GCR Mar 2019 by Prime Creative Media

March/April 2019

COFFEE AFTER BREXIT The big implications for the UK coffee industry

EXPLORING PRICES

What will disrupt the trading market in the long run?

RESOLUTION 465

ICO takes strong action to address the international price crisis

EYES ON YUNNAN

Private and public sectors turn attention to the Chinese province

FORWARD

THINKING HEMRO GROUP SPEAKER OF THE MANAGEMENT BOARD MARCEL LEHMANN ON CASTING A VISION FOR THE COFFEE GRINDING INDUSTRY www.gcrmag.com

CONTENTS March/April 2019

COVER STORY

CHANGING OF THE GUARD

Hemro Group Speaker of the Management Board Marcel Lehmann talks about implementing lean principles to the company’s four portfolio brands – Mahlkönig, Ditting, Anfim and HeyCafé – and casting a vision for the future of the coffee grinding industry.

IN THIS ISSUE FEATURES

10 IN WITH THE NEW

Hemro Group Speaker of the Management Board Marcel Lehmann on a new company vision for the coffee grinding industry

15 COFFEE AFTER BREXIT

Why experts and coffee businesses alike say Brexit has big implications for the United Kingdom coffee industry

21 EXPLORING PRICES

A look at the economic factors set to shake the trading market and coffee prices in the long run

25 RESOLUTION 465

The International Coffee Organization implements action to fight the global price crisis

28 AGE OF EXTINCTION

Royal Botanic Gardens Kew Researchers confirm wild coffee species are in danger

39 NEW KIDS ON THE BLOCK

Previewing the Best New Product Awards and SCA Certified Home Brewer Program at the 2019 Specialty Coffee Expo

PROFILE

33 A RARE EXCEPTION

Lavazza explores its connection to the world’s oldest coffee plantation in Ethiopia

36 SCA GETS A NEW CHIEF

Yannis Apostolopoulos on his new position and plans to expand the global specialty coffee community.

42 MADE IN MELBOURNE

The World Coffee Championships head to Australia’s coffee capital in 2020

46 FRESH PERSPECTIVE

MyCoffeeWorld with Roasting Plant heralds the end of stale coffee with Javabot smart automation

OPINION

48 THE POWER OF COMPETITION Eversys Chief Commercial Officer Kamal Bengougam explains how healthy rivalry can enhance a business’s bottom line

“CHANGING PROCESSES IS ONE THING, BUT CHANGING PEOPLE AND BREAKING UP THOSE OLD PATTERNS IS EVEN MORE DIFFICULT.” Marcel Lehmann

Hemro Group Speaker of the Management Board

ORIGIN

50 EYES ON YUNNAN

Decades of effort from private and public sectors pay off as attention turns to the Chinese province

LAST WORD

58 I, SAWYER Melitta, H.I.S. and Rethink Robotics join forces to take automation to next level at Henn na Café in Tokyo

REGULARS 04 EDITOR’S NOTE 06 NEWS DRIP BY DRIP 54 DIARY DASHBOARD 56 MARKETPLACE

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EDITOR’S NOTE Global Coffee Report

PUBLISHER Christine Clancy christine.clancy@primecreative.com.au EDITOR Sarah Baker sarah.baker@primecreative.com.au JOURNALIST Ethan Miller ethan.miller@primecreative.com.au

A LITTLE MORE CONVERSATION PLEASE I LIKE TO COMPARE the coffee industry to New York – the city that never sleeps. At all times of the day and night, across the international time zones, there’s movement: the annoucement of a company acquisition, the successful discovery of new technology, a major international event, a new coffee cultivar, or news that a former company founder is considering running for US Presidency. While much of this news is positive, at the moment, there’s a lot to be concerned about as well. The two pressing topics that spring to mind are climate change and low coffee prices. As I conclude an extremely hot Australian summer and bare witness to the freezing conditions in parts of Europe and America, I find solace in the fact I can retreat to airconditioning and the comfort of ice-cream. For now, that’s my selfish approach to dealing with the affects of climate change in my small world, but I, like many of us, need to think broader. In response to the global price crisis and the rising costs of farming production, the International Coffee Council (ICC) has given the International Coffee Organization (ICO) the mandate to implement a series of actions to address the challenges of the current low prices. This includes a global communication plan, pricing warming system and initiative to increase domestic consumption in producing countries (see page 25). News of the policy came at the same time Royal Botanic Gardens, Kew research revealed that 60 per cent of wild coffee species are in danger of extinction. This includes the wild relative of Coffea arabica, the world’s

