Quality Coffee from Seed to Cup

The global beverages market, which includes tea and coffee, was valued at USD 787 billion in 2023, and projections are that it will be USD 1.2 trillion by 2030. There are, however, challenges. For example, the global price of coffee beans and fuel has been increasing. These increased prices, combined with the yen’s decline against major currencies, have sharply driven up the cost of imported goods. What are the main drivers in the coffee and tea sector, and do you believe Japanese companies like yourselves are well positioned to tap into this growth and react to the challenges?

With the Japanese market, it is true that the yen’s depreciation has greatly affected the price of coffee beans since they are imported goods, but I still see huge potential growth in the Japanese market because if you look at the average number of cups of coffee consumed per year by Americans and Europeans, the number in Japan is quite small by comparison. In the US, it’s 480 cups, and in Europe, it’s 550 on average, but Germans drink 700 cups, and the people of Finland drink over 1000 cups. Japan consumes only 350 cups per year. Because of that, I feel there’s room for growth in the Japanese market.

The key to future market growth is innovation. Market growth is supported by new developments. Good examples include instant coffee, capsule coffee, and canned coffee. The market will expand as there are more options for drinking coffee. Also, the world’s population is increasing, as are average incomes, which will lead to an increase in the demand for quality coffee.

Another challenge in Japan is the population crisis, where 13% of the working population is over 65. There is also the “2024 problem,” where there is expected to be a shortage of over 240,000 drivers across the country in 2027 due to new overtime regulations starting this year. This creates logistics and market difficulties. We’ve already seen that coffee consumption in Japan dropped 27% in 2023, highlighting the shrinking domestic market. These pressures are pushing Japanese companies to seek growth in international markets. How is your company tackling these challenges, and do you sense any opportunity in this crisis, either domestically or overseas? Also, which market shows the greatest growth potential for Japanese food and coffee beverages?

At UCC, we see these issues as new business opportunities, not challenges. We want to turn the aging population and other issues into new business opportunities and opportunities for business growth. For example, decaffeinated coffee will become more popular as the number of senior citizens increases. Climate change and longer summers will increase the popularity of iced coffee options. In this way, we believe that we can continue to grow by flexibly responding to changes in the business environment.

As for the upcoming logistics issues, they will affect not only our company but also companies across Japan, so consolidated shipping and reducing stock points can serve as countermeasures.

For overseas markets, the reason we are going abroad is not to compensate for the shrinkage of the Japanese market. We don’t foresee any shrinkage in the market. As the leading Japanese coffee maker, we are determined to enlarge the Japanese market together with overseas expansion. Japan is a pioneer in the world of coffee, and we will lead the way as the world collectively adapts to ongoing changes. If Japan can provide solutions to the ongoing social issues, then those solutions could be used in other countries as well.

At UCC, we see priorities everywhere, and we apply our full energy to all the areas that we are currently operating in globally, such as ASEAN, New Zealand, Australia, Oceania, Europe, and the US. We also believe in localizing our strategy to meet the unique preferences of coffee cultures around the world

As the pioneer and leader in the coffee industry in Japan, how are you planning to increase the number of cups consumed per person in the country?

There’s no single solution to solve this problem. Rather, it will take a diverse approach with multiple ideas to achieve a synergy that gradually increases coffee consumption. For example, the timing of consumption is traditionally in the morning, afternoon, and evening, but perhaps we can also encourage other consumption times. In addition, coffee preferences can vary depending on the season. For example, some people shift to iced coffee in the summer. We provide various products that appeal to the diversity of coffee drinkers and their changing tastes.

In addition, the volume of decaffeinated coffee sales in Europe accounts for about 10%, but in Japan, it is less than 1%, so we will be able to expand the market by increasing the number of choices and touchpoints. We also prioritize innovation to make it easier to brew coffee where freshness is locked in, enhancing the appeal of coffee and expanding opportunities for people to enjoy our products.

Originally, in Japan, coffee was a drink that was enjoyed on special occasions. With the development of canned coffee and counter coffee at convenience stores, the market has expanded to include beverages that can be easily enjoyed daily. To further expand the market, finding new coffee value is key. There is a growing market of health-conscious consumers. The health benefits of coffee are well known, and there are opportunities to add value to coffee as a wellness product. To achieve this, we have developed products that focus on health benefits.

World’s first canned coffee, produced by UCC

UCC's mission is to enhance the appeal of coffee as an existing luxury product and as a daily beverage so that more people can enjoy coffee. At the same time, we are creating new value for coffee and creating new demand. We also believe that our mission is to inspire our consumers with exciting new flavors and coffee-drinking experiences, which we have continued to do.

We continue to be a pioneer in creating new value in coffee culture. For example, we believe it is important to continuously provide new value and options, such as the launch of the world's first canned coffee and the first production of black unsweetened canned coffee.

Speaking of innovation, you have a hydrogen coffee roasting service, which combines environmental benefits with potential improvements in product quality. This promises to be a valuable innovation in the coffee industry, though it does have a few risks—for example, safety concerns due to hydrogen’s flammability. Still, UCC is the first company in the world to apply for a patent for hydrogen roasting and plans to use large-scale hydrogen fuel roasters at its Fuji Factory, which will begin operations in April 2025. What will the hydrogen-roasting coffee segment look like by 2030, and how will hydrogen-roasting give you a competitive edge over your rivals?

