Coffee sector

update October 2013

1. B ackground and key

issues Coffee sector
2. L atest developments
1. Background and key issues
Developments in international coffee
markets
Developments in the ACP Since the 2006/07 season, ACP coffee Africa and the rapid growth in robusta
producers have been playing an increas- consumption in recent years. Although
ing role in global coffee production, with demand growth is strongest in emerging
3. Implications for the ACP
strong growth in East Africa but a contin- markets, product differentiation is a grow-
Scope for joint action in developing
ued decline in West Africa. Some 55% of ing feature of established coffee markets
new markets in emerging economies
ACP production is of arabica coffee, with (e.g. single-origin coffees, coffee certi-
Moving up the value chain in producers in 10 ACP countries growing fied as sustainably produced, fair-trade
traditional markets
only arabica beans. coffee and organic coffee). The growth
Getting to grips with evolving market in sales of single-serve coffee pods is
trends “Since the 2006/07 season, ACP also a major feature of established cof-
Promoting investment in value-added coffee producers have been fee markets.
processing for local markets playing an increasing role in
global coffee production” The challenge of serving differentiated
coffee markets is increasingly being taken
The sharp decline in arabica prices in up in Eastern Africa. However, the bulk
2012 has therefore fallen particularly of sustainably certified coffee contin-
heavily on these ACP producers. Only ues to be sourced from Latin America.
a relatively small price recovery is pro- This raises the policy challenge of pro-
jected for arabica coffee in 2013; after moting sustainability certification and
an initial rally, prices declined marginally guiding producers through the numer-
through to May 2013. Meanwhile, robusta ous schemes available, many of which
coffee prices have proved more stable, involve different costs and benefits. The
with a smaller price fall in 2012 and a distribution of the costs and benefits of
recovery in the first months of 2013, tak- certification schemes along the supply
ing prices to within 1.4% of their February chain is likely to gain significance in the
2012 level. However, the price gains in coming years.
early 2013 had been largely lost by the
end of May 2013. Because of the strong demand growth in
emerging markets, East African produc-
African robusta coffee producers have ers are continuing to seek new partners
launched initiatives to improve quality and not only for marketing coffee but also for
promote greater use of robusta beans, investment in value-added processing.
which is considered necessary given the The Jamaican experience in market-
predominance of arabica production in ing Blue Mountain Coffee highlights the

http://agritrade.cta.int/ I 1
 Coffee sector

challenges faced in identifying new prices have not necessarily translated

partners in non-traditional markets, 2. L atest into higher net producer incomes.
which has led to a quest for entirely Indeed, in June 2013, the International
new partners. developments Coffee Organization (ICO) warned that
the weak coffee market was generating
In Ethiopia, Africa’s largest coffee pro- Developments in “prices below the cost of production”
ducer, export levels were adversely international coffee (see Agritrade article ‘Ethiopian coffee
af fected in 2011/12 by disputes markets sector caught by falling global prices’,
between the government and private 22 July 2013).
exporting companies, in part linked to Declining prices since 2012
strategies for managing disease trans- “World coffee prices remain
mission challenges. Although there was In May 2011, arabica and robusta cof- high in historical terms – but
strong export growth in 2012/13, price fee prices hit record highs of US$304.9 have not necessarily trans-
declines held back the growth in earn- cents/lb and US$2,588 per tonne, but lated into higher net producer
ings. The dispute between the gov- prices have consistently fallen since: by incomes”
ernment and private sector in 2011/12 June 2013 there had been a 60% drop
exemplifies the importance of harmo- in arabica and 30% drop in robusta Higher prices of alternative crops have
nious relationships if volatile markets prices. Despite these price declines, led to some producers abandoning
are to be effectively managed. There world coffee prices remain high in coffee production, raising concerns
is also the issue of the role of govern- historical terms. However, high world over long-term supplies.
ment regulation and parastatals in the
context of a need to serve increasingly Figure 1: Evolution of ICO indicator prices 2011–13
differentiated coffee markets. This is
a challenge across a number of ACP 300
250 ICO Composite price
regions, and is linked to the need for
US cents/lb

innovative strategies in the production 200 Colombian

Mild Arabica
and marketing of coffee, to deal more 150
Robusta
effectively with price volatility and rising 100
input costs. 50
0
The related problems of pest infes-
b 11
ua 11