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most widely traded coffee, which The International Union for Conservation of Nature Red List has categorised an “endangered species”, entirely due to climate change projections (see page 28). On a political front, many coffee businesses in the United Kingdom are bracing for the worst when they wave goodbye to the European Union and say hello to a prolonged period of uncertainty and increased tariffs on imported coffee (see page 15). So the conversation isn’t particularly encouraging, but it is necessary. We have to take a global approach to coffee if we want it to survive and thrive, so let’s get the conversation started. Talk to your boss, your peers, and most importantly, talk to your customers. More than ever, the ICO identifies consumers as “a very important stakeholder in the international coffee sector” who need to be considered as part of the solution and not forgotten. We need to let them in. Educate and sensitise them about the economic reality of what’s happening in the coffee industry today. If not, one day the morning coffee they enjoy, won’t be there the next.

DESIGN PRODUCTION MANAGER Michelle Weston michelle.weston@primecreative.com.au ART DIRECTOR Blake Storey blake.storey@primecreative.com.au DESIGN Kerry Pert, Madeline McCarty BUSINESS DEVELOPMENT AND MARKETING ACCOUNT MANAGER Camilo Molina camilo.molina@primecreative.com.au CHIEF OPERATING OFFICER Brad Buchanan brad.buchanan@primecreative.com.au CLIENT SUCCESS MANAGER Janine Clements janine.clements@primecreative.com.au CONTRIBUTORS Lindsay Holloway, Kamal Bengougam PHOTOGRAPHY Andreas von der Heyde, Blake Storey HEAD OFFICE Prime Creative Pty Ltd 11-15 Buckhurst Street South Melbourne VIC 3205 Australia p: +61 3 9690 8766 f: +61 3 9682 0044 enquiries@primecreative.com.au www.gcrmag.com SUBSCRIPTIONS +61 3 9690 8766 subscriptions@primecreative.com.au

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ARTICLES

All articles submitted for publication become the property of the publisher. The Editor reserves the right to adjust any article to conform with the magazine format.

Sarah Baker Editor, Global Coffee Report

Global Coffee Report is owned and published by Prime Creative Media. All material in Global Coffee Report Magazine is copyright and no part may be reproduced or copied in any form or by any means (graphic, electronic or mechanical including information and retrieval systems) without written permission of the publisher. The Editor welcomes contributions but reserves the right to accept or reject any material. While every effort has been made to ensure the accuracy of information Prime Creative Media will not accept responsibility for errors or omissions or for any consequences arising from reliance on information published. The opinions expressed in Global Coffee Report are not necessarily the opinions of, or endorsed by the publisher unless otherwise stated.

NEWS In brief

NEWS DRIPBYDRIP EUROPE For two years in a row, Allegra World Coffee Portal’s annual Project Café United Kingdom report found local coffee operators both frustrated and concerned about Brexit’s effect on the industry and their businesses. Forty-nine per cent of industry leaders surveyed for the 2019 report indicated that Brexit was negatively affecting their business, and 87 per cent believed Brexit has damaged the UK economy. According to the British Coffee Association, in the event of a “no deal” Brexit, UK trade would return to World Trade Organization (WTO) policies. Unless the UK eliminates tariffs for all WTO partner countries as part of a non-discrimination policy, tariffs on coffee imported from the EU would be set at 7.5 per cent for roasted and 9 per cent for instant. See page 15. Since 2016, the coffee market has experienced a continued downward trend. Today, according to the International Coffee Organization (ICO), coffee prices are 30 per cent below the 10-year average. These current low prices impose short- and long-term challenges for the global coffee sector and its stakeholders. In the short term, the earnings of coffee growers are severely affected, impacting the most vulnerable, and potentially increasing poverty and deprived living conditions. Low prices also lower the incentive to invest in coffee plantations today. The resulting under-investment, combined with the impact of climate change on productivity and rising global demand at 2 per cent per year, represents a threat to the availability of coffee in the long term. See page 21. 6

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Dr Aaron Davis, Head of Coffee Research at the Royal Botanic Gardens, Kew, joined an expedition in Sierra Leone to locate wild coffee species Coffea stenophylla.

