King Coffee Co, a seasoned original equipment manufacturer (OEM) factory of more than 400 brands of coffee, tea and healthy beverages for two decades, has ventured into creating its own coffee brand.
In late March of this year, the company produced and launched Xo Cube, an instant freeze-dried coffee in a cube format, selling online via Lazada and Shopee as well as offline through Lotus's hypermarkets.
The product is available in the domestic market and the US.
CHANCE OCCURRENCE
"I dreamed of starting my own business one day, but I never imagined it would be the coffee business, which has a full market with many brands and strong market leaders," said Taninrat Dechodomphan, chief executive of King Coffee.
According to Mr Taninrat, he entered this market by accident. He decided to start importing functional coffee products to sell in Thailand after being introduced to a Malaysian trader by his cousin when he was in his twenties, one year after graduating from Kasetsart University.
The business fared quite well, but faced a setback when Mr Taninrat was cheated by a partner. He decided to set up his own factory on Rama II Road to produce functional and weight control coffee mixes for various companies.
"We were chosen to produce coffee for the house brand of Carrefour hypermarket, the French modern retail chain, in Thailand for two years. Although the profit did not meet our expectations, the venture helped raise our profile in the market," said Mr Taninrat.
COFFEE SEGMENTS
After establishing itself for five years, King Coffee became a recognised name among its clients. Demand for functional coffee products, such as "weight loss coffee" and "coffee for youthful skin", registered a rapid increase for several consecutive years, he said.
As a result, many companies joined the weight loss coffee segment, with numerous popular brands produced in King Coffee's factories. One of these was Nature Gift, which spurred more than 100 brands, including Nescafe, to enter the segment.
"The wave of functional coffee resulted in business continuing to grow year-on-year," said Mr Taninrat.
"However, a breakthrough happened when we received an order from one of Thailand's leading single-level direct sales companies that sells its products at the 7-Eleven convenience store chain."
King Coffee Group operates five factories: three in Bangkok and two in Sinsakhon Industrial Estate in Samut Sakhon. King Coffee produces coffee and tea as an OEM, while Pharma & Nutrient Co produces food supplements and King Cosmetics Co cosmetics, both as OEMs based in Bangkok.
The two factories in Samut Sakhon are King Spray Drying Technology Co, which produces spray-dried coffee for the industry and its Bangkok company, and King Freeze & Dry Co, which produces Xo Cube freeze-dried coffee.
The group also produces tea and healthy ready-to-drink beverages, such as cocoa and beauty drink supplements, as well as flexible packaging. Other services include consultancy, branding and marketing services, both domestically and internationally.
Last year, the group invested more than 100 million baht to expand its facilities to produce its new freeze-dried coffee at its Samut Sakhon plant. Another 50 million baht will be used to promote Xo Cube this year, he said.
"I am an avid coffee drinker with many years of trying different coffee brands," said Mr Taninrat.
"With prices quite high, I want to offer consumers an alternative with Xo Cube. Freeze-dried coffee has a taste that is nearly as fresh as brewed coffee."
BOUNTIFUL OPPORTUNITY
He said the freeze-dried coffee market is still a small category, with all brands imported.
"We decided to create our own coffee brand to offer Thai consumers more alternatives in terms of product form. The freeze-dried coffee market is still untapped with few players. King Coffee is the first Thai factory to produce freeze-dried coffee," said Mr Taninrat.
"We aim to expand our business in international markets where freeze-dried coffee consumption is already familiar."
The global coffee market was estimated at US$433 billion (14.8 trillion baht) in 2022 and is projected to grow at an average annual rate of 7.4% over the next two years.
Thailand's coffee market is expected to be worth 60 billion baht, twice the value it tallied a decade ago. In-home consumption is valued at 33 billion baht with a growth rate of 10.7%, attributed to the pandemic as more people stay at home.
He said the market potential is huge as per person coffee consumption in Thailand is only 300 cups per year, while it is 530 cups in the Philippines, 600 in Europe, 1,300 in Brunei and 1,310 in Finland.
Xo Cube introduced three varieties of freeze-dried coffee in the market -- Xo Cube 3-in-1, Xo Cube mocca and Americano -- targeting first-time workers and office workers.
King Coffee Group also established the joint venture Xo Cube Company with a Thai partner in the US to expand distribution in that country.
The first batch of Xo Cube was sent to California and is now available in supermarkets. The Thai partner is in talks with other retail chains, including Costco, to distribute Xo Cube coffee.
Following the US market, the company wants to expand its reach to the European market.
Mr Taninrat said the company aims to generate sales of 160 million baht in the first year for Xo Cube 3-in-1 coffee. King Coffee is optimistic the product will reach 500 million baht in sales within three years, combined domestic and international markets, he said.
The group reported sales of 700 million baht in 2022 and projects 1 billion baht this year, with 70% coming from the coffee business and 30% from segments including food supplements and packaging.
Mr Taninrat plans to list the company on the Stock Exchange of Thailand within three years to upgrade its image and facilitate expansion, both domestically and internationally.
"We've expanded our businesses to cover downstream and upstream. For the next step, we want to increase our cosmetics portfolio to tap into growing demand," he said.
"Food supplements are also in the pipeline, which will help sustain our business growth over the long term."
