HSH Nordbank and the Hamburg Coffee Company
The coffee trade is special as is the bond between HSH Nordbank and HACOFCO
With 162 liters consumed per person each year, coffee is Germany’s favorite drink. Much more so than curative waters, mineral water and beer. The Hamburg Coffee Company (hereinafter HACOFCO) plays a significant role in ensuring that German cups are always well filled and that the coffee’s aroma remains fresh. The company is specialized in coffee and trades a large volume with a comparatively small team. This especially in a market which is characterized by turbulence of a climatic, political and speculative nature. From the perspective of the financing banks, cooperation requires significant product knowledge in addition to trust in order to be able to respond together with the right financing models minimizing risk in the process.
Whether it is café latte, lungo, latte macchiato or good old filter coffee: the Germans are through and through coffee junkies. “Coffee is the most consumed beverage in Germany,” says Holger Preibisch, CEO of the Hamburg-based German Coffee Association e.V. Germans drink an average of 160 liters per person each year. This corresponds to around 7.2 kilograms of coffee according to the German Coffee Association’s calculations. The EU average in 2015 amounted to just 5 kilograms per person. This means that German’s drink more coffee than the Italians (5.6 kilograms) and the French (5.1 kilograms). Only the Scandinavians – first and foremost the Finns with 12.2 kilograms, followed by the Swedes with 10.1 kilograms and the Norwegians with 8.8 kilograms of green coffee per person per year – reach for the cup or pot more frequently.
It is true that the Germans still have some catching up to do with the Scandinavians in terms of quantity. However, Germans already consume a volume of coffee which would fit in an enormous container ship – and this on a daily basis. And the fact that around 7.1 kilograms of coffee per year was consumed per person in Germany as early as 1990 is an indication of a saturated market. The potential for growth in quantity consumed is therefore limited. Not so for quality: On the one hand, the number of those in this country who, according to Preibisch, want it “quickly and conveniently” is growing – these are the users of (more expensive) capsules and pad machines or proud owners of fully automatic machines. On the other hand, there is a growing number of users wishing to take more time for brewing and who cherish self-poured filter coffee – they almost practice a science in terms of coffee types, water temperatures and the fineness of the grind.
Market development of “single portions” for capsules and pads
(Food retail including online sales)
Sources: German Coffee Association
This indicates not only that “to go” is booming but that “relaxed” coffee houses are also making a comeback. A profound knowledge base around coffee has been built up since HACOFCO was founded in order to fulfill the growing demand for specialties and gourmet coffees. Several coffees are cupped on their own premises each day and the different varieties are evaluated according to taste and aroma. This guarantees that only the best qualities make it into the cups of consumers.
Most important supplier countries to Germany in 2015 (entries rounded in tons) and market share as a percentage
Sources: Federal Statistical Office of Germany, German Coffee Association
All customer groups and trends described represent a challenge of equal measure for Bent Dietrich. It is absolutely crucial to adjust to new trends quickly and in doing so deliver the very best customer service. The supply of coffees of every kind for every possible consumer has after all been the concern of HACOFCO for years. Dietrich founded the company in 1987 and remains a director to this day alongside Andreas Reyelt. The sister company, American Coffee Corporation (AMCOF), followed five years later in New Jersey. With just 25 employees at the headquarters in Hamburg’s port and another 10 in New Jersey, HACOFCO has supplied customers in the German market for decades but also supplies far beyond Germany’s borders thanks to modern communication technology. Nowadays coffees are marketed in faraway countries such as Japan and Australia.
By its own account, the company is the second largest coffee importer and exporter in Germany. “We sell between 2.5 and 3 million sacks of green coffee from more than 30 supplier countries each year
Coffee has not been shipped in bags for years but is now primarily shipped as a bulk ware. The good old bag does, however, represent a great tradition and offers the best possibilities for storage. HACOFCO therefore maintains a stock to be able to respond to requests rapidly or to cover supply shortages. Around two thirds of the coffee is made up of the Arabica variety, the rest being Robusta.
HACOFCO positioned itself early for the sale of fair trade and organic certified coffee and has developed significant competence in this segment. “The market share of certified coffees in Germany is not even 8%; however, for us it already represents a share of 18%,” reports Dietrich.
The Hamburg location is no coincidence. The proximity to the international port, having some of the storage facilities in walking distance and the coffee trade tradition in Hamburg’s “Speicherstadt” (Eng. “city of warehouses”) are all unbeatable location advantages for HACOFCO.
The company’s banking partner, HSH Nordbank, is also based in the city and was practically born with the necessary trading gene with the harbor on its doorstep. In addition to this, it has deep knowledge about the nuances of the food industry. “The markets for coffee – which by the way is the second most important commodity in the world after crude oil – are probably the most demanding of all, up there with cacao, wine or wheat. For companies as well as for banks,” says Michael Rothehüser, Head of Retail & Nutrition for corporate customers at the HSH Nordbank.
Development of the green coffee price since 2004
(Average annual value in US cents/lb, 2016: June 2016)
Sources: German Coffee Association/ICO
“A multitude of factors influences the coffee price. Market conditions and therefore the financing conditions can change practically overnight,” adds Ute Brettschneider, department director in corporate customers/food science division at HSH Nordbank and the bank’s coffee expert. Coffee is traded on two exchanges in London and New York. With that there is clearly no “one” coffee price. Coffee is also not a uniform product. The price of each individual shipment is influenced by a multitude of factors – from the quality of the variety, the current interaction between supply and demand, the US dollar exchange rate through to harvest cycles and freak weather in supplier countries. Sellers such as HACOFCO find themselves in the often unenviable position between coffee suppliers in the countries of origin and the strong retail or discount chains on the buyer side. HACOFCO therefore has the challenge and function of bridging the interests of the participants and being the go-between.
HACOFCO’s trading volume recently amounted to the proud annual figure of around half a billion US dollars, which can fluctuate markedly due to market movements and therefore presents the banks with different challenges. Therefore, partners need a good market understanding and must be able to adapt quickly to changed market conditions. Put another way: Fewer than 35 employees in Hamburg and New Jersey move an enormous market and capital volume – with corresponding opportunities and risks. “For this we need a reliable banking partner who understands the market laws of commodity futures and does not get nervous with the slightest blip,” summarizes Dietrich.
Dietrich has found this partner in the person of Ute Brettschneider in particular. Brettschneider also represents the HSH Nordbank in the German Coffee Association of which HACOFCO, as to be expected, is also a member.
Once a junior financing partner, HSH Nordbank has become one of HACOFCO’s most important house banks over the years. Brettschneider and the whole team from HSH Nordbank support HACOFCO as they do other companies from the retail and food science field with, for example, classic loans, the handling of international payments, currency hedging transactions, promissory notes or factoring. Dietrich is particularly impressed by the loyalty and faithfulness of his bank: “HSH Nordbank has also stood by us through turbulent times.” The long-standing cooperation between HSH Nordbank and HACOFCO is testimony to the fact that trust and mutual understanding have grown more and more over the years. “The key to success is our frequent personal meetings,” say Dietrich, Brettschneider and Rothehüser in unison. Of course over a good cup of coffee.