ICO member governments approved Resolution 465 at the 122nd session of the International Coffee Council (ICC) in September 2018. Resolution 465 gives the ICO the mandate to implement a series of actions to address the challenges of the current low prices. One such action already underway is the ICO’s research into the determinants of price movements and volatility, and the impact of trading activities at the coffee futures market on coffee spot prices The ICC will also implement a global communication plan, targeted at consumers, together with producers, the coffee industry, opinion makers, and other stakeholders. The goal is to show the economic reality of the coffee sector. See page 25. The Royal Botanic Gardens, Kew has conducted an extinction risk assessment using the categories and criteria laid down by the International

Union for Conservation of Nature Red List of Threatened Species for all 124 confirmed coffee species. The study determined that 13 species are Critically Endangered, 40 are Endangered, and 22 are Vulnerable. Fourteen species were not assessed due to a lack of data and were unlocatable by Kew. Some of these 14 may already be extinct. See page 28. Eversys Chief Commercial Officer Kamal Bengougam says technology should exist to enhance our daily lives. Artificial intelligence should never supersede what was created through “divine intervention or a giant blast”. The same paradigm exists in the coffee world. Machines are not there to replace the barista. They are there to complement them, providing greater consistency, productivity, and connectivity. See page 48.

The number of wild coffee species Royal Botanic Gardens, Kew, have revealed as under threat of extinction in research published in Science Advances in January, 2019.

World’s leading filling & sealing solution.

COFFEE & TEA

FILLING THE GAP IN THE MARKET.

SCA 2019 Boston April 11 –14 booth 760

NEWS In brief

AMERICAS

Yannis Apostolopoulos has been named Executive Director of the Specialty Coffee Association SCA. At the end of 2018, former Executive Director Ric Rhinehart stepped down to pursue the organisation’s new Coffee Price Response Initiative. Now at the helm, Apostolopoulos is responsible for “taking SCA into the future and accomplishing the many critical projects and objectives laid out in [its] strategic plan”. See page 36. From 12 to 14 April, the Specialty Coffee Expo is expected to welcome some 13,000 attendees from more than 75 countries. The SCA Expo will also host its prestigious Best New Product Awards, highlighting products that embrace quality and value to the specialty coffee and tea industry. SCA Chief Events Officer Cindy Cohn says this year’s line-up of products already promises some interesting new inventions from the technology and coffee preparation categories. The Expo will host the SCA Certified Home Brewer Program, promoting brewing excellence. To become certified, the SCA works with engineers at University of California, Davis Coffee Center to test that the machines met strict criteria on proper water temperature, brewing time, and ability to brew within the SCA Golden Cup recommendations. See page 39. MyCoffeeWorld, an initiative and investment vehicle from Pascal Schlittler, supports and invests in companies to help revolutionise the coffee industry. This includes US-based coffee chain Roasting Plant and its patented Javabot system. The Javabot roasts in

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micro batches according to the Roast Master’s precise profiles, automatically accounting for changing ambient environmental conditions such as temperature and humidity. Roasted beans are used within seven days to ensure maximum taste and freshness. See page 46.

ASIA PACIFIC Australia has become the first country the Lavazza family has permitted to replicate and roast one of its iconic coffees outside of Italy. Cristiano Portis, Asia and Pacific Coffee Research and Development Manager and Licensed Q Grader for Lavazza, says Lavazza’s Kafa Forrest single origin coffee is the same as Italy’s, but the roasting process and roasting time is different. The result is a roast that’s a bit lighter and brighter compared to Italy’s, with a stronger aromatic cup profile and fruity, floral tones. See page 33.

Melbourne will become the first city outside of the United States to host the 2020 World Barista and Brewers Cup Championships together for a second time. More than 85 licensed national barista champions from across the world will descend on Australia’s coffee capital when the prestigious coffee competitions take place at the Melbourne International Coffee Expo (MICE) from 4 to 7 May 2020. According to a 2018 IBISWorld report, Australian incomes result in high annual growth of 2.2 per cent in the café and coffee shop market, estimated to be worth about A$9.8 billion. See page 42. Since a big push in the late 1980s, Arabica production in China overall has been increasing exponentially – nearly 20 per cent per year on average, according to the Yunnan International Coffee Exchange (YCE). At the same time, coffee companies big and small have been flocking to the

