hong Kong's hot drinks market in the coming years. Total imports by this special Chinese administrative area in 2003 were 158,000 bags (154,000 bags in 2002), including a reported 53,000 bags from the mainland, but substantial re-exports of coffee, including some back to China, were also recorded. Based on the official data for net imports (which is thought to involve some double counting and also not to reflect fully the true volume coming in from the mainland), and taking account of changes in stock levels, consumption (or disappearance) appears to have been around 50,000 bags in both 2003 and 2004. However, industry surveys of per capita consumption levels would suggest a figure somewhat higher than this - at least 60,000 bags and possibly as much as 90,000 bags. Whatever the true figure, however, it does appear that Hong Kong has recorded a somewhat smaller increase in coffee consumption over the past ten years than have Asia's other NICs.

- and no more so than in China, where some analysts put growth at around 10% a year. Based on data from the FAO and other sources, the country produced 386,000 bags in 2003 (67,000 bags in 1993) and it imported 375,000 bags (337,000 bags), although the real figure is thought to be substantially higher because of the large quantities smuggled in from neighbouring countries. When the official figure for re-exports is taken into account, annual consumption that year is calculated at 340,000 bags, compared with 160,000 bags in 1993.

Another dynamic Asian market is Malaysia, although the actual level of demand is hard to assess, as the available statistics vary so considerable, underlined by the fact that production estimates for 2003 range from 667,000 bags (the UN Food and Agriculture Agency) to 950,000 bags (the USDA). Imports that year were 546,000 bags and reexports 1,278 bags, according to the ICO, suggesting that supplies However, according to USDA estimates, domestic use in recent years has been running at 85,00095,000 bags a year, which would suggest a per capita level of 23 grams - a figure that some experts argue seems to be far too low.

However, whatever the real level is, it is unquestionably considerably better than the per capita figure for India, which is a mere 6 grams a year, compared with 66 grams for tea. Indian coffee consumption, however, is rising strongly, with the Coffee Board estimating that demand - which is concentrated on the southern states - has grown from 55,000 to 75,000 tonnes over the last three years, boosted partly by rising out-of-home consumption stimulated by the huge growth in coffee bars.

In a recent report on the country's coffee scene, the USDA, noted that coffee blended with chicory remains very popular and that in some brands this additional ingredient reaches the maximum permitted limit under the Prevention of Food Adulteration Act (PFA) of 49%. It also noted that the PFA does not permit the use of flavors in packaged coffee, as any additive (except chicory) is treated as an adulterant. "This has restricted innovation in coffee-based products," the USDA says, adding that a change in this ruling, which could lead to consumption growth through new products in the domestic market, appears "unlikely".

Coffee demand is also on a strong up-trend in Indonesia, after dipping sharply during the country's economic problems in the late 1990s, and from a much higher base than in India, with the USDA estimating the annual rate of increase at I1%. Annual per capita demand is estimated at around 50 grams. putting it therefore roughly on a par with that of Thailand, another growth market thanks largely to the huge rise in the number of coffee shops in recent years.

Coffee consumption is also on the rise in Vietnam, but the per capita level is still a low 0.30 kg a year - a figure that the authorities want to lift to I kg as part of their efforts to achieve a better balance between world supply and demand. In Asia's other significant coffee-producing country, the Philippines, domestic coffee consumption is estimated to be about I min bags and reported by the USDSA to be growing at around 2-3% a year, which is roughly in line with annual population growth.

All assessments of the AsiaPacific region growth potential as a coffee consumer indicate that it is huge. Datamonitor, for instance, is forecasting average annual growth of nearly 3% in volume terms to 2009 [TABLE 2] and 2.5% in value terms, so lifting the total from an estimated US$5.086 bin in 2004 to US$5.758. In its view, the Chinese coffee market - projected to be the fastest growing - will by 2009 be worth US$493.2 min, against US$296.2 min last year.

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