Ap 012

Ju 012

gu 12

De be 2

b 12
ua 12

Ap 013

13
01

tations and climate change are also

ce r 20

br 20

Au 20

br 20

20
2

Oc st 2

ce r 2

2
Fe er

ry

ril

ne

Fe er

ry

ril
e

affecting coffee production in some

b
to

to

m
Oc

ACP regions, with ‘aid for trade’ sup-

De

port potentially having a role to play

in facilitating necessary adjustments. Source: International Coffee Organization/CommodAfrica

Coffee production in the Caribbean’s The evolution of the price differential Production and demand trends
main producer, the Dominican Repub- between arabica and robusta coffee
lic, continues to rise, while Jamaican has had a major effect on demand According to the ICO, in 2012/13 world
production still falls below expecta- in recent years. In 2011, the arabica coffee production reached 135.9 mil-
tions, despite efforts to diversify mar- price premium was US$1.90/lb, up lion (60-kg) bags and an estimated
kets and improve marketing. In the from between US$0.35 and 0.85/lb in 144.6 million bags in 2012/13 (US
Pacific, however, there continues to be 2009/10, leading some coffee roasters Department for Agriculture – USDA –
scope to expand quality-differentiated to increase use of robusta coffee in estimated 150.7 million bags), following
coffee production, which serves par- blends. However, by March 2013 the a second year of massive production
ticular niche markets. price differential was back down to in Brazil and Vietnam in response to
US$0.35/lb, reversing this trend. the high prices of 2011 and favourable
weather conditions. But even larger
production increases were held back
by heavy rains in Indonesia, and cof-

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 Coffee sector

fee rust disease affected production pared to +1% for arabica. Despite this those in Kenya. Elsewhere, little effort
in 50% of the Central American coffee growing trend toward robusta coffee, is being put into promoting domestic
growing areas. some major retailers, such as Star- coffee consumption. Nevertheless, it
bucks or KFC’s fast-food chain Yum is anticipated that coffee consumption
Consumption also grew rapidly, reach- Brands, still remain hostile to robusta within the EAC will continue to grow
ing 139 million bags in 2011 and 142 because of a persistent image of lower steadily.
million bags in 2012, which reflects a standard coffee.
strong demand growth in emerging Trade developments in 2012/13
markets of 6.6% per annum, com- Rising coffee consumption in emerg-
pared to the global average of 2.4%. ing countries (+21% between 2009 and According to the ICO, world coffee
Consequently, stocks have fallen by 2012) was the second major feature of exports grew by some 10% between
some 17.1% (from 18.2 to 15.1 million the coffee market that was confirmed production years May 2011/April 2012
bags in 2012/13). The strong growth in 2012/13. This is closely linked to and May 2012/April 2013, from 103.4 to
in demand in emerging markets may increasing consumption in coffee pro- 113.8 million bags (USDA estimates put
have prevented even more dramatic ducing countries, in some instances 2011/12 exports at 114.5 million bags
price declines; however, production is with a growing demand for quality cof- and 2012/13 exports at 115.6 million
expected to fall back in both Brazil and fee. Thus Brazilian consumers are now bags, with a drop to 114 million bags
Vietnam in 2013/14. increasingly in direct competition with in 2013/14). However, perspectives for
the average European and American 2013/14 vary. Rabobank envisages a
It is now apparent that the longer- coffee consumers; in 2012, Brazilian positive outlook for the arabica price,
term impact of Brazil’s “off-and-on robusta coffee exports fell by 57% owing to a potential deficit on world
year cycle” is reducing in intensity, as because of rising local demand. Local markets, with anticipated purchases by
new coffee areas have been opened coffee consumption is also increas- roasters and Brazilian producers hold-
up with higher yields and less risk of ing in Indonesia, which is increasing ing off the market. A similar strategy
frost damage. demand pressure and hence support- might be followed by Vietnamese pro-
ing prices. ducers in the coming months to shore
“A major feature of the cof- up world robusta prices. On the other
fee market in 2012/13 was the There is considerable effort to promote hand, USDA forecasts that world prices
continued growth in demand coffee consumption in a number of will drift in the coming months as world
for robusta beans” ACP coffee producing countries. For coffee inventories rise to a 5-year high.
example, with government support,
A major feature of the coffee market Cameroon’s private sector Conseil Trends in differentiated coffee,
in 2012/13 was the continued growth interprofessionnel café cacao (CICC) direct marketing and processed
in demand for robusta coffee beans. has launched ‘Festicoffee’, an annual coffee products
Although markets such as the US event with the dual aim of rejuvenat-
have denigrated robusta for many ing coffee production and stimulating In spite of the economic crisis, there
years, things are changing. In 2011, US domestic consumption. has been a continued development of
imports of robusta coffee increased the gourmet coffee culture during 2012
threefold (although they are still only In East Africa, the Coffee Board of and 2013, similar to the gourmet wine
equivalent to 14% of the volume of ara- Kenya has been encouraging domes- culture. Top Parisian hotels such as
bica imports), with this trend continuing tic coffee consumption through coffee George V and the Hotel Vendôme have
into 2012 (+80%). In contrast, arabica awareness campaigns. Indeed, over therefore developed special “coffee
imports fell by a third in 2012, resulting the last 3 years, many coffee shops times”, with coffee “grand cru” being
in growing exchange-certified stocks of have opened in major urban centres offered, all of which highlight the avail-
arabica coffee (+72%) and a decline in across the East African Community ability of niche markets for top-quality
exchange-certified stocks of robusta (EAC), catering for a growing middle coffee.
coffee (−55%). class. Coffee consumption is taking off
most strongly in Kenya, with estimated According to Euromonitor, a second
In the long term, the ICO forecasts that growth rates of 15–20%. In Tanzania, major trend is the increased sales of
the demand for robusta will grow by where a distinct preference for tea coffee pods – easy-to-use “single-
6% per year in 2014 and 2015, com- exists, growth rates are one-tenth of serve” capsules and bags popularised