region, including Nestlé and Starbucks, which released its first single origin Yunnan coffee in 2017. As the greater Yunnan coffee industry expands, so does its specialty sector – though still comprising less than 10 per cent of total coffee production. In the 2017-18 harvest season, Yunnan produced 2.3 million 60-kilogram bags of coffee across 120,000 hectares and 1.14 million farmers. See page 50. Japan-based travel agency H.I.S. has opened an automated barista coffee shop called Henn na Café in Tokyo, Japan. Guests select and pay for the drink they want at a terminal, then receive a coupon with a QR code. They scan this receipt at the counter and Sawyer starts to prepare their coffee using a Melitta Cafina XT4 fully automatic espresso machine or Poursteady for filter coffee. See page 58.

Since a big push in the late 1980s, Arabica production in China has been increasing exponentially – nearly 20 per cent per year on average, according to the YCE.

WMF Professional Coffee Machines. “Made in Germany” since 1927.

Quality Time. When indulgence cannot wait – the WMF 5000 S+ Thanks to a 10-inch touch display, the new WMF 5000 S+ offers all information at a glance – including nutritional information, promotional offers and usage videos. Designed for a recommended daily capacity of 250 cups, it offers top performance and reliability with a high-performance pump and a robust heavy-duty brewer. The intelligent Dynamic Coffee Assist permanently guarantees the highest quality of all espresso-based coffee specialities. Equipped with an integrated Milk Excellence Sensor, the WMF 5000 S+ boosts milk management to a new level of quality, while convenience and ease-of-use is further enhanced by an automatic height-adjustable spout and a new Choc Mixer. The WMF CoffeeConnect digital solution allows you to fully leverage sustainable business models to increase the efficiency of your coffee enterprise. www.wmf-coffeemachines.com

COVER STORY Hemro Group

In with

THE NE HEMRO GROUP ENTERS 2019 WITH NEW PRODUCTS, PROCESSES, AND LEADERSHIP. SPEAKER OF THE MANAGEMENT BOARD MARCEL LEHMANN TALKS TO GLOBAL COFFEE REPORT ABOUT LEAN PRINCIPLES AND CASTING A VISION FOR THE COFFEE GRINDING INDUSTRY.

s the global coffee industry continues to expand its presence and drive innovation to keep up with the demands of its increasingly knowledgeable and curious consumer base, opportunities to influence cup quality and improve customer experience are getting more attention. Despite the fact that grinding coffee is a single and relatively quick part of the brewing process, it has a substantial impact on flavour and cup excellence. As such, companies like Hemro Group are looking for ways to help its customers improve quality or add value. “People are starting to recognise that the best cup of coffee is also highly related to how you grind the beans,” says Marcel Lehmann, Speaker of the Management Board at Hemro Group, which owns the Mahlkönig, Ditting,

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Anfim, and HeyCafé brands of premium coffee grinders. Lehmann acknowledges that grinders often don’t get the credit they deserve. In fact, before he left a consulting role at Porsche to join Hemro in 2017 as Chief Operating Officer, he was equally unaware of their value or the companies making waves in the niche industry. “When you’re not in the coffee industry, you may not know there is a difference in coffee grinding machines or recognise [the brands] the way people can identify a sports car on the street,” Lehmann tells Global Coffee Report. After only a short time in his new industry, Lehmann learned that Hemro’s grinders have fans as equally as enthusiastic as Porsche’s. “Every day I witness the same level of enthusiasm among [the grinder users] as I have experience with new car buyers,” he says, even citing examples of Mahlkönig tattoos. “Our fans love coffee and they really enjoy the products. We are incredibly proud to produce grinders that individuals admire and give loyalty to. Of course we want to see that grow and strengthen in the future.”

