Louis Dreyfus Company & Zephyr Japan’s JV taps into Japanese specialty coffee market

08 Sep 2021 --- Louis Dreyfus Company Asia (LDC) has signed a joint venture (JV) agreement with specialty coffee merchant Zephyr Japan to deliver premium coffees to Japanese consumers. The global specialty coffee market is expected to top US$83 billion by 2025, with significant opportunities in Asia.

Coffee companies in this region are focusing on offering customized, taste-based coffees to local consumers – in line with global trends embracing premiumization and experimentation with novel flavors.

“This partnership with Zephyr Japan represents LDC’s first venture in Japan, a fast-growing market for specialty coffees,” says Ben Clarkson, LDC’s global head of coffee.

“It is also another positive step forward for our specialty business expansion, positioning LDC to increase premium coffee flows into Japan and East Asian markets.”

This latest development follows LDC’s partnership with global private label coffee company Instanta with plans to build and operate a freeze-dried instant coffee plant in Binh Duong province, Vietnam.

Iced coffee takes up a significant volume of coffee consumed in Japan, highlights Innova Market Insights.“We will further extend our presence in Asia and enter the key consumer market for specialty coffees that is Japan, combining Zephyr Japan’s strong market knowledge and LDC’s expertise in sourcing top-quality, sustainably produced coffee beans,” comments Ross Hawkins, LDC’s global head of coffee partnerships.

“Both companies will complement each other’s expertise and capabilities,” adds Kurato Hashimoto, founder of Zephyr Japan. “This strategic partnership will create excellent opportunities for mutual growth while meeting the needs and expectations of Japanese consumers.”

Concerns over the global coffee supply recently escalated as Vietnam, a key producer of robusta – the bitter-tasting bean used in instant coffee and some espresso blends – struggled with the economic slowdown resulting from its COVID-19 lockdown measures.

Japanese coffee trends
Iced coffee takes up a significant volume of coffee consumed in Japan, according to Innova Market Insights. The local market accounts for 30 percent share of iced coffee launches in Asia during 2019.

Notably, Japan dominated with a 74 percent share of Asian iced coffee sales value, in 2019.

Stagnant sales values over the 2015 to 2019 period seem to indicate a market that is now mature, highlights the market researcher, but the 8.5 percent NPD CAGR seems to indicate efforts to maintain interest in a highly fashion-conscious market.

Specialty coffee demand has been booming in Japan, alongside the consumption of on-the-go formats and indulgent formulations. In some local launches, coffee was elevated with a carbonated element and marketed as an alternative to soft drinks.

Ayurvedic ingredients, functional mushrooms and other botanical superfoods are featuring strongly in coffee launches, in line with the food-as-medicine trend.Popular positionings also include free from lactose and sugar options, products from sustainably sourced ingredients, local favorites variety (coffee jelly and Sapporo coffee), artsy packaging appealing to younger generations and defined origin blends (particularly Brazilian).

Caramel and strawberry have been noted as equally popular flavors for iced coffee launches in Japan.

Emergent global coffee themes
According to Innova Market Insights analysis, coffee trends on the market this year include functional blends with beneficial botanical ingredients, such as lion’s mane extract, ginseng, olive leaf powder and other superfoods.

In line with the food-as-medicine trend, vitamin-enriched and Ayurvedic recipes – such as coffees infused with turmeric and cardamom – are capturing significant consumer demand for functional pick-me-ups.

Among exemplary launches, Orbit Coffee released a new offering blended with Maca root for mental sharpness as well as fructose and dextrose, which serve as fast carbohydrates to provide energy quickly. In addition, slow carbohydrates like maltodextrin and isomaltulose are added to extend the energy surge for a longer period of time.

Innova Market Insights also identifies nutritionally positioned launches fortified with MCT oil for brain and memory function, as well as CBD for a calming effect to counter the coffee’s energy spike. “Keto-friendly” is also a notable positioning, as well as high-caffeine blends.

Spirit-infused coffee varieties – such as blackberry bourbon infused coffee – are also in vogue, alongside floral coffees like lavender-honey, branded café instant and RTD formulations, celebratory and veteran-honoring launches, and single origin labeled offerings.

In packaging trends, compostable materials are featured prominently in new coffee launches such as Nexe Innovations’ plant-based espresso pods, as brands shift toward 100 percent bio-based materials.

By Benjamin Ferrer

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