Entering the Italian market for coffee

Italy sourced 97% of its imports in 2018 directly from producing countries. The three main green coffee supplying countries were Brazil, Vietnam and India, accounting for about 64% of total supplies. Although the market for specialty coffees is still a very small niche market in Italy, it brings interesting opportunities for exporters of high-quality coffees from special origins with unique stories.

1. What requirements must coffee comply with to be allowed on the Italian market?

You can only export coffee to Italy if you comply with strict European Union requirements. Buyer requirements can be divided into:

1. Musts: legal and non-legal requirements you must meet to enter the market;
2. Additional requirements: those you need to comply with to stay relevant in the market;
3. Niche requirements: applying to specific niche markets.

The highlights for these requirements are given below, specified for the Italian market where relevant.

Legal and non-legal requirements you must comply with

Legal requirements

You must follow the European Union legal requirements applicable to coffee. These rules mainly deal with food safety, where traceability and hygiene are the most important themes. Special attention should be given to specific sources of contamination, of which the most common are:

• Pesticides — consult the EU pesticide database for an overview of the maximum residue levels (MRLs) for each pesticide;
• Mycotoxins (fungi);
• Salmonella (although coffee is considered low-risk).

Italy applies the same legal requirements as other European Union countries, but industry sources indicate that import controls for factors such as pesticides and moulds are very strict in the country.

Green coffee is graded and classified for quality before export. There is no universal grading and classification system for coffee. The Specialty Coffee Association’s standards for green coffee grading are often used as a point of reference. However, most producing countries have and use their own grading systems.

According to the International Trade Centre, grading is usually based on the following criteria:

• altitude and region;
• botanical variety;
• preparation — wet or dry process, washed or natural;
• bean size or screen size, sometimes also bean shape and colour;
• number of defects or imperfections;
• roast appearance and cup quality in relation to flavour, characteristics and cleanliness;
• bean density.

Specialty coffee is graded according to its cupping profile. Fragrance, flavour, aftertaste, balance, acidity, sweetness, uniformity and cleanliness are important topics in the grading process. If you sell specialty coffee, it is important for buyers to know what the cupping score of your coffee is. Although not mandatory, it could be relevant to add this information to the documentation of the coffee you are exporting.

Note that there is no exact definition of specialty coffee within the coffee industry. The Coffee Quality Institute and the cupping protocols of the Specialty Coffee Association consider that coffees graded and cupped with scores below 80 are considered standard quality and not specialty. Nevertheless, the exact minimum scores defining specialty coffee differ per country and per buyer. Some buyers consider 80 too low and demand a cupping score of 85 or higher.

Labelling requirements

Labels of green coffee exported to Italy should comply with the general food labelling requirements of the European Union. The label should be written in English and should include the following information to ensure traceability of individual batches:

• product name
• International Coffee Organisation (ICO) identification code
• country of origin
• grade
• net weight in kilograms
• for certified coffee: name and code of the inspection body and certification number

Figure 1: Examples of green coffee labelling

Source: commodity.com

Packaging requirements

Green coffee beans are traditionally shipped in woven bags made from jute or hessian natural fibre. Jute bags are strong and robust. Other materials, such as Grainpro or other innovative material like Videplast liners, are often used to pack specialty coffees inside jute bags.

Most green coffee beans of standard quality imported into Italy are packed in container-sized bulk flexi-bags that hold roughly 20 tonnes of green coffee beans each. The rest of the green coffee is transported in traditional 60 kg or 70 kg jute sacks, each with a net volume of 17 tonnes to 19 tonnes of coffee.

Other packaging used in transporting coffee includes polypropylene super sacks for 1 tonne of coffee, polyethylene liners for 21.6 tonnes and vacuum-packed coffee. These techniques provide two advantages in the coffee trade, namely increasing efficiency and maintaining or preserving quality.

