Myanmar coffee scene fuelled by middle-class caffeine high

Customers enjoying their drinks at a coffee shop in downtown Yangon. (©AFP PHOTO/Soe Than WIN)

(Yangon-AFP) - Behind a wooden counter in downtown Yangon's Coffee Club, the unmistakable hiss of a barista steaming milk briefly drowns out a funky soundtrack piped through a store filled with students glued to their smartphones.

In any other Asian capital it would be a ubiquitous sight. But in Yangon, this is something new.

Long absent from the region's booming cafe culture, Myanmar's commercial capital is now witnessing a surge in swish coffee bars providing an alternative to the treacly instant coffee served by thousands of street carts.

It is a trend that points both to the changing tastes of Myanmar's emerging middle-class but also the widening gap between them and the nation's poor.

Nyi Nyi Tun, a doctor, is typical of the newly aspirant customers relishing consumer goods that were either far beyond their reach or simply unavailable under Myanmar's brutal and economically incompetent military dictatorship.

"I came here to read," he said, sipping an americano and perusing the web on a tablet. "With friends, a streetside tea shop is better. But if you want to be somewhere alone and quiet, then this kind of coffee shop is good."

To escape the noisy onslaught of Yangon's increasingly vehicle-clogged streets, Nyi Nyi Tun is willing to fork out as much as $2 -- ten times what a traditional Myanmar coffee made from pre-mixed sachets and condensed milk costs at roadside stalls.

'Exponential growth'

In the last few years since the end of outright military rule in 2011, around two dozen speciality coffee shops have opened up in Yangon alone.

"You will witness exponential growth of the coffee industry in the next three years," predicts Ye Naing Wynn, managing director of the Nervin Cafe chain -- Myanmar's oldest -- which now boasts five outlets including in Mandalay and the capital Naypyidaw.

"A country like Myanmar has newly opened up. People have been closed up for so many years. The natural human reaction is they want to experience new things," he adds.

Initially it was the large influx of expats and tourists that helped foster Yangon's nascent coffee scene. But owners say locals now make up the majority of drinkers.

"That's my target audience going forward to be honest... because any food and beverage business that relies 70 percent on locals ought to do well in the long run," says Thura Ko Ko, who returned to Myanmar from overseas four years ago and opened The Coffee Club above another of his businesses -- a mobile phone shop.

It helps, he adds, that speciality coffee is seen as something aspirational and trendy.

"Sometimes I sit in and I overhear some new local customers try and they're not quite sure what a cappuccino is -- but they've seen it (on) the TV, they've seen it online and that's been a big influence in lifestyle as well. Everything from Korean soaps to films," he says.

Out of reach

The economic potential of Myanmar's growing middle class is not lost on international companies who are scrambling to access one of Asia's last untapped markets.

In 2013 Starbucks CEO Howard Schultz hinted during a trip to Thailand that he was eyeing Myanmar while Carlsberg is also hoping to break into the beer market -- an area currently monopolised by the country's military.

Management consulting giant McKinsey believes up to a quarter of Myanmar's population could be living in large cities by 2030 -- up from 13 percent in 2010 -- while the economy, if managed properly, could quadruple from $45 billion in 2010 to $200 billion by 2030.

"The size of the urban middle class is expected to double over the next decade, with annual double-digit growth in middle class incomes over the next five years," says Rajiv Biswas, Asia-Pacific chief economist at IHS.

"This will generate very rapid growth in urban consumer demand for retail goods, including consumer durables such as autos, motorcycles, refrigerators and air conditioners, consumer electronics such as mobile telephones and tablets, and basic consumer goods such as food and beverages," he adds.

But Sean Turnell, an expert on Myanmar's economy at Macquarie University in Australia, warns against overhyping the potential of the middle class in a country where the vast majority of its 60 million population are the rural poor.

"Serious consumption usually starts for people with disposable incomes above around $5,000. There would be few in Myanmar with this sort of spending power," he says.

However much buzz is created by the opening of the next hip coffee joint, for people like Ko Phyo, who runs a photography shop in Yangon, a latte will likely remain far outside his budget.

"It's too expensive for ordinary people," the 33-year-old says while sipping a sweet brew in one of Yangon's many traditional, cheaper teashops.

"It's ten times more expensive in those places. Only the middle classes can afford that."