SOMETHING FOR EVERYONE Those fans are at the heart of Hemro’s business, which is why the Swiss company sought to build a complete one-stop-shop for a wide variety of premium grinding solutions. From the super premium Mahlkönig grinder to the high precision Ditting shop grinder, or Anfim’s genuine Italian espresso grinder to the entry-level HeyCafé model, Hemro’s brands have been focused

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COVER STORY Hemro Group

on developing grinding solutions for decades. Besides this full spectrum of shop, espresso, and industrial grinders, Hemro also offers what it calls “tailored solutions”, customised grinding solutions for every customer, application, need, and budget. “What we’re saying is ‘we understand grinding, so come to us with your problem and we will find the solution you need’,” Lehmann explains. “We work together with our customers and really dig into their problems to find them the best solution across our portfolio.” The challenge with such a complete and diverse offering, Lehmann says, is ensuring each brand not only continues to serve its specific customer base at a high quality, but also aligns with the entire portfolio and company vision. “It’s quite the task to bring all four brand identities together and leverage the strengths of each brand, while facing quite different demands from [each of their customer bases],” he says. Lehmann is also conscious of the potential for one brand to dilute the business of a sister brand within a portfolio. “It’s key to fill spaces where you don’t already exist,” he says. “So for us, these four brands have been quite a good match.” Partnerships with Mahlkönig and Ditting, German and Swiss companies respectively, were part of the initial Hemro launch in 2007. In 2012, it acquired Italian manufacturer Anfim. Chinese producer HeyCafé, the youngest of the bunch, joined recently. The company portfolio also includes a state-of-the-art burr production facility in Germany so the four brands and their customers have access to high-quality burrs over the lifetime of the grinders – a key component to perfecting the end cup of coffee. Even though three of the four brands have been around for decades – Mahlkönig and Ditting date back to the 1920s and Anfim to the 1960s – Hemro itself is young and has seen a lot of change recently. As such, the energy and current management style at the company are like that of a startup, Lehmann says. “There’s quite a lot of change happening right now, but it’s good. We have a team where everyone is willing to learn and develop. I love that dynamic team spirit – together we are taking each leap at an impressive pace, witnessing and capturing immediate results, replicating the good and learning from the bad, and celebrating each milestone together.”

Hemro plans to release new Next Generation grinders that are engineered and built specifically to meet customer needs.

CHANGING OF THE GUARD Being a relatively young company with new leadership has propelled Hemro forward with a fresh perspective. While it inherited the strong brands and customer bases of the premium grinder manufacturers, it also inherited old patterns and ways of doing things that no longer worked in the fast-moving industry, such as assembling each grinder piece individually. So part of Lehmann’s role when he joined was to evaluate how things were being done internally and what improvements could be made. One major adjustment was implementing lean principles across the entire business. From operations and purchasing to production and assembly lines, teams took steps to streamline processes, increase efficiency, reduce wasted resources, and improve workflow. Lehmann, who moved into his current leadership role in 2018, is quick to point out that improving efficiencies and increasing capacity isn’t about “making people work faster or putting more pressure on them, but about setting the standards we want to follow, understanding processes clearly and then providing guidance. It’s about focusing on the things that bring value”. Following implementation of Hemro’s lean principles during the past two years, the company has almost doubled the capacity of grinders it can produce, including grinding discs and Mahlkönig’s beloved premium grinder, the EK43. The move toward lean also helped improve

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efficiencies, and reduce opportunities for wasted resources – all while maintaining high-quality products for its customers, and a strong internal culture. “It’s been a refreshing way to grow the business. We talked a lot about processes and product, but from a cultural point of view we tried to bring in a new spirit to build a culture of coffee enthusiasts,” Lehmann explains. “Changing processes is one thing, but changing people and breaking up those old patterns is even more difficult.”

THE NEXT WAVE The departure from old ways of doing things is also something Hemro has implemented externally. But to understand what could be improved on the product side, Hemro went straight to the industry for input. In order to

make the right product decisions and take action, “we seek to be aligned with and stay much closer to the customer”, Lehmann says. “We need to be one of the first to hear and understand the most recent requirements and trends in the market.” In addition to building sales hubs for all regions around the world to have representatives closer to its customers, Hemro also kicked off a coffee industry summit to meet and exchange the latest insights with experts throughout the entire coffee value chain. This included discussing common problems in grinding and brewing, gaining feedback on Hemro’s latest fleet of grinders, and even the first glimpse of new models on the horizon. The goal is to better understand what Hemro customers truly need, Lehmann tells GCR. “And what we came out [of that] with was a demand for additional products to what we were offering. It gave us the missing pieces to the complete 360-degree customer perspective. We took all this into consideration and developed our first wave of Next Generation grinders, engineered and built to specifically meet those customer needs.” At the World of Coffee Expo in Amsterdam June 2018, Hemro debuted three of those Next Generation grinders: Mahlkönig’s E65S, and Anfim’s Practica and Solida. Hemro plans to implement the valuable feedback across its entire portfolio and release new Next Generation products in subsequent waves over the next couple years. In fact, “within the coming years, you will see a new grinder portfolio”, Lehmann says. “It’s quite an exciting time for our company to renew our product lines and bring new solutions to our customers.” He understands, though, that they will have to continue listening to the industry and to their customers in order to stay ahead. Similar to what was uncovered during internal process evaluations, “current patterns may not work in the future, so we have to really understand not only how customers use grinders now, but also how they will want to use them in the future”, Lehmann explains. “We have to be the first to understand that and then the first to translate that into a solution in order to remain an innovator in the industry.” G C R