Figure 2: Examples of coffee packing: jute bag, container-sized flexi bag, GrainPro and Videplast liner

Sources: raadtradingco.com, bls-bulk.com and GrainPro

Additional requirements

Additional food safety requirements

Expect buyers in Italy to request extra food safety guarantees from you. Regarding production and handling processes, you should think of:

• Implementation of good agricultural practices (GAP): The main standard for good agricultural practices is GLOBALG.A.P., a voluntary standard for certification of agricultural production processes that provide safe and traceable products. Certification organisations, such as Rainforest Alliance-UTZ, often incorporate GAP in their standards.
• Implementation of a quality management system (QMS): A system based on Hazard Analysis and Critical Control Points (HACCP) is often a minimum standard for green coffee storage and handling.

It is good to keep in mind that your Italian importer might re-export large quantities of green coffee to other destinations in Europe. Those other buyers push their requirements forward to other players in the supply chain, which might increase the need for you to adopt other specific certifications or standards. This will depend on the final market and market channel used.

Additional sustainability requirements

Corporate responsibility and sustainability are growing in importance in the coffee sector. Adopting codes of conduct or sustainability policies related to environmental and social impacts of your company will give you a competitive advantage. Leading companies in the Italian coffee market, such as Lavazza, all have sustainability policies in place.

Certification standards like Rainforest Alliance-UTZ have also become important in the mainstream coffee market. These certification standards are usually part of the sustainability strategy of traders, roasters and retailers. Italian roaster Kimbo, for example, only sources Rainforest Alliance-certified coffees, and large Italian retailers, such as Coop, sell roasted coffee products which are certified by the main certification standards, such as Fairtrade.

In order to market your coffee as organic in the Italian market, it must comply with the regulations of the European Union for organic production and labelling. Obtaining the EU organic label is the minimum legislative requirement for marketing organic coffee in Italy. With regard to fair trade certified coffee in Italy, the most common standards include Fairtrade and the company-specific standards of Altromercato.

Awareness of Fairtrade-certified products has grown in Italy. Growing 43% since 2014, sales of Fairtrade-certified green coffee reached 852 tonnes in 2018. Before you can market your coffee beans as fair trade or organic, an accredited certifier must audit your growing and processing facilities. Examples of accredited certifiers are Control Union, Ecocert, FLOCERT, ProCert and SGS.

See our study on sustainable coffee for more information about the demand on the European market, trends and specific trade channels.

Niche requirements

Direct trade relations, and high transparency and traceability from source to consumer, characterise the high-end specialty coffee segment. This means that buyers of these types of coffees ask for requirements that go far beyond certification. These buyers will visit your coffee farm, evaluate your product, and try to establish a relationship with you. Besides high-quality, these buyers are interested in your stories from origin. This implies that you should know the specifics of your coffee, and be willing to honestly share this.

2. Through what channels can you get coffee on the Italian market?

The Italian coffee end market can be divided into in-home and out-of-home consumption. Pods and capsules are the largest growing segment in the end market. As an exporter, you can use different channels to bring your coffee to the Italian market. Entering the market will vary according to the quality of your coffee and your supplying capacity. Suppliers in producing countries mainly enter the European market through an importer, but direct trade has been growing.

How is the end market segmented?

The Italian coffee end market can be segmented as follows:

Figure 3: Coffee end market segmentation based on quality

Low end: These are mainstream low-quality, mainly blended coffees. Approximately 40% to 100% of the beans in these blends are Robusta. Most coffee pads, ground coffee and instant coffee belong to this low-end segment. This market is in decline. Product and price examples in the low-end segment, based on Cicalia’s retail prices in 2019, include:

	Product	Price (€/kg)
Low end	Motta (Classic whole beans, 1 kg package)	7.44
Lavazza (Caffe suerte, ground coffee, 250 g package)	9.80
Caffè Hag (Classic ground coffee; brand is owned by Jacobs Douwe Egberts, 250 g package)	12.56

Coffees in the low end of the market are mainly sold in supermarkets and through service channels, such as offices and universities. The largest retailer groups in Italy are:

• Coop Italia, with a market share of 14.2% in 2017;
• Conad, market share of 12.5%;
• Selex, market share of 9.7%;
• Esselunga, market share of 9.0%;
• Carrefour, market share of 5.9%.