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 Coffee sector

by brands such as Nespresso, Senseo Coffee Roasters and Nespresso, have to 800,000 in 2012/13 (although shifts
and Lavazza. This market component also contributed to the trend. in demand have created considerable
was worth US$8 billion in 2012 ($5.1 problems for Jamaican Blue Mountain
billion alone in western Europe). For its part, the UK Department for Coffee exporters); and in Thailand from
International Development’s (DFID’s) 270,000 to 650,000 bags in 2012/13.
“A major trend is the increased Food Retail Industry Challenge Fund
sales of coffee pods” (FRICH) has financed fair-trade coffee Russia, however, remains the leading
projects and facilitated direct marketing importer of soluble coffee, importing
It is estimated that sales of coffee links with major UK retailers such as 2.3 million bags in 2012/13, with the
pods have been increasing at 20% per Sainsbury’s. This has created oppor- second largest importer, the Philip-
annum in recent years, with the poten- tunities for exports of gourmet coffee pines, showing considerable import
tial to constitute a third of the coffee from a Fairtrade-certified producers’ volatility, but still accounting for 1.5
market by 2016. Reports in The New cooperative in the Democratic Republic million bags in 2012/13 (USDA).
York Times in June 2013 found that the of Congo (DRC). Also, since December
retail price of single-serve coffee pods 2012, Sainsbury’s has been display- Significantly, with the price differential
was equivalent to US$50/lb, suggest- ing Malawian Mzuzu Fairtrade Ground between robusta and arabica coffee
ing that considerable additional value Coffee. having declined dramatically, some
is being generated along the supply instant coffee makers have started
chain for coffee pods, little of which While the UK remains the leading fair- using low-grade arabica in their
currently finds its way into the pockets trade market in the world, China is also instant coffee blends. For example,
of ACP coffee producers and coffee a growing market. According to a 2012 Uganda Drugar beans, an unwashed
sector enterprises. survey, Chinese consumers are willing and low-quality arabica, stored in US
to pay a 22% price premium for fair- warehouses, fetched roughly US$1.15/
“There are increasing numbers trade coffee, or even more in the case lb in early June 2013, while Uganda
of initiatives to directly link pro- of female consumers. Consumers who standard robusta was being sold to
ducers to consumers” make their own coffee are reported to US importers at the same time for
be likely to increase the trend the fol- around US$1.18/lb. Some roasters
A third trend in 2012 was the increas- lowing year. are also returning to arabica after hav-
ing number of initiatives to directly link ing switched a couple of years ago to
producers to consumers. Most, but not “There is soaring demand for lower-priced robusta. So far, the switch
all, are linked to sustainability, organic instant coffee in emerging in beans is limited in scale because it
and fair-trade certification schemes. markets” is easier for instant coffee makers or
Sales of “UTZ Certified” coffee, for small roasters to change blends than
example, increased by 38% in 2012 Developments on the Chinese market for large roasters.
to 188,096 tonnes, with new partners also highlight the soaring demand for
such as the Dutch airline KLM support- instant coffee in emerging markets. Developments in the ACP
ing the product. The demand growth for robusta has,
therefore, outpaced demand growth for Overall trends
US imports of certified Fairtrade and arabica, which has traditionally domi-
Rainforest Alliance coffee reached a nated the gourmet market. According to ICO estimates, between
record of 74,000 tonnes in 2012, valued 2011/12 and 2012/13, ACP countries
at US$32 million, with 60 new import- World soluble imports have gone increased their production by 13.6%.
ers and roasters becoming involved in from 9 million bags in 2008/09 to 12.1 Increases were registered in all ACP
fair-trade coffee and 50 new products million bags in 2011/12, decreasing coffee producing countries except
being launched. According to Rainfor- only slightly in 2012/13 to 11.8 million Ghana, Liberia, Malawi, Papua New
est Alliance, this growth was boosted, bags (USDA). Chinese imports have Guinea (PNG), Sierra Leone and Togo.
among other initiatives, by McDonald’s, gone from 115,000 bags in 2008/09 It is estimated that ACP producers will
whose espressos are now 100% Rain- to 400,000 in 2011/12 and 700,000 represent 14.1% of global coffee pro-
forest Alliance certified. Other North bags in 2012/13 – a sixfold increase duction in 2012/13, compared to 13.2%
American companies, such as Caribou in 4 years. Japan’s imports are also in 2011/12, in the context of a 6.4%
Coffee, Second Cup, Green Mountain rising, from 630,000 bags in 2008/09 increase in global production.