“WE ARE INCREDIBLY PROUD TO PRODUCE GRINDERS THAT INDIVIDUALS ADMIRE AND GIVE LOYALTY TO. OF COURSE WE WANT TO SEE THAT GROW AND STRENGTHEN IN THE FUTURE.” Marcel Lehmann The Speaker of Hemro Group Management Board

Marcel Lehmann is passionate about understanding what Hemro customers need across its porfolio of products.

Marcel Lehmann joined Hemro in 2017 and has helped implement lean principles across the entire business.

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FEATURE Brexit

COFFEE AFTER BREXIT ALTHOUGH THERE ARE STILL MANY QUESTIONS, EXPERTS AND COFFEE BUSINESSES ALIKE SAY BREXIT HAS BIG IMPLICATIONS FOR THE UNITED KINGDOM’S COFFEE INDUSTRY.

ot too different than two years ago, when the United States found itself divided following presidential nominee Donald Trump’s election, today the United Kingdom finds itself at a crossroads, with the nation divided over its membership in

the European Union. In June 2016, 51.9 per cent of UK voters – in a record turnout – voted in favour of leaving the European Union, a 25-year partnership. So following invocation of Article 50 in March 2017, the United Kingdom had two years to create a plan and come to an agreement with the European Union for its departure on 29 March, 2019. On 15 January, Prime Minister Theresa May’s proposal was rejected by a margin of 230 votes – the biggest defeat of government policy since the 1920s. Despite this, she survived a “no confidence” vote that was tabled by an opposing party the following day.

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FEATURE Brexit

Although terms of the departure and their ultimate effects on businesses are still unknown (nothing had been finalised as of print), the United Kingdom’s looming departure of the European Union has many implications for the local coffee industry. For two years in a row, Allegra World Coffee Portal’s annual Project Café UK report found local coffee operators both frustrated and concerned about Brexit’s effect on the industry and their businesses. In fact, 49 per cent of industry leaders surveyed for the 2019 report indicated that Brexit was negatively affecting their business, and 87 per cent believe Brexit has damaged the UK economy. “Sustained uncertainty on the UK’s future relationship with the EU continued to frustrate the coffee shop industry in 2018. The political impasse over the past 18 months has contributed to growing anxiety on labour shortages, rising prices, investment and eroded consumer confidence,” the 2019 Project Café UK report says. Among those leaders surveyed, Allegra CEO Jeffrey Young says there are questions around whether their growth would have been stronger if it wasn’t for the uncertainty of Brexit. “Both branded chains and independents have all had tremendous growth, but that rate of growth has slowed radically,” he tells Global Coffee Report. “Until only a couple years ago, it was well over 10 per cent growth, but it’s down to 4 to 5 per cent growth predicted for the next few years.”

CURRENCY CONCERNS Because coffee is traded as a commodity in the US dollar, currency always plays a role in the global coffee industry. But since Brexit entered the picture, the sterling pound has been weak and volatile. “Following such a prolonged period of uncertainty through the negotiations, a problematic impact on UK coffee businesses has been the weakening of the pound, particularly at key points when Brexit talks have stumbled,” explains Chris Stemman, Executive Director of the British Coffee Association (BCA). “The weakening pound has added significant costs through foreign exchange to UK coffee companies in being able to trade, import, and sell coffee.” Due to rising import costs, UK roasters and cafés will have to absorb price increases or pass them onto consumers.

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Coffee imported into the United Kingdom, whether green, roasted, or ground, has become more expensive as financial uncertainty around Brexit has threatened currency values, says Jens Roehrich, Professor of Supply Chain Innovation at the University of Bath School of Management. UK coffee roasters and cafés have had to either absorb these cost increases or pass them onto consumers in the form of higher product prices.

