Tea & Coffee Trade Journal essay

Inside Austria's coffee market. (www.allbusiness.com)
McCabe, JanePublication: Tea & Coffee Trade Journal Date: Sept 1992Subject: Tea (Beverage) (Supply and demand), Coffee (Beverage) (Supply and demand), Coffee industry (Market share)
Austria has been experiencing a boom in roasting and, as follows, green imports. When one might consider this is a sure sign that consumption is increasing in this 32,375 sq.m. nation, the figures actually are not at all what they seem. The real reason for the increases in the Austrian coffee market is the amount of coffee that leaves Austria--not in re-exports, but actually is bootlegged out of the country into the neighboring former Eastern Bloc nations. Many of the employees of major roasters are purchasing the R&G coffee and either reselling it or giving it to family members who live outside Austria.
The black market is thriving in Hungary, Poland, Czechoslovakia, Russia and Romania. It is not the jeans, television sets or cigars that everyone wants; it's coffee. Selling out on the open streets, both in Poland and even more so in Hungary, coffee is snatched up for usually less money than what domestic roasters can offer. Some Hungarian roasters angrily eye the Austrian roasters, accusing them of ruining their market share; others merely shrug and see a better future for all roasters as certainly people want coffee products.
Market Roaster Breakdown
Jacobs is the market leader in Austria, with 28% of consumer sales; Eduscho follows with 23%, Heinz Vespustek of the Kaffee Verband tells me. Alvarado holds a 14% share, and Julius Meinl holds an 8% share. Tchibo, with a 4-5% market share, is only imported as a brand and is sold in some stores,
The Austrians are traditionally very proud of their coffee and coffeehouses. As was explained to me, the Austrians do not just consume coffee, they celebrate coffee. People' can spend three hours consuming a single cup of coffee and they will not be disturbed, Hellmut Braun of Eduscho proudly told me. Coffee is served in an elaborate fashion, whether you're in a fancy restaurant or the comer coffeehouse, and there seems to be about one coffeehouse per street. The Austrians imbibe the beverage in the turkish style, in small cups. The separate coffee menu seems endless as all sorts of concoctions with and without liquor, milk or sugar are listed. Ornate copper urns are displayed in many coffee-serving establishments. Consumers' choices never include a black cup of coffee.
Tea in Austria
Black tea consumption has been stagnant for several years now in Austria.
The image of tea is still portrayed in consumers' minds as a beverage to be consumed while one is ill. Recent contenders on the tea scene are fruit teas which, in one year, have surpassed all Black tea consumption, and are still growing. Fruit teas either are mixed with Black teas, or more likely, they are all fruit, or a mixture of fruit and herbs. One of the current generic promotions with tea includes a tea time on a local music station on the Austrian radio. The Austrian Tea Board, of which Dr. Heinz Vejpustek is executive secretary, agreed to pay about $10,000 for 20 days for the constant mention of tea. Tea is referred to at least 20 times while 50 minutes of music are played, with a popular topic being discussed over a cup of tea.
The Austrian economy is thriving and its economic ventures with the former Eastern Bloc countries are coming to fruition. The coffee roasting industry has no complaints in this nation.


Overview - Hungary
Legal 500 commentary:
Landlocked Hungary links old and new Europe, lying between established EU member Austria, new EU members Slovakia and Slovenia and future members Romania (expected to join in 2007), and Croatia, currently in negotiations about a joining date. Its other neighbours are Serbia and Montenegro, and Ukraine. Hungary itself joined the EU in May 2004 and has been a Nato member since 1999. President László Sólyom took office in August 2005 for a five-year term. Prime Minister Ferenc Gyurcsány, of the Hungarian Socialist Party, has been in office since October 2004 and the next parliamentary elections are due to be held in 2006.
Billing
A relatively high number of lawyers for the size of the country means that competition is fierce, keeping fees relatively stable at all of the firms. Clients can expect to pay from between €100 an hour to €400 an hour for partners' work, exceptionally rising as high as €500 an hour for specialist advice from a senior partner at an international firm. Work carried out by assistants is likely to be charged at between €80 and, where they are working in an international law firm, €100 an hour. Some clients specify a fixed fee, others pay by the hour but often firms will give an estimate based on hourly rates.
Marketing
Regulations set by the Hungarian Bar mean that firms cannot advertise. One avenue of promotion they can use is their own website. However, law firms are limited to including general descriptions of their experience on a site, and cannot, for example, use online examples of work done for clients.
In-house lawyers
In-house lawyers at Hungary's larger companies handle most day-to-day issues, through to representing them in court. However, they will go out of house for specialist advice or when dealing with complex issues.
Economy
Hungary, once a centrally planned economy, is now a successful market economy.
Growth in GDP was put at 3.9% in 2004 and has seen a continued uplift as a result of accession to the EU on one May 2004. The confidence of foreign investors appears to have strengthened following accession, with real estate funds eager to invest in a buoyant market. In recent years the economy has grown on average faster than the original 15 EU member states, but has lagged behind the average growth of the ten states that joined on one May 2004.