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 Coffee sector

ACP exports have increased strongly bags), compared to less than 1 million 200,000–300,000 tonnes in the next 5
with a 19.3% increase in compari- bags 2 years ago. However, coffee years (from a current level of 120,000
son to global growth of 7%, resulting bean exports totalled 32,564 tonnes tonnes). The programme involves
in the ACP region’s share rise from from October 2012 to April 2013, down training and management support to
9 to 10% of global exports between nearly 8% on the same period last farmers, improving access to credit,
October 2012 and April 2013. Several season. and encouraging the formation of
ACP countries have registered strong cooperative associations to reduce
increases in the volume of export: In March 2013, the government of the role of intermediaries. Emphasis
Burundi (+77%), Dominican Repub- Côte d’Ivoire approved a 4-year pro- is also placed on developing value-
lic (+54%), Ethiopia (+51%), Tanzania gramme to relaunch the coffee sec- added coffees, including developing
(+92%) and Uganda (+27%). But there tor, totally financed from its own geographical designations of origin for
have been disappointing financial resources. The programme’s aim is to quality washed coffee from the moun-
returns, given the lower global prices. achieve coffee production of around tainous regions of Côte d’Ivoire (which
Indeed, the fall in world market prices
in 2012 and 2013 has strongly affected Table 1: ACP coffee production in selected African countries
the 26 ACP coffee producing countries. (’000 60-kg bags)
Countries with a high coffee export
dependence were particularly affected Crop year 2010/11 2011/12 2012/13
(e.g. Burundi, with 59% of total export
World 133,498 135,934 144,646
earnings between 2000 and 2010,
Ethiopia 33%, and Rwanda 27%). Africa
Angola Apr/March 35 29 50
In Kenya, for example, prices per tonne
Burundi Apr/March 353 204 483
fell from KShs 513,590 in 2011 to KShs
429,327 in June 2012, while in Cam- Cameroon Oct/Sept 608 555 850
eroon producer prices at the beginning Central African Rep. Oct/Sept 95 86 100
2013 were FCFA 850/kg compared to
FCFA 1,400 3 years earlier. Against this Congo, DR Oct/Sept 305 352 450
background, it is a major challenge to Côte d'Ivoire Oct/Sept 982 1,907 2,000
keep coffee farmers interested in cof-
Ethiopia Oct/Sept 7,500 6,798 8,100
fee production, rather than switching
to other crops. Gabon Oct/Sept 1 0 1
Ghana Oct/Sept 112 146 85
Developments in West and Guinea Oct/Sept 386 351 415
Central Africa
Kenya Oct/Sept 658 680 767
Developments in Côte d’Ivoire (Africa’s Liberia Oct/Sept 10 11 10
second largest robusta producer) were Madagascar Apr/March 530 604 575
dominated in 2012 by increased state
Malawi Apr/March 17 27 20
engagement in the coffee sector, with
the first full year of application of the Rwanda Apr/March 323 247 400
2011 coffee reform programme. Auc- Sierra Leone Oct/Sept 33 76 50
tion sales are held under the reformed
Tanzania July/June 846 534 918
system to determine the guaranteed
producer price, which was set at FCFA Togo Oct/Sept 160 162 150
620/kg – a level higher than the aver- Uganda Oct/Sept 3,203 2,817 3,000
age FCFA 406 paid over the previous
Zambia July/June 13 10 10
8 years. Coffee production in Côte
d’Ivoire is increasing: the ICO esti- Zimbabwe Apr/March 10 9 10
mated production of 2 million bags in
Source: ICO/CommodAfrica
2012/13 (according to USDA 1.7 million

