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Preparing China for the next phase of quality coffee

From the March 2016 issue.

China’s largest coffee producer, the Dehong Hogood Coffee Company, has teamed up with Italian capsule manufacturer NexTS to develop an exciting new segment of China’s growing coffee market.

Coffee capsules

With appreciation for coffee on the rise amongst China’s growing middle class, new market segments are opening that offer huge opportunity for those companies that are positioned to seize their chance.

The Dehong Hogood Coffee Company is one of China’s largest coffee producers, and is already an established brand in the instant coffee market.

However, as the coffee market grows in China, so too does the sophistication of the consumers there, with growing demand for new and different ways of drinking coffee, and a growing emphasis on quality as well as convenience.

These market factors have led to the rising popularity of the single serve segment among discerning coffee drinkers around the world, and so the Dehong

Hogood Coffee Company has spotted an opportunity to gain a foothold in the market in China in its very early stages.

Based in the Yunnan province of China, the Dehong Hogood Coffee Company produces coffee on more than 15,000 hectares of land in China’s premium coffee and tea cultivation region.

Yunnan coffee fields

With an annual turnover of more than US$400 million in 2015, the Dehong Hogood Coffee Company is already established as the largest instant coffee brand in China, and exports its products – instant coffee, roasted beans and green beans – to 48 countries on five continents.

When it was looking to expand into the single-serve segment, the Dehong Hogood Coffee Company was looking for a partner that would offer innovative solutions and a capacity to produce high volumes of product to suit its growing business.

That is how they came to work in partnership with Italian capsule manufacturer, NexTS.

Based in Cernusco sul Naviglio on the outskirts of Milan in Italy, NexTS is the result of a partnership between Andrea Varisco and Richard Vergiani, who formed the company as an offshoot of thermoforming mould producer, Termostampi, after seeing the potential for coffee capsules.

This was back in 1998, giving NexTS almost two decades of experience in the capsule manufacturing market.

“Even if the market for pods has only started to really grow in the past six or seven years, I can say that we have a quite longer experience with this product,” says Vergiani, the company’s President.

NexTS specialises in themoforming coffee capsules made from polypropylene or polystyrene. These capsules are completed with barrier properties that protect the coffee from oxygen and humidity.

This technology ensures that the flavour and aroma of the coffee is retained throughout the transport and storage phase of its journey into the cup, giving the consumer a much richer, espresso-quality drink without the need for the machinery or know-how of a barista.

As well as its ability to produce technologically complex capsules in response to the specific requirements of its clients, NexTS places great emphasis on its ability to cater to large contracts rapidly and efficiently.

“High volumes and precision are our goals,” says Vergiani.

Dehong Hogood’s spokesperson, Zhenjia Chen, says that NexTS’ ability to produce a consistent product in large volumes was one of the key considerations behind their decision to partner with them.

“We had some very particular requirements for this partnership with NexTS,” says Chen, “such as to be able to produce special volumes of capsules to meet the demand that we expect from our consumers.”

Chen says that since the Dehong Hogood Coffee Company started working with NexTS in 2015, it has brought considerable value to the partnership.

“We are confident to use NexTS’ products,” he says. “I think that the products provided by NexTS will bring us a lot of new opportunity. For instance, those innovative products can help us to open new markets in other Asian countries.”

With a strong track record working with some of the world’s largest coffee companies to produce some of the world’s most sophitisicated coffee capsules, the match between the two companies is a strong one.

Vergiani tells GCR that not only is his company capable of producing high volumes of capsules at a high standard, they are also incredibly sophisticated.

“Our capsules are probably the most complex capsules on the market,” Vergiani says. “Some of our products have high technological complexity due to the specific requirements of our clients, such as coupling systems – a sort of hook for internal filters, undercutting dimensions – which are not easy to be realised.”

Chen says that, as the Dehong Hogood Coffee Company further develops its offering and presence in the single serve category, he is hoping to tap into NexTS’ expertise to develop new capsules for the market.

Roasted coffee

“We look forward to elevating our relationship with NexTS to a high level of strategic cooperation, for example, in helping us to design a new type of capsule,” Chen says.

This is an area in which NexTS is very comfortable, according to Vergiani.

“We drive and support the client in all the steps of product development: from the concept, to the engineering and prototype to the phase of mould production,” he says. “Our flexibility allows clients to choose the shape, dimension, and colour of their own product.”

This willingness to continue working with the Dehong Hogood Coffee Company on future product development is testament to the fact that the capsule technology that NexTS works with is, as Vergiani says, “alive”.

“We continue to refine them, in collaboration with our clients, in order to reach perfection,” he says.

“Considering the capsule as a system that has to work perfectly within another system – the coffee machine – it must be flawless.”

According to Vergiani, the success of this approach comes from NexTS’ willingness to listen to, and work with, the needs and ideas of its clients. It is from these new needs and ideas that innovation is born, he says, and it is sometimes the most unexpected requests that yield the most exciting results.

“Improve and differentiate is our task,” Vergiani says, adding that NexTS is not just concerned with creating
the capsule itself, but also working with its clients right along the production chain. GCR

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