The services sector accounts for almost two-thirds of GDP, with strengths in financial advice, real estate, and business advice, while a manufacturing-led industrial sector is responsible for about a quarter. Flourishing industries include road-building and construction, reflecting a buoyant property market. Hungary is losing low-skill manufacturing as the cost of labour exceeds that of Eastern European countries but is at the same time building knowledge-based industries such as IT and pharmaceuticals.
Inflation has fallen from 14% in 1998 to 7% in 2004, boosting consumer spending, while unemployment remains at about 6%. In capital markets, equity deals have continued be static, as has been the case since the Russian financial crisis of 1998, but a market for fixed-income bonds is gathering strength. M&A activity, however, has been buoyant, fuelled by low valuations and increasing foreign confidence. Germany is Hungary's largest foreign economic partner, with Austria not far behind.
Shifting the terms of analysis, 80% of GDP comes from the private sector and the rest from the public sector. Sweeping privatisation has reached Budapest Airport which is being bought by UK group BAA, and means the only significant areas still to pass from public to private, and often foreign, ownership are the health service and state-owned airline Malév. A referendum was held on the future of the health service in 2004, but a low turnout invalidated the result, and no further date has yet been set. It is now unlikely to take place before the 2006 elections, which are expected to be held in May. Attempts to sell Malév have as yet come to nothing.
The privatisation process is approaching maturity with an increase in the number of PPPs and the financing of projects to expand the motorway network, which when completed will also have a significant effect on the economy.
Legal market
Budapest is home to almost two million people, or a fifth of Hungary's population, and its legal community is similarly concentrated in the capital. International clients have been investing in the country since the privatisations of the 1990s and interest continues today, with property now a prime market. With the foreign money came foreign law firms, setting up office in Budapest in partnership with Hungarian firms in accordance with local Bar Association rules.
Regionalisation means more transactions involving several Central European countries and Hungarian law firms are consulted on the local aspects of multinational deals, benefiting firms in international networks. Overall, the amount of legal work has increased, but has not yet prompted many new entrants into the market.
The top Hungarian firms are now taking their regional expertise into the newly emerging markets of Central and Eastern Europe, among them Köves Clifford Chance, which provides an all-round service to clients in Hungary, as well as in Romania, Bulgaria, Serbia and Croatia.
During 2005, well-respected Réczicza White & Case LLP increased its focus on business outside as well as inside Hungary's borders and partner Rob Irving spent much of 2005 working in Romania's fast-growing economy. Martonyi és Kajtár Baker & McKenzie, whose co-founder János Martonyi is a former Hungarian foreign minister, rates highly for the experience and expertise from years working for an impressive roster of multinational clients.
CMS Cameron McKenna LLP and Hayhurst Robinson have merged to create a firm known under the 'CMS Cameron McKenna' name and the move will strengthen its position in the region. Former Hayhurst Robinson Budapest managing partner Balázs Máthé, who was previously head of corporate at Berecz & Andrékó Linklaters and a leading M&A specialist, opted not to go with the merger, preferring to set up alone.
Siegler Law Office/Weil, Gotshal & Manges continues to strengthen, and is particularly known for M&A, with expertise in sectors including energy, broadcasting and real estate.
Many domestic law firms are well regarded, some boasting extensive links within the country's political establishment. Established law firm Nagy és Trócsányi is one such firm; counsel Professor László Sólyom is currently on leave of absence to serve as Hungarian President, and partner László Trocsanyi is a former Hungarian ambassador to Brussels. Forgó, Varga and Partners was founded in 2000 to focus on M&A. Since then it has strengthened its position in TMT, dispute resolution and PPP. Danubia and SBG & K Patent and Law Offices are both known for an in-depth approach to patent and trade mark law.
Other notable Hungarian firms include Sándor Szegedi Szent-Ivány & Komáromi, which grew by 50% in 2005 and is a member of Eversheds International. Szecskay - Attorneys at Law, Burai - Kovács & Partners, and Bogsch & Partners are others.
German and Austrian companies have led investment into Hungary, and those linked to German firms and serving a large German-speaking clientele include Luther, Fest & Kajli Attorneys, Haarmann Hemmelrath and Nörr Stiefenhofer Lutz.
French firm Gide Loyrette Nouel - Molnár & Ferenczy is often the first port of call for French clients, but it also employs native speakers of English and German.


Wednesday, December 29, 2004 - Page updated at 12:00 A.M.
Vienna not swamping Starbucks
By Sonya Yee
Los Angeles Times
VIENNA, Austria —
It seemed so brash and, to many Viennese, so American when Starbucks arrived three years ago bearing Frappuccinos and caramel macchiatos into this proud capital of coffeehouse culture.
The coffee chain established its beachhead on prime real estate across from the famed Hotel Sacher and the Vienna State Opera. This, management said, was only the beginning. Starbucks would open a new store at least every month. By 2005, there would be 60 in Austria.