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 Coffee sector

currently accounts for 40% of produc- bilitate 13 cooperatives and more than fee Traders Association, between Octo-
tion). There is an ongoing campaign 100 associations on 4,000 ha in Porto ber 2012 and March 2013, earnings
to promote the local consumption of Amboim, in Kwanza Sul Province, has at the Nairobi Coffee Exchange fell by
coffee with financing and training being also been agreed. 33.7% (to US$67.34 million) compared
provided to young people to open “cof- to the same period the previous sea-
fee kiosks”. Local coffee consumption Developments in East and son. The average auction price fell to
in Côte d’Ivoire is currently estimated Southern Africa US$180.73 per 50kg from US$286.89
at 108,000 bags, down from an ear- (−37%). The website Agrimoney.com,
lier average of 300,000 bags (this is Ethiopia is Africa’s top coffee producer however, has argued that the desir-
attributed by USDA representatives to and the fifth largest producer in the ability of high-quality Kenyan beans
a higher portion of production being world. However, almost half of Ethio- for blending purposes has enabled
exported, which leaves less available pia’s coffee production is consumed Kenyan beans to fetch prices of up to
for domestic consumption). domestically. In 2012/13, Ethiopia was US$290 cent/lb, far more than New
caught out by falling coffee prices York arabica futures prices (US$1.39/
Cameroon is pursuing a strong cof- because disputes with the private sec- lb in mid June 2013). This suggests
fee policy, with the aim of produc- tor in the previous season had left large considerable scope for improved mar-
ing 160,000 tonnes of arabica and carry-over stocks. keting of Kenyan coffee beans.
robusta by 2020 as against 51,000
tonnes forecast in 2012/13 (ICO). The “Ethiopia was caught out by “There is considerable scope
country hopes to attract young farm- falling coffee prices because for improved marketing of East
ers into coffee production (the current of disputes with the private African coffee”
average age is 55.8 years) through the sector”
“new generation” programme. This is According to USDA, similar scope for
accompanied by efforts to boost local This saw an increase in exports at a the development of Tanzanian speci-
consumption through the annual “Fes- time of rapidly falling arabica coffee ality coffee exports is also thought to
ticoffee”. Currently, coffee consumption prices. As a consequence, elevated exist “if production and processing are
in Cameroon amounts to 75,000 bags export levels “failed to generate a improved”. Because of this, the Tanza-
per annum. proportionate increase in foreign nian Coffee Industry Strategy 2011–
exchange” (see Agritrade article ‘Ethi- 2021 places considerable emphasis on
In May 2013, Nestlé announced a deci- opian coffee sector caught by falling improving the efficiency of the coffee
sion to invest FCFA 20 billion in a cof- global prices’, 22 July 2013). Indeed, chain, enhancing the marketing of pre-
fee processing factory in Cameroon. export volumes rose by 31.7% but mium coffee, and diversifying export
Works are scheduled to start in August receipts fell by 1.3% to US$199.3 mil- markets (see Agritrade article ‘Good
2013 with output to be sold largely on lion. According to the Coffee Board, performance in the EAC’s coffee sec-
the domestic and regional markets. Ethiopian farmers are not producing tor, despite depressed global prices’,
This investment represents a major enough, and there are plans to intro- 29 July 2013).
expansion; in 2012, locally processed duce coffee into new production areas.
coffee amounted to only around 200 Low levels of productivity in existing Meanwhile, Ugandan robusta coffee
tonnes, under half of 1% of domestic production zones would appear to be production continues to grow although
coffee production. linked to the traditional production and arabica production remains depressed,
farm management systems used and leaving Uganda less affected by falling
Efforts are under way to redevelop cof- to limited government extension ser- prices, given the lower price declines
fee production in Angola, which cur- vice support (compared to neighbour- of robusta relative to arabica. Never-
rently produces approximately 15,000 ing EAC countries). theless, earnings only increased 1.2%
tonnes (compared to 235,000 tonnes despite a 29% increase in the volume
in 1967). A contract was signed with There was a slight (2%) decline during of sales. The spread of coffee wilt
Thai Hoa Vietnam Group in July 2012 to the marketing year 2012/13 in Kenyan remains a major source of concern
rehabilitate 100,000 ha of former coffee production to 48,000 tonnes – sub- in Uganda, while the black twig borer
producing lands over a 10-year period, stantially below the record production beetle is causing increasing concerns
using Brazilian financing (US$250 mil- level of 130,000 tonnes achieved in in robusta coffee growing areas.
lion). A US$8.5 million project to reha- 1987/88. According to the Kenya Cof-