In addition to reducing the environmental impact, we aimed to produce even more delicious coffee, and as a result, we arrived at hydrogen roasting. The result is an innovation that realizes our commitment to the environment and great-tasting coffee. In the future, we will consider expanding to other manufacturing plants globally, and hydrogen roasting is not the only goal. We will always explore new innovations.

One competitive advantage of establishing this hydrogen roasting technology is that we can brand ourselves and become known as an environmentally friendly coffee roaster. Many of our clients and customers are becoming more environmentally conscious, so being able to roast with environmentally friendly energy would add value to our coffee and to our brand. We are now in the testing phase, and within the hydrogen-based society, Scope 1 and Scope 2 have been overcome, but Scope 3 and the application have been the challenge in many industries. In our case, we have created a high-quality, high-level hydrogen roaster, so we want to leverage that advantage fully. We believe that it is important to have products and solutions that achieve our environmental and sustainability goals as well as our commitment to great-tasting coffee. We are proud that the hydrogen roasting method that satisfies both at the same time is very unique and can differentiate us from UCC.

Hydrogen roasting machine

Hydorogen-rosted coffee from Ethiopia

The company was founded by one of your ancestors, Tadao Ueshima, known as the father of Coffee in Japan. He laid the foundation for Japan’s modern coffee culture, and UCC continues to build on his legacy. What are the competitive advantages that make you so appealing to clients compared to other coffee makers?

The founding spirit and the starting point of our company is the founder’s strong determination to let as many people as possible enjoy delicious coffee. Based on this founding spirit, ready-to-drink canned coffee was developed so that anyone can enjoy delicious-tasting coffee anywhere. With this goal in mind, our company has expanded into new and exciting fields. However, this founding spirit and motto of “Every coffee, every moment" lives on.

The core mission of our company is to provide the best-tasting coffee. To do so, we develop in-house coffee manufacturing and brewing technologies when necessary. Along with coffee, enjoying cakes or snacks makes the experience more enjoyable, so creating our brand cakes and providing them to cafes was another way to provide the best coffee experience. Now, we have become a comprehensive coffee solution provider. We also created a museum, seminars, and an academy to spread the joys of coffee culture and increase the number of coffee lovers.

Speaking of your education and outreach efforts, in 2018, UCC expanded its international presence by opening its first overseas training center in the Philippines. What is your vision for the UCC Coffee Academy and training centers, and are there any new locations that you are considering opening?

Our core company philosophy and mission is to increase access to delicious coffee and increase the number of coffee fans. We use the method that we have in the coffee academy in Japan to provide the same experience in overseas training centers. Thanks to this academy and training scheme, we have created a global network of baristas. Within our group companies, there are many barista champions of latte art and brewing from different countries, so we now use this network to have an Asia tour with our customers. The tour is basically the barista champions going across the world to demonstrate their expertise.

You have significantly expanded your global presence and sustainability efforts since 2017. For example, in Indonesia, you have established a joint venture company, PT. Bahana Genta Viktory and PT. UCC Victo Oro Prima. You have also partnered with QBIT Robotics and established joint operations in the Philippines and Thailand. Your hydrogen roasting project was done in collaboration with Heat Energy Tech Co. and supported by Japan’s New Energy and Industrial Technology Development Organization. Which of your more recent partnerships and collaborations are you most excited about, and are you seeking any new ones?

We are not confined to any specific area, but we want to increase the penetration and raise the value of the coffee culture globally, so considering our limited resources, working with partner companies is important. As for regional expansion, we would like to prioritize what we already have at this moment.

UCC has built a global network with 21 group companies in Asia, 18 in Europe, and 10 in Oceania. Are you looking to expand further? Outside of Asia, where do you think the markets have the greatest growth potential?

As I mentioned, we are currently emphasizing the locations where we already have operations and we will apply our concerted efforts in all these areas rather than having a specific focus, but we expect the growth area to be the Asian nations.

You mentioned you see UCC leading the future in coffee innovation. As a company that created the world’s first canned coffee and has developed many products that have pioneered this industry, both in Japan and overseas, what type of new products are you currently working on that you can share with us?

Our current research and development focus is on how to tackle social issues. We have a common shared value concept and sustainability perspective, and now health has become an important issue. If we provide a solution that uses the health benefits of coffee, that will further add and create new value. We are a company that is dedicated to coffee. We also believe in a world where producers and consumers enjoy the health benefits of our products.

Which is your favorite type and/or brand of coffee?

I like many kinds of coffee, but UCC coffee is the best brand. Depending on the occasion, the best coffee changes, and that’s the uniqueness of coffee.

Do you drink over 300 cups per year?

In terms of people who drink a lot of coffee, I always think of my father, who is 86 years old and drinks coffee every day. He is very healthy, and he enjoys playing golf. I once joked with him that he needs to live a long life to prove the validity of our company motto, “Long Life with Coffee."

Your company is celebrating its 91st anniversary. What message would you like to convey to the world, and how would you like UCC to be seen through the eyes of our global readers?

UCC will continue to be a value creator and a promoter of the coffee culture. We would like to keep providing new opportunities for people globally to experience the joy of coffee while also contributing to the wellness and prosperity of the farmers. We consider ourselves as a middleman between the farmers and the consumers, and it is our mission to make both sides happy and create a good environment by creating new value and enlarging the coffee market.

Thank you very much.

For more information, visit their website at: https://www.ucc.co.jp/