Mid range: Good commercial quality coffee. Mid-range coffees typically consist of Arabica and Robusta varieties in blends, such as high-quality espresso. Sustainability certifications are important. The mid-range segment represents a stable coffee market. Mid-range coffees are often sold in supermarkets and by the food service industry. Examples of products and prices in this segment are:

	Product	Price (€/kg)
Mid range	Lavazza Tierra Bio (Organic and UTZ certified, whole beans, 180 g package)	18.83
Illy (Rosso Moka, classic coffee beans, 250 g package)	30.24

High and upper ends: High-quality coffee mainly consists of washed Arabicas. These coffees are often single origin and coffees with a background story. The upper end of this segment consists of specialty coffees of excellent quality, often from micro or nano lots that go through innovative processing such as naturals and honeys. These are mainly fully traceable and single origin Arabica beans with a cupping score of 85 and above. Long-term contracts between suppliers and buyers characterise this segment, as well as higher paid prices. Buyer’s direct involvement makes sustainability certification uncommon. Buyer and supplier usually agree on projects for communities and distribution of money to farmers. The high and upper end segments make up a small but growing market.

These coffees are mainly sold directly by specialty roasters and specialised coffee houses, at their physical or web shops and at coffee events, such as the Milan Coffee Festival. To find examples of Italian specialty roasters, see the website European Coffee Trip.

Examples of coffees in the high and upper end market segments include:

	Product	Retail price (€/kg)
High and upper ends	Fully washed processed coffee beans from Barichu, Nyeri, Kenia, roasted by Caffè Rinaldi, 250 g package	52.00
90H macerated natural processed coffee from Alfredo Estevez, Copan, Honduras, roasted by Burgan Coffee Lab, 250 g package	81.96
Limited special edition coffee from a competition series: Natural, aerobic maceration processed beans from Daterra Estate, Brazil, cupping score 92.5, roasted by Gardelli Coffee, 250 g package	200.00

Value distribution: As per the above examples, end market prices for coffee vary depending on the targeted market segment. Green coffee export prices typically amount to only 5% to 25% of the end market prices, depending on the coffee quality, the size of the lot and the supplier’s relationship with the buyer. Figure 5 below shows the value distribution of wholesale coffee. Roasters end up taking more than 80% of the wholesale coffee price. A coffee farmer takes about 10%.

In addition to the market segmentation by quality, the Italian coffee sector can also be segmented into in-home and out-of-home consumption:

• In-home consumption: Many Italians prefer to start their day having a coffee at home (92% in 2017), where they try to replicate a luxury coffee experience. A growing number of consumers are interested in better quality and variety, resulting in a more diverse in-home coffee market. Ground coffee is the most consumed product at home with 53%, followed by pods and capsules at 37%.
• Out-of-home consumption: Italy has the second-largest out-of-home market in Europe, after Spain, at 52 thousand tonnes of green and instant coffee in 2018. Thanks to the well-established catering and out-of-home market in Italy, about 72% of Italian coffee consumers drank a coffee away from home in 2017. Consumption at work is also common (48%), especially coffee pods and capsules (50%). The out-of-home market in Italy accounts for 18% of the country’s total coffee volume sales.

Figure 5: Italian coffee sector segmentation by in-home and out-of-home consumption

Through what channels does coffee end up on the end market?

As an exporter, you can use different channels to bring your coffee to the Italian market. Entering the market will vary according to the quality of your coffee and your supplying capacity. Bear in mind that shortened supply chains are a general trend in Europe. This means that retailers and coffee roasting companies are increasingly sourcing their green coffee directly from producers and producers’ cooperatives.

In Italy, approximately 97% of end-market consumption consisted of roasted coffee in 2018, while the remaining 3% related to instant coffee and extracts. Hence, the trade channels discussed here relate to roasted coffee, particularly specialty coffee. Figure 7 shows the most important channels for your green coffee beans to enter the Italian market.

Figure 6: Market channels for green coffee in Italy

Importers

Importers play a vital role in the coffee market, functioning as supply chain managers. They maintain wide portfolios from various origins, pre-finance operations, perform quality control, manage price fluctuations and establish contact between producers and end buyers, such as roasters. In most cases, importers have long-standing relationships with their suppliers and customers.