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 Coffee sector

In Burundi, while production almost was considered that this would help In both Kenya and Tanzania, increased
doubled and there was a 75% increase insulate Kenyan producers from the emphasis is being placed on devel-
in sales, falling prices resulted in earn- price volatility being experienced on oping local coffee consumption, as
ings rising by only 8.3%. Production is global coffee bean markets. Consid- it is considered that this will facili-
therefore likely to fall back consider- erable scope was seen for mobilising tate opportunities for increased local
ably as farmers switch to other crops. Chinese investment in this process value-added processing of coffee. The
In Rwanda, fluctuating world prices of moving up the coffee value chain emergence of Kenyan roasters, blend-
have led exporters to withhold coffee, (see Agritrade article ‘Developing new ers and processors could offer a new
creating large stockpiles. The Rwanda partnerships for movement up the cof- outlet for Tanzanian and other regional
Development Bank is concerned over fee value chain’, 9 September 2012). coffee production, as well as offering
possible defaults on loans to coffee In October 2012, the Tanzania Coffee scope for the development of joint mar-
farmers and now requires farmers to Board announced plans to promote keting strategies for single origin and
demonstrate that they have strategies local coffee consumption and target other premium label coffees.
in place for dealing with world market “strategic markets” (see Agritrade arti-
price volatility. cle ‘Tanzania coffee board looking for Developments in the Caribbean
market diversification’, 2 December
In terms of direct sales in East Africa, 2012). Rwanda, for its part, is report- The two main coffee producers in
the successful launch of the Oromo edly looking to expand sales of special- the Caribbean are the Dominican
Coffee Company in the UK (market- ity coffees to Japan, with plans being Republic and Haiti. Reported coffee
ing coffee produced in Ethiopia) has developed for shipping coffee directly production in the Dominican Republic
opened up new routes to market, with to the Japanese market. grew strongly in 2011/12, before fall-
certified organic and fair-trade coffees ing back in 2012/13, while Haiti’s pro-
now in stores, restaurants and hotels. While efforts to identify potential Asian duction remained fairly stable. Most
The move toward increased private joint venture partners potentially offer Haitian coffee is exported via the
sector initiative in the Ethiopian cof- an important vehicle for redefining East Dominican Republic. However, there
fee sector is likely to be given added Africa’s engagement with the evolv- are private sector projects in place to
impetus with the planned privatisation ing global coffee economy, the current sell organic Haitian coffee throughout
of six government-owned enterprises, policy emphasis on market diversifica- the United States, alongside several
including the 600 ha Arbagugu Coffee tion has not yet changed the region’s projects aimed at developing Haiti’s
Plantation in the Oromia Region, which dependence on traditional European high-quality coffee production. In 2012,
grows the Harar coffee variety. markets. In the case of Tanzania in this included a €2-million value chain
2012/13, the importance of the EU project launched by the French Devel-
In terms of linking up to Asian consum- market increased to 50.69% of total opment Agency and the Inter-Amer-
ers, the Ugandan joint venture Beijing exports, up from 32.63% in 2011/12, ican Development Bank to reinforce
Chenao Coffee Company exhibited while 70% of Kenyan and between 75 cooperatives involving some 10,000
and operated a coffee bazaar at the and 79% of Ugandan coffee continues producers.
Guangzhou Food Expo and Coffee to be sold on the EU market.
Boutique in May 2013, where Ugandan
arabica coffee was presented. Table 2: Caribbean coffee production (crop year July/June, ’000 60-
kg bags)
Across the East African region, cof-
fee producers are looking at market 2010/11 2011/12 2012/13
diversification and value addition as
Dominican Republic 378 682 550
tools for dealing with international
coffee price volatility. The Coffee Haiti 350 349 325
Board of Kenya announced in July
Source: ICO/CommodAfrica
2012 that it was looking for partners
to help expand “local processing In 2012/13, the Jamaican coffee sector lower export sales. The premium Blue
and packaging capacity to improve reported continuing declines in pro- Mountain Coffee brand is also fac-
export of processed coffee to the duction – down to 6,600 tonnes from ing financial difficulties, with demand
emerging foreign coffee markets”. It 15,177 tonnes in 2006 – resulting in falling and prices well below the pre-

