Apocalypse: The scramble for the coffee pie is intense

By: John Kamau

Besides its green mermaid logo, Starbucks is famous for its chain of mass market coffee shops.

In the US, it has been fighting to dominate the high end market too with specialty coffees as it comes under pressure from Keurig and Nestles’ Nespresso – some of the best known single-serve coffee makers in the huge US market.

Both Keurig and Nespresso have in recent years revolutionized the way people look at the $100 billion-plus world coffee market with their coffee-pod capsules that bring them billions of dollars.

And that is where the Kenyan farmer comes in.

Specialty coffees are selling at premium prices – and in Kenya, they can get that for a song.

Nine years ago, Starbucks earned a negative reputation after it attempted to stop Ethiopians from earning more from their coffee.

Before the Ethiopians launched their campaign, and won, the international Coffee shops could sell Ethiopia’s Sidamo and Harar coffees for up to $26 a pound (430 grams) because of their specialty and pay the coffee farmers between 60 cents to $1.10 for their crop, which would not even cover production costs.

Not that Starbucks – and other giants cannot pay for premium prices.

Sometime this year, the media reported how Starbucks surprised everyone after they purchased a whole lot of the top-ranked coffee from a farm in southeastern Brazil, for $23.80 (Sh2,500) a pound (430 grams) during an auction competition for its top-end Reserve Roastery and Tasting Room on Capitol Hill.

Today, it is selling it for $80 (Sh8,240) per half a kilo, or about $7.50 (Sh772) for a cup!

KATI KATI BLEND

For years, Starbucks was contented with the mass market and left the top-end market to the likes of Stumptown and Chicago’s Intelligentsia Coffee, which purchases coffee from some select coffee farms in Mt Kenya region and Burundi.

One of this is Harrison Kiongo’s 4-acre Hakimson Estate in Nyeri.

On its website, Stumptown says some of its coffee “is grown in the shadow of Aberdare National Park, where rhinos, leopards, baboons, and lions live in lush canyons and bamboo forests.”

Its Kenya Kangunu brand sells for $22 (Sh2,226) per 340 grams. In 2015, the highest paid farmer in Nyeri received Sh85 a kilo!

By: partnering with smallholder farmers, these multinationals want to secure their supply of the highest-quality, and pay as little as possible.

Wall Street Journal is reporting that Nesspresso is now taking risks in South Sudan, just to get a slice of the country’s top-end produce.

It has invested $3.5 million to revive former plantations and has a new brand: Suluja.

Not to be beaten, Starbucks has started producing its own coffee from its Hacienda Alsacia, a farm it purchased in Costa Rica in 2013.

It is an experiment – if successful- that will see Starbucks manage similar farms in East Africa where it has some farmer support centres.

Back in Kenya, Starbucks has launched the Kati Kati blend – which they called in their PR releases a balance between citrus and spice notes from Kenya and subtle floral aromas and crisp acidity from Ethiopia: the world’s cradle of coffee.

Launched in 1971 by three devotees of Dutch connoisseur Alfred Peet, the man who popularised Kenya Arabica beans in the US, Starbucks has grown ever since to become the number one coffee retailer in North America buying more than 227 million kilos of “green” (unroasted) beans which is about 3 percent of the world’s supply annually.

Peets is still a specialty coffee company known for its signature Baridi Blend, which consists of beans from Kenya, Ethiopia, Tanzania and Rwanda, roasted specifically for iced coffee.

They still purchase their beans from the auction.

POOR EARNINGS

These blends have become roasters’ signatures in the coffee industry designed for the innocent takers.

Those with big farms are able to sell their coffee directly.

Take the case of 300 acre Theta Country Farm Estate.

Owned by James and Phillip Gitao, they were able to get a US partner, Kevin Kuyers, to start the Theta Ridge Coffee LLC in South Bend, Indiana.

Kuyers’ father, a Milwaukee businessman Milton Kuyers, introduced him to a Kenyan coffee farm owner whose son is now executive director of the Eastern African Fine Coffees Association.

Today, the company imports coffee from Colombia, Brazil, Peru and Nicaragua.

This year, Kuyers was honoured by the Specialty Coffee Association of America (SCAA) for his service to the organisation.

It is this specialty that has become the hallmark of Starbucks and other specialty roasters who insist on single sourced trademarked Arabica coffee.

The Western supermarkets brands usually sell the dull-flavoured, easy-to-grow robusta coffee which is cheap and is grown in Indonesia and Vietnam.

That is where the Kenyan coffee falls within this game.

While the value of retail sales has more than doubled since the early 1990s, the same cannot be said of the earnings of the farmers who are the originators of the over 600 billion cups consumed every year.

STARBUCKS CONFRONTED

For Ethiopia, it took the intervention of global charity, Oxfam, to push Starbucks from blocking Ethiopia’s bid to trademark its Sidamo, Yirgacheffee and Harar coffees which were commanding high retail price internationally.

Starbucks had opposed Ethiopia’s bid – through Ethiopian Coffee Trademarking and Licensing Initiative- to trademark its coffee and have them differentiated in the international market in order to fetch high prices.

“The theory is: make the pie bigger. Let the market pay,” explained Mr. Getachew Mengistie, former Director General of the EIPO. “Rather than focusing on short term gain, this way we can enlist the big companies to do what we don’t have the skills or financial means for – that is, building recognition of our brands in international markets and so increasing long term demand for them.”

It was not until Starbucks was confronted by major charities that it gave way and allowed for the distribution, marketing and licensing of Ethiopia’s specialty coffee.

In just three months, the price of Yirgacheffe increased by $ 0.60 cents to $2 a pound.

With Starbucks, Keurig and Neumann Group fighting for a slice of the coffee pie, the regional farmers are simple pawns in the game.

SOURCE: DAILY NATION