The Russian Coffee Market

Daniel Brooks

The Russian coffee market today has its roots in the Soviet era and is influenced by how consumers drink tea. It has also been deeply influenced by the appearance of a new kid on the block – gourmet coffee served at home, in coffee shops and other venues.

Russians on average drink about 4 cups of tea every day. They customarily make coffee the way they make tea; one reason why instant coffee is so popular. The electric kettle reigns supreme and Russians reach for it reflexively, pouring hot water into a cup with the soluble coffee in it, the way they would make a cup of tea. Sugar is usually added; about 83% of coffee consumed in Russia is made with sugar. It’s the same consumer habit as in other tea markets, such as the UK.

Although about 85% of coffee consumed in Russia is soluble, most consumers believe that roast and ground coffee (called R&G) is superior to instant. This belief has its roots in the Soviet era.  In those days green beans, bought with difficulty, were often roasted at home. The aroma of the coffee would fill the apartment or perhaps the entire stairwell. The roasted coffee would be ground into a powder and brought to a boil three times in a Turkish coffee maker with plenty of sugar. Even today this collective memory is often recalled fondly in market research as consumers explain why they believe R&G coffee is superior to instant.

Before 1992, the instant coffee imported into the Soviet Union was low grade soluble. As was true of most consumer goods in those times, coffee was difficult to find. Much of the soluble originated in India and was sold in tin cans. Nescafe Classic was available in the USSR as well. This made the word Nescafe synonymous in the minds of many Soviet citizens with coffee, one reason why Classic remains a market leader throughout the CIS.

The coffee market in Russia changed in about 1995 with the appearance of high quality freeze dried soluble, launched first by Tchibo Exclusive and followed by Nescafe Gold and eventually, Kraft Monarch along with several other brands. The process of freeze drying improves the taste of soluble coffee, compared to spray dried and agglomerated coffee, the instant coffees most popular in Soviet times. From 1995 to about 2013, demand for premium soluble grew every year from a low of about 2000 tons of coffee in 1995 to about 40,000 tons today, eclipsing the other kinds of coffee in Russia such as R&G, coffee in sachets and similar varieties. Currently, with about 38% of volume share, freeze dried remains the predominate kind of coffee consumed in Russia.

Roast and ground coffee was always an important part of the Russian coffee market. Its demand at retail grew to 24,000 tons by 2013, expanding steadily. From 1995-2013 R&G was overshadowed by the more spectacular growth of the soluble market. All along, Russian consumers continued to believe firmly that roast and ground coffee is inherently superior while purchasing soluble because of convenience.

As the Russian soluble market matured and grew, the remainder of the coffee world was going through a revolution in coffee drinking.  Led by the US and Europe, out of home consumption of gourmet coffee underwent a boom that began in the 1990’s and continues today.  Consumers the world over switched from filter coffee to in home espresso machines, mostly using portioned coffee such as Nespresso capsules and similar. Out of home gourmet coffee exploded led by coffee shop businesses both large and small. This revolution in coffee consumption began to spill over to Russia in the 2000’s when Kafemania and Shokolodnitsa appeared in Russia, along with a growing number of smaller coffee shops and outlets. By the end of the last decade, espresso coffee was widely available in the cities in Russia with populations above 1 million and had begun to spill over into petrol stations, providing coffee caffeine hungry drivers with cappuccinos and Americanos as they drove to their dachas on weekends, across the country. Good news for coffee lovers, with even better news coming as this segment grows.

By the end of 2013 and beginning of 2014, the growth in freeze dried soluble consumption began to slow down. Part of the change can be attributed to the collapse of the rouble that took place in 2013 and the slowdown of the Russian economy as a whole. Inflation for all food products put pressure on soluble coffee volumes. Consumers became highly price conscious and sought price offs like never before. Kraft and Nestle and other market leaders came out with inviting price reductions. This trend is continuing in 2017. More and more coffee is sold with deep discounts at retail, causing the market leaders such as Nestle, Kraft, Orimi and Strauss to put pressure on smaller brands.

As soluble growth slowed down, consumption of R&G and coffee shop consumption increased in this decade and up until today. This segment survived and even flourished during the 2013 economic downturn and in its aftermath. Coffee shop expansion barely missed a beat while R&G coffee grew at 10-12% per year in volume during the period. These trends are expected to continue in the coming years. Instant continues to dominate the market in value and volume but its growth is around 1%, not the rapid expansion of former days.

Consumers in Russia are switching to R&G coffee and out of home consumption because coffee is an emotional product. We mostly buy coffee because of the way it makes us feel. Consumers buy coffee, especially in coffee shops, because it connects us with other people, bringing us together in a prestigious setting. These two kinds of brand positioning, in marketing terms, are known as status and connection. Even today, as Russians are increasingly price conscious, consumers are willing to pay eight to ten times more per cup of coffee in an out of home setting. A cup of high quality instant coffee at retail costs 4-5 roubles. Premium ground coffee made at home costs about 12 roubles per cup. In comparison, a Cappuccino cost around 100 Roubles per cup on the low end of the scale and goes up from there to as high as 300 Roubles. Nevertheless, coffee shop growth and out of home consumption continues to set the pace for the market.  That’s the power of marketing at work.

Russian coffee lovers are becoming increasingly aware of the origins of coffee. They know that coffee prepared in a high-quality coffee shop tastes great. While soluble coffee is a high-quality coffee, nothing beats the flavor, aroma and taste of a beautifully balanced cup of roasted coffee, served hot. Milk and sugar enhances the experience and for many, masks the bitterness and acidity of high quality Arabica coffee. For many consumers, the experience of gourmet coffee is well worth the extra cost, as coffee shops around the world have come to know and appreciate.

The growth of roast and ground coffee has had a spillover effect on the soluble coffee market. Since about 2015, the fastest growing segments in the soluble coffee market in Russia are varieties of instant coffee that resemble roast and ground coffee in some way. Many soluble producers now make an instant coffee granule that contains up to 25% finely ground coffee. This instant coffee is closer to the taste and aroma of ground coffee. Another new product is a soluble variant that contains air. When mixed with hot water, it produces a layer of foam on the surface of the coffee, similar to a crema on an espresso. With these concepts, soluble brands are tagging on to the coffee shop experience by offering instant coffee that has similarities to roast and ground coffee drinks. As a result, these are the fastest growing segments of the Russian soluble market.

Russia has a long way to go before catching up with other coffee markets. Russians per capita consumption of coffee is 1.5 kg per year. Finland’s consumption per capita is 11.5 kg and Germany comes in at 6.5 kg. Moscow has about 4 coffee shops for every 100,000 people compared to 132 shops per person in New York city (253 in Seattle, the home town of this writer). The coffee market has taken notice. About 230 coffee shops opened in Moscow in 2006 versus 519 openings in 2016.

The beauty of coffee is the way it is constantly evolving. In Russia, the growth in gourmet coffee has only begun. With it, there will be more ideas coming.


Daniel Brooks has specialized in the Russian coffee market since 1995. He was GM Tchibo beginning in 1995, and was CEO at Tata in from 2009-2012. Since 2012 Daniel has been involved in coffee and tea projects in Russia on behalf of May Foods, United Coffee Company (Holland), teapigs (UK) and others. Currently Daniel represents Dr. Suwelack GmbH, a coffee producer based in Germany and has developed his own coffee brand called U&Me.

Sources:  ICE, Euromonitor, International Coffee Organization, Roschaicoffee, ICO, interviews