As Specialty Coffee Grows, Single-cup Follows in Japan

Japan may be years ahead of the U.S. in vending, but in coffee service, the reverse is true. Which is why Japanese coffee service firms are paying careful attention to developments in the U.S. OCS market, such as the growth in specialty coffee.

The Japanese OCS industry is paying special attention to single-cup brewers, which provide coffee house quality coffee in the office.

The country has already responded favorably to the specialty coffee revolution that has revitalized U.S. coffee consumption in recent years, creating a new coffee culture that is further refining that country's well established appreciation for coffee. As a new coffee culture takes hold, coffee service providers see a rising demand for cartridge-based, single-cup systems.

Flavia Japan, the largest provider of cartridge single-cup systems in Japan, recently held its first annual distributor conference in Tokyo. The company hosted Automatic Merchandiser to provide an overview of the U.S. single-cup phenomenon, the purpose being to offer Japanese service providers a sense of what the future holds for their country.

Because coffee is more readily available to Japanese consumers – coffee houses are to be found on every urban block, as are coffee vending machines and convenience stores – Japanese coffee service operators are particularly interested in products that better meet customer needs.

As the specialty coffee market grows in Japan, coffee service operators are interested in knowing that in the U.S., where specialty coffee is more established, a system exists that successfully delivers coffee house quality coffee to the office.

Starbucks, which opened its first store in Japan in 1996, introduced a new refreshment concept, and it is more popular than the traditional type of coffee house among the younger people.

Having placed stores in high-rent retail areas, Starbucks has a non-smoking policy, which in Japan is a pioneering move. Starbucks also makes it easy for customers to mix milk, cream, chocolate or whatever they want in their coffees, which is also a departure from the more traditional coffee house.

As Starbucks invades Japan, the market responds
Japan's traditional coffee culture has responded to Starbucks by incorporating some of its features.

Doutor Coffee, long the dominant coffee shop chain in Japan, has responded to Starbucks with a new line of stores called Excelsior Café, imitating Starbucks' interior design and adding an extensive food menu, but also allowing a smoking section.

There is now a two-track coffee house industry in Japan, the old and the new, each catering to its own clientele.

And just as Starbucks must compete against the more established coffee house, which features mildly-roasted black coffee, specialty OCS systems must compete against the better established glass pot brewers and omnipresent coffee vending machines. It's a challenge that OCS operators are studying carefully.

Japan's own specialty coffee association, the Specialty Coffee Association of Japan, only recently formed in 2003.

Japanese coffee service operators believe the demand for their service will increase as the country faces a severe labor shortage and the younger workers change jobs more frequently than their parents, who typically spent their entire working lives at one company.

The Japanese government forces people to retire at a certain age, and immigration is carefully restricted. Employers, many believe, are becoming more anxious to provide higher quality worker benefits such as specialty office coffee.

According to Japanese coffee industry sources, cartridge-based single-cup systems account for about 5 percent of office coffee systems. This was the percent of U.S. coffee service installations five years ago. Hence, Japanese observers believe the number of cartridge-based, single-cup systems can triple in the next five years if current market trends continue.