Green coffee beans mainly enter Italy via the Port of Genoa and the Port of Trieste. Most green coffee traders in Italy are located near these ports. In general, importers either sell the green beans to roasting companies in Italy or re-export them to other European buyers.

Large-scale importers usually have minimum quantity requirements starting at around ten containers, covering a wide range of qualities, varieties and certifications. At the same time, they provide strong support on logistics, marketing and financial operations. Examples of large importers in Italy include Garbin Coffee Trade, Interkom, Imperator and Alkaff.

Specialised importers are able to buy small volumes of high-quality coffee and single origin coffees. Examples of small and large specialised importers in Italy include: Best Coffee SLR (in addition to conventional coffee, they focus on certified and specialty coffees), Sandalj Trading Company (specialty coffee, focus on traceability) and Altromercato (fair trade coffee).

Agents that act as intermediaries between you, coffee importers and roasters, are not as common in Italy as in other European countries, such as Germany and the United Kingdom. An agent usually has the knowledge to evaluate and select interesting buyers for you.

Who may find this an interesting channel? The most interesting channel for you will depend on the quality of your coffee and your supply capacity in terms of volume. If you are an exporter of green mainstream coffee beans and you can offer high volumes (10 containers or more), you should look into entering the Italian market through large importing companies. These companies usually have agents or representative offices in producing countries, which can be your first point of contact.

Specialised traders can be interesting if you have evidence of high cupping scores at least 80 or higher, although some buyers may require scores higher than 85, plus sustainability certification, such as organic or fair trade, or you are selling single origin coffee. Keep in mind that many specialised importers prefer to work directly with producers or cooperatives.

Large roasters and private labels

Most large roasters buy their own coffee beans at the country of origin, although they might also source through importers. Roasters usually perform analysis and cup testing to check the evenness of the roast and to identify any defects that can occur in post-harvest processes, such as fermentation, drying and storage. Large roasters usually blend different qualities of green coffees to maintain quality constant. The final product is distributed to retailers and the food service industry.

Roasters can operate under their own brands or private label. Examples of large roasters operating under their own brands in Italy include: Lavazza, Kimbo, Illycaffè and Hausbrandt. Examples of Italian private label coffee roasters are: Co.ind, Gruppo Gimoka and Daroma.

Who may find this an interesting channel? Supplying to large-scale roasters is only interesting if you are able to supply large volumes at consistent quality. If you work with bulk coffees, discuss minimum quality and other requirements, such as certification, with your potential buyer.

Small roasters

Even though small roasters mostly source their green coffee from importers that also help with finance services, quality control and logistics, a growing number of small roasters import green coffee directly from origin. Small roasters are often specialised in certain high-quality blends and single origins. However, not all small roasters are able to sustain direct trade relations, since they have to take on additional responsibilities which are usually outsourced to traders, such as logistics, documentation and pre financing. Therefore, many small roasters continue to buy via importers, but still maintain direct connection with their producers.

Examples of small roasters in Italy directly importing coffee include: Gardelli Specialty Coffees, D612 Coffee Roasters and Caffè Malatesta.

Who may find this an interesting channel? Supplying to small roasters is interesting if you have high-quality coffees, micro lots, sustainability certification or if you are willing to engage in long-term partnerships. So if you have very high-quality coffees and are working through an importer, for example, you could explore direct trade possibilities and connect with specialised roasters. In addition, if you are a farmer that has the financial means and technical know-how to organise export activities, then you can offer your coffee directly to specialised coffee importers and small coffee roasters.

3. What competition do you face on the Italian coffee market?

In 2018, the three main green coffee supplying countries to Italy were Brazil, Vietnam and India, accounting for 64% of total Italian coffee imports. The mainstream coffee segment, with low added value, is highly competitive. This segment is mainly dominated by major suppliers and cooperatives which are able to deliver large quantities so they can compete on price. It is difficult for small and medium-sized companies to compete with this segment. The level of competition is lower in the specialty coffee market, where volumes are smaller and the focus is more on quality, origin and sustainability. However, the entry point into this segment is much higher and may require larger investments.

