New Exports For A New Market

CLEARWATER - In the United States, today's "coffee snobs" want to know a coffee's country of origin and the region of the country - even which plantation - its beans were grown on, said Barry Altman, an executive at Clearwater's Melitta USA.

But that hasn't been the case in Mexico, where for generations the store shelves have been dominated by something that might make American coffee snobs blush: instant coffee, said Altman, Melitta's director of international business development.

Now, Melitta is launching a high-priced, fresh roasted coffee that will test the Mexican palate, as well as the financial strength of Mexico's growing middle class. Its new coffee line, Coleccion de Cafe Gourmet, will retail in a Mexican subsidiary of Wal-Mart and other Mexican stores for 50 percent more than competing Mexican coffees.

Economists say the middle class is surging in Mexico and other parts of Latin America, bringing millions of people out of poverty. Melitta and other Florida exporters could stand to reap fat profits if the trend continues.

"For us in Florida who export to Latin America, this has been wonderful, a period of unprecedented economic growth," said Manny Mencia, senior vice president for international development for Enterprise Florida, the state's economic development agency. Mencia, Gov. Charlie Crist and state trade representatives are in Brazil and Chile this week for an international trade mission.

Like many other Florida-based exporters, Melitta has profited from strong sales to developing and industrialized nations. In Melitta's case, a growing middle class in Mexico and elsewhere in Latin America are snapping up coffee makers and filters.

Other Tampa Bay area companies attribute rising exports to a weak dollar, which makes U.S. exports cheaper, and the world's appetite for raw materials. One Tampa company, Smorgon Steel Recycling, has seen its scrap metal exports increase by 20 percent a year, said Smorgon President Tommy Quirke. Lately, Smorgon has been selling heavily to Turkey, which turns the scrap metal into building materials for the United Arab Emirates and other booming Persian Gulf countries, Quirke said.

Tariffs Kept Coffee Sellers Out

From Melitta's U.S. headquarters in the ICOT business park off Ulmerton Road, the company is dipping its toe into the Mexican coffee market for the first time.

Like some other Latin American countries, Mexico has protectionist policies that place high tariffs upon imports of items such as coffee beans, which compete directly against Mexican-made products, Altman said. So, Melitta historically has sold only filters and coffee makers in Latin American countries, he said.

But in recent years, a rising middle class and the emergence of Starbucks in Mexico have convinced Melitta's executives that it can launch a line of premium coffees there.

Last year, BusinessWeek magazine reported that the Mexican middle class, or those with incomes between $7,200 and $50,000 a year, had grown to about 10 million families. That is equal to about 40 percent of Mexican households, compared with about 30 percent several years ago, BusinessWeek reported, citing data from Mexican economics firm Grupo de Economistas y Asociados.

Meanwhile, Starbucks entered Mexico in 2002 and has since grown to 140 stores, a Starbucks spokeswoman said. Altman said Starbucks has helped to boost coffee's stature nationwide.

"If you want to be seen at the hip spot in Mexico City and you're a teen or in your 20s, you're going to Starbucks," Altman said.

To get around that country's protectionist policies, Melitta is buying coffee beans from Mexico, shipping them to Melitta's New Jersey coffee roasting plant and exporting the finished coffee grounds back to Mexico for sale. Melitta just signed a deal with one of Wal-Mart's Mexican subsidiaries, Superama, to carry its Coleccion de Cafe Gourmet coffee line, and Melitta's goal is to have its coffee in 250 stores by mid-2008. There are three varieties: classic roast, espresso and decaffeinated.

The big challenge: price. Its premium coffee will run about 75 pesos for a 10-ounce bag, compared with about 50 pesos for its Mexican competitors. Even with a rising Mexican middle class, will a nation of instant-coffee drinkers pay extra for a premium American product? the company wonders.

Will The Move Be Profitable?

For Melitta - as with many other U.S. companies - cracking the Latin American market won't be easy or immediately lucrative.

With the region's growing wealth, Melitta's sales growth has been impressive. Sales are up 15 percent this year over last year in Mexico, while sales in Central America are up 80 percent and sales in Colombia are up 103 percent.

But in real dollar terms, those sales are less than overwhelming. Overall, Melitta USA's international sales come to less than 5 percent of its annual sales, said company Chief Executive Officer Martin Miller. Actual sales in any one of those countries may only be in the hundreds of thousands of dollars per year. Still, the company is hoping its revenue can continue to grow by up to 15 percent a year in Latin America, Miller said.

It's an open question whether that can happen.

Mencia, the Enterprise Florida international trade executive, said Latin America's rising wealth has been driven by external forces: huge international demand for its oil, cement and other materials. If demand dries up, Mencia worries that the countries of Latin America could revert to old populist policies and start putting up trade barriers.

At least for now, companies like Melitta see opportunities.

"I'm seeing stability in an otherwise restless part of the world," Altman said.