TRADE TRIBULATIONS Weak currency largely impacts trade, which is the Brexit topic with the largest implications on the UK coffee industry. “Firms with international linkages on either the market or supply side need to be aware that Brexit may disrupt trading patterns not only between UK and EU countries, but also between UK and third countries,” Roehrich says. The nation imports a significant percentage of its food supply from EU countries, and obviously all green coffee is imported into both the European Union and the United Kingdom. So even if a café sources its coffee from a UK roaster, for example, the beans are ultimately imported. “Leaving the frictionless trade provided within the EU may result in the imposition of tariffs that could have a significant impact,” Roehrich explains. “Businesses importing goods from the EU should factor future applicable tariffs into their product costs now, and consider how this will affect them. The burden of increased tariffs and other costs could be pushed down onto producers and workers, [resulting in higher] purchase prices or lower wages.” In the event of a “no deal” Brexit, UK trade would return to World Trade Organization (WTO) policies. Unless the United Kingdom eliminates tariffs for all WTO partner countries as part of a non-discrimination policy, tariffs on coffee imported from the EU would be set at 7.5 per cent for roasted and 9 per cent for instant, according to the BCA. “Application of WTO rules and tariffs are particularly negative for the coffee industry,” Stemman tells GCR , “because even though the largest single category of UK imports is green coffee from the rest of the world, the

supply chains that are in place mean that the imports of coffee and coffee products from the EU are of greater value than those from the rest of the world.” On the opposite side of the trade debate is the idea that increased importing costs could encourage UK coffee companies to source more supplies locally and go direct to origin for their green coffee. These moves would support not only the local economy, but also the coffee farming communities that UK companies would engage with directly. Downstream, UK export business could strengthen as countries with stronger currencies look to the United Kingdom to leverage their buying power. This aligns positively with recent expansion in the UK re-export market. The nation’s coffee re-exports have grown at an average annual rate of 25 per cent in volume and 14 per cent in value, according to the CBI Ministry of Foreign Affairs. It mainly reexports within the EU and to the United States. Robin Abrams, Finance Director at UK trade and structured debt finance house Trade Finance Global (TFG), cautions against the net gain in that scenario. “It very much depends on what the input costs are and the source of supply,” he explains. If the UK supplier has inputs that are imported, which coffee businesses will, the higher costs from potential upstream tariffs could offset gains from greater export sales. Some business owners are actually pushing for a “no deal” Brexit accompanied by a “free trade” agreement to remedy the issue of costly tariffs. Though Abrams doesn’t promote one scenario over another, he again cautions: “The EU is one of the strongest trading blocks in the world, so coming out of that, you lose the established beneficial relations in trading with other jurisdictions. Plus, we’ve seen the time it takes to negotiate an exit, so actually negotiating a brand new trade agreement is not going to happen quickly.”

INVESTMENT INSTABILITY As the uncertainty surrounding Brexit affects UK trade with other countries, it also impacts UK investment by other countries. As of June

Because the UK is very dependent on foreign labour, Brexit might limit the pool of staff available to work in coffee shops.

“THIS IS PROBABLY THE FIRST TIME – EVEN GREATER THAN THE 2008-09 GLOBAL CRISIS – THAT THE INDUSTRY SEEMS TO BE SLOWING DOWN FASTER THAN WE IMAGINED.” Jeffrey Young Allegra CEO

2018, 34 per cent of companies monitored in the EY Financial Services Brexit Tracker had “publicly confirmed, or stated their intentions, to move some of their operations and/or staff from the UK to Europe” in an effort to minimise tax issues and stock delays as a result of Brexit. These statements come from both massive multinationals and small enterprises. “Political uncertainty stops investment, so stakeholders in the UK have been waiting to see what happens,” Abrams tells GCR . “A lot of companies held on for a long time, but they’re no longer willing to deal with the uncertainty and the potential risks. Slowly multinational companies are scaling back their investment in the UK and redeploying resources to protect themselves in case of a bad Brexit.” Similarly, UK-based companies have delayed investment and related growth plans. With the general uncertainty around the economy and dampened consumer confidence, there is a lack of investment from UK coffee operators, Allegra’s