South Africa’s biggest instant coffee companies, Frisco, Ricoffy and Nescafé are at war over market share, which is great news for coffee drinkers – the price of instant coffee is expected to be lowered.
Owner of the Frisco coffee brand, AVI Limited, says the company’s revenue and operating profit has been lower than the first half of last year. The company cites ‘aggressive competitor activity’ as the reason for this.
The increased competition has forced AVI to cut their instant coffee prices. Their main competitors are the Swiss giant Nestlé (owners of Nescafé) and Ricoffy.
Ricoffy presents tough competition, as one in every two cups of instant coffee consumed in South Africa is Ricoffy.
Nestlé recently invested R1.2-billion to expand its instant manufacturing plant in Estcourt, KwaZulu-Natal. They have also invested in chicory farming in both KwaZulu-Natal and the Eastern Cape. Chicory is a root often used as a coffee substitute, and contains no caffeine.
On average, 29% of South Africans consume up to 3 cups of instant coffee per day. According to a survey conducted by Insight Survey, instant coffee has gained more popularity than tea.
Though its Ciro brand, AVI has become to the sole distributor of European coffee brands Douwe Egbert and Jacobs in South Africa. Last year, Jacobs Douwe Egberts (JDE) and Nestlé SAP were matched in terms of retail coffee volumes, despite a lag in sales.
South Africans who enjoy the convenience of instant coffee can enjoy buying it cheaper for longer, as the Rand has strengthened and the price of coffee beans decreased across the globe. Arabica coffee bean prices dropped by 15%.
AVI hopes that lower prices will drive the volumes and profit margins of its coffee brands in the second half of the year.