But with 2005 days away, Starbucks' Austrian empire stands at eight stores, all in and around Vienna. That's down from 10 — two didn't make it, including one at a high-profile spot by the Naschmarkt, Vienna's beloved outdoor market.
The perceived travails of what one newspaper called the "U.S. paper-cup store" have inspired no small amount of "schadenfreude."
"We don't want to burst out in unrestrained coffeehouse chauvinism here," said a recent commentary in the daily Die Presse. "But a little satisfaction that not every standardized global chain can just take over the Naschmarkt is allowed."
Starbucks arguably has done little to inspire such gloating. It hasn't driven local coffeehouses out of business. It doesn't advertise and, aside from the hype of its grand opening, has turned out to be a relatively unobtrusive presence in the city.
Nevertheless, for some Vienna cafe partisans, the American chain symbolizes the insidious creep of globalization. The traditional coffeehouse, in this view, stands as a noble bulwark against the uniformity brought on by mass culture.
"Individuality is the core argument for the coffeehouse," said Tobias Leibetseder, a patron at Cafe Jelinek in Vienna. Table mate Angelika Karner said she'd never been to Starbucks and wasn't planning to do so.
"It is just too American for me," she said.
The Viennese coffeehouse, almost by definition, offers free newspapers and an oxygen supply severely compromised by the fug of cigarette smoke. Coffee is brought to the table — ideally, by a surly, tuxedo-clad waiter — on a small silver tray, accompanied by a glass of water with the coffee spoon balanced on top.
Cafe Jelinek is one of thousands of coffeehouses playing a cherished role in the life of the city. For decades, it was run by the Knapps. Guenther took care of the kitchen and made the coffee, but Maria's benevolent dictatorship set the tone.
Children, dogs and cellphones were forbidden to disturb the shabby cafe's hushed ambience. A sign above the vintage, wood-burning stove informed customers that "whoever is in a hurry will not be served," a decree that Frau Knapp had no qualms about enforcing.
Beset with hip problems and migraines, Maria Knapp wanted to retire, threatening to consign Jelinek to history. But the Haases and Schiffners, two couples who ran a traditional restaurant across the street, persuaded her to let them take over at the start of 2004.
"We always liked the place, and we always wanted to have it," Manfred Haas said. "We also didn't want anyone to destroy it."
Cafe Jelinek patrons, including an American, recoiled at the idea of a chain coffee house.
"I refuse to go to Starbucks," said Alys George, a Stanford graduate student living in Vienna. "They are so generic. They all look the same."
George can be found in Cafe Jelinek several times a week, working on her dissertation on turn-of-the-century Austrian literature.
"You can come here, and to most of the coffeehouses in Vienna, order a coffee, sit for four or five hours, read the paper, and nobody cares," she said.
In this context, Starbucks' offer of a "third space" between home and work appears redundant.
"It's a difficult market. It's not like in the States," said Peter Aigner, who handles marketing for Starbucks in Austria.
Coffee-to-go gets a bad rap, Aigner said, and many Viennese persist in believing, falsely, that they will be forced to drink out of a paper cup.
"They also compare it with fast-food chains, where you go in, eat quickly and leave," he said. "The typical Austrian just does not have America in mind when he thinks of coffee."
Cheerful, clean-living Starbucks also may be at a disadvantage in that, unlike Viennese coffeehouses, it serves no alcohol. It also bans smoking in a city where few restaurants have a no-smoking section.
But Carl Hauch, managing director of Starbucks in Austria and Switzerland, says the no-smoking policy has won the chain a following.
"We are almost an oasis for a lot of people," he said, "especially young mothers with children."
Hauch, an American who took over in October 2003, wouldn't comment on Starbucks' ambitions.
"Our sales are up strongly; we see the business growing," Hauch said. "Some of the customer comments show we are meeting some needs."
He called the closure of the two stores in Vienna "a real-estate decision, not a comment on potential success."
Starbucks may have found Vienna's Naschmarkt unwelcoming, but Johanna Wechselberger snapped up the space as soon as the coffee chain left it, opening the Mocca Club cafe and coffee roaster in October.
Mocca Club looks less like a Viennese coffeehouse than an upscale Starbucks, with colonial-themed decor and more than 40 varieties of coffee. There are armchairs, the service is suspiciously friendly, and although smoking is allowed, Wechselberger doesn't encourage the practice by putting ashtrays on the tables. But in a nod to Viennese tradition, there is table service, and the coffee arrives on a gleaming silver tray, complete with water and spoon.
Wechselberger, a Vienna native who says business is thriving, has a soft spot for the classic coffeehouse but does not disdain innovation. She chats with American coffee-shop owners in forums online and even took part in a "how to open a coffee shop" seminar at Coffee Fest in Seattle, the birthplace of Starbucks.
"There were so many good marketing tips," she said. "The Americans are way ahead there."
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