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 Coffee sector

recession level. This largely reflects Developments in the Pacific Apart from PNG, initiatives were
the weakness of Japanese demand launched in June 2012 to boost the
and the fundamental transformation In PNG, which is developing the pro- coffee sector in Samoa, including a
of previous marketing arrangements duction of award-winning gourmet programme to distribute seedlings of
(see Agritrade article ‘Jamaican coffee coffees, overall production shot up in improved arabica varieties and NGO
sector falls short of expectations’, 28 2011/12 to a record of 1.4 million bags initiatives to support direct sales to the
October 2012). of arabica as a result of favourable New Zealand Coffee House chain.
weather and high international prices.
Although there has been some suc- However, this is projected to fall back
cessful marketing for Blue Mountain to 1.2 million bags in 2012/13. Exports 3. Implications for
Coffee in the US and the UK, the fell from 767,712 in October 2011/April
volumes involved are relatively small. 2012 to 329,659 in October 2012/April the ACP
Efforts to develop markets in China 2013. This can partially be attributed to
have faced serious challenges. In the off-year biennial production cycle, Scope for joint action in
December 2012, the Jamaican gov- and in part to fears of election-related developing new markets in
ernment announced that it was look- violence disrupting coffee activities. emerging economies
ing for new partners for coffee mar- While coffee rehabilitation, nursery,
keting in China, following violations coffee freight schemes and grower The continued dependence in East
of trademark protection, which the mobilisation projects are under way, Africa on a limited number of export
Coffee Industry Board was unable to there are fears that job opportuni- markets remains a concern, despite
address with the existing partners (see ties in other sectors of the economy strong consumption growth in emerg-
Agritrade article ‘Jamaica seeking new will draw labour away from the coffee ing economies and policy commit-
partners for coffee marketing in China’, sector, with consequent declines in ments to diversification.
2 February 2013). production.
“There is scope for joint ACP
Table 3: Pacific coffee production (crop year, thousands of 60-kg action in developing new mar-
bags) kets in emerging economies”

2010/11 2011/12 2012/13 Given the limited success to date of

national market diversification efforts,
Papua New Guinea 870 1,414 1,200
a concerted region-wide strategy for
Source: ICO/CommodAfrica repositioning the EAC coffee sector
may yield greater benefits. A regional
PNG is facing problems with third-party ‘Constraints on product differentiation approach could potentially:
certification (TPC), where the “costs of in the Pacific’, 13 June 2013). There
compliance often lead to the exclusion would appear to be scope for this type mobilise more resources;
of smallholders”. This situation is com- of support through the US$46.3-million
pounded by road infrastructure con- World Bank-funded project, ‘Produc- achieve economies of scale in devel-
straints and weaknesses in the supply tive Partnership on Agriculture’. oping new marketing strategies (par-
chains, which mean that 50 to 85% ticularly for quality-differentiated and
of possible third-party certified coffee In 2012, an agreement was reached value-added coffee products);
is “sold to alternate ‘predatory’ buy- with fair-trade organisations in Australia
ers at a much lower rate”. Overall it is and New Zealand to develop sustain- a llow more cost-effective instru-
held that while “in most cases the ben- able coffee farming in PNG. So far, ments of support to be established.
efits of TPC for farmers outweigh the only the Neknasi Coffee Cooperative
costs… only a few thousand farmers (Morobe Province) has received Fair- These would assist with necessary
supply the market.” It is considered that trade certification and eight others are investment in improved competitive-
more needs to be done to strengthen in the process. Meanwhile, PNG coffee ness and value-added processing in
producer organisations and improve companies have been invited to the order to exploit the evolving global
infrastructure, which could reduce 10th China Agriculture Trade Fair. market trends.
the cost of TPC (see Agritrade article