New entrants to the market may face some extra competition from already successful coffee exporters, especially so because of their already established long-term relationships with buyers. Entering the market as a newcomer requires you to have extensive knowledge of your product assortment, stable quality and volumes, and open and honest communication to start building your own new relationships with buyers.

Arabica supplies from Brazil stable, Colombia and Honduras gain market share

Brazil is the world’s largest coffee producer and Italy’s largest supplier. Brazilian supplies to Italy reached 176 thousand tonnes in 2018, registering a slight average annual growth of 1.8% since 2014. Brazil produces both Arabica (75%) and Robusta (25%), but exports 95% Arabica.

Brazil’s coffee producing areas are relatively flat, which has intensified the use of mechanical pickers in the industry. This has drastically reduced labour costs in Brazil’s coffee production, but also resulting in lower quality, as machines do not distinguish between ripe and unripe cherries. Coffee prices in Brazil went down, especially in relation to other coffee producing countries. Low-grade Brazilian Arabica is mostly used in blends.

Other relatively large Arabica suppliers to Italy are Honduras and Colombia, with 25 thousand tonnes and 18 thousand tonnes respectively in 2018. Honduras export volume to Italy grew at an average annual rate of 18% between 2014 and 2018. The introduction of more disease-resistant varieties in Honduras, after a severe coffee rust outbreak, is perceived to have lowered the cup quality, but production volumes have increased. Honduras is Central America’s largest coffee producer, of which a large share is organic. Approximately 28% of total Honduran coffee exports consist of sustainably produced coffee.

Colombian coffee supplies to Italy also increased between 2014 and 2018: 8.7% annually on average. Colombia is the world’s largest producer of washed Arabica, home to a strong national coffee industry offering technical assistance, research and quality development. The Colombian Coffee Growers Federation strategically promotes and markets Colombian coffee, solidifying the country’s established image and brand for high-quality coffees. The Café de Colombia trademark is a registered protected geographical indication (PGI) in Europe, which is unique among coffee producing countries.

Most Italian Robusta coffee supplied by Vietnam, India and Uganda

Italy’s share of Robusta in its coffee imports is 38%. Vietnam is the world’s second-largest coffee producer, mostly exporting Robusta coffees. Approximately 21% of Italy’s total coffee imports came from Vietnam in 2018, amounting to more than 130 thousand tonnes of green coffee in 2018. Between 2014 and 2018, Vietnam’s coffee exports to Italy remained relatively stable, growing approximately 1.6% in volume.

Vietnam’s coffee production is strongly focused on creating large volumes of standard quality coffees mostly directed to the instant coffee market. However, as high-quality Robusta gains interest in consumer markets, Vietnam’s specialty coffee industry is slowly developing.

India is another large coffee producer, the world’s sixth-largest, exporting coffee to Italy. An estimated 70% of the coffee produced in India is Robusta and Italy is India’s largest export market. In 2018, Italy imported nearly 81 thousand tonnes of green coffee from India, growing at an average annual rate of 3.7% since 2014. Indian Robusta is often preferred for Italian blends thanks to its good blending quality. Much of India’s exports consists of washed Robusta from Kerala, the Monsoon Malabar, a high-quality Robusta. This coffee is exposed to the salty sea air during the monsoon season, which gives it a specific taste. The coffee sector in India is promoted by the Coffee Board of India.

Uganda accounts for 9.3% of all Italian coffee imports. Approximately 81% of Uganda’s coffee is destined for the European market. Africa’s second-largest coffee producer and the world’s tenth-largest, Uganda exports approximately 75% Robusta coffees.

Coffee in Uganda is mainly grown by smallholder farmers, who are organised under NUCAFE, the national umbrella coffee farmers’ organisation. NUCAFE’s membership counts 213 farmer cooperatives and associations. The Uganda Coffee Development Authority (UCDA) helps to promote and guide the development of the Ugandan coffee industry through quality assurance, research and improved marketing techniques.

This study has been carried out on behalf of CBI by ProFound – Advisers In Development.

Please review our market information disclaimer.