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 Coffee sector

Indeed, when it comes to getting to newly emerging market components interest across the ACP. More detailed
grips with new markets such as China suggests that there could be consid- market research could then be left to
(the size of which makes intra-ACP erable scope in the growing market industry associations to define the
competition a non-issue), a case can for single-serve coffee pods. Based specific marketing strategies required
be made for joint ACP coffee sector on retail prices of single-serve coffee in the specific national and regional
programmes, given the commonality pods in the US and the weight of coffee contexts to most effectively capitalise
of the challenges faced and the diverse contained in each pod, The New York on evolving trends.
experience to date of individual ACP Times estimated the retail-equivalent
coffee sectors. This is particularly the price for the coffee contained in the Promoting investment in
case when it comes to developing pods at around US$50/lb. value-added processing
investment and trade strategies and for local markets
developing commercial relationships Getting to grips with
for marketing coffee in China. The key evolving market trends In the face of rising urban incomes and
challenge is to engage with these new changing patterns of consumption as
markets in ways that structurally trans- New opportunities for marketing cof- economic growth takes off across the
form the basis of engagement of indi- fee arise: from the gourmet coffee region, Nestlé’s decision to invest in
vidual ACP coffee sectors with global culture, through organic and fair-trade the Cameroonian coffee sector can
coffee supply chains. certified coffees, to the growing rise be viewed as indicative of the growing
of single-serve coffee pod consump- local and regional demand for value-
Moving up the value chain tion in traditional markets, and the rise added coffee products in Central and
in traditional markets of instant coffee markets in emerging West Africa. Questions arise, however,
economies. While a variety of national over the relative roles that local com-
The growing trend in traditional Euro- initiatives have been launched to try to panies and major multinationals should
pean and US markets toward single- tap into these evolving trends, there play in developing production for spe-
serve coffee pod consumption poten- would appear to be real cost benefits cific market components. Clear gov-
tially creates new opportunities for from a collective undertaking of basic ernment strategies will be needed to
value addition. Kenya already has com- analytical work on market trends. This ensure that local companies can also
panies involved in roasting and vacuum could be carried out at the regional benefit from these emerging market
packing coffee for direct retail sale. In level (e.g. through the African Fine Cof- components.
the horticulture sector, the success of fees Association) or collectively at the
shelf-ready vegetable packs targeting ACP level, given the commonality of

Main sources

1. International Coffee Organization (ICO), ‘ICO monthly coffee market report’, May 2013
http://www.ico.org/documents/cy2012-13/cmr-0513-e.pdf

2. ICO, ‘Report on the outbreak of coffee leaf rust in Central America and action plan to combat
the pest’, 13 May 2013
http://dev.ico.org/documents/cy2012-13/ed-2157e-report-clr.pdf

3. Oxford Business Group, ‘Papua New Guinea: Coffee industry builds steam’, 7 February 2013
http://www.oxfordbusinessgroup.com/economic_updates/papua-new-guinea-coffee-industry-
builds-steam

4. ICO, ‘World coffee trade’, web page

http://www.ico.org/trade_e.asp?section=About_Coffee

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 Coffee sector

5. UTZ, ‘Over 13.3 billion cups of UTZ Certified coffee sold in first half of 2012’, 26 July 2012
https://www.utzcertified.org/attachments/article/26582665/Full%20press%20release.pdf

6. Ugandan Coffee Development Authority, ‘UCDA monthly report’, May 2013 The Technical Centre for Agricultural
http://www.ugandacoffee.org/resources/reports/08%20May%202013%20report.pdf and Rural Cooperation (CTA) is a
joint ACP—EU institution active in
7. Coffeecorp.org, ‘Production and export statistics’, Papua New Guinea agricultural and rural development
http://www.coffeecorp.org.pg/pestats.html in African, Caribbean and Pacific
(ACP) countries. Its mission is
8. New York Times ‘$51 per pound: The deceptive costs of single-serve coffee’, 2 August 2012 to advance food and nutritional
http://www.thekitchn.com/51-per-pound-the-deceptive-cost-of-single-serve-coffee-the-new- security, increase prosperity and
york-times-165712 encourage sound natural resource
management.
About this update
This brief was updated in October 2013 to reflect developments since August 2012. Other It does this by providing access
publications in this series and additional resources on ACP–EU agriculture and fisheries trade to information and knowledge,
issues can be found online at http://agritrade.cta.int/. facilitating policy dialogue and
strengthening the capacity of
agricultural and rural development
institutions and communities in ACP
countries.

Technical Centre for Agricultural

and Rural Cooperation (ACP—EU)
PO Box 380
6700 AJ Wageningen
The Netherlands
Tel: +31 (0) 317 467 100
E-mail: [email protected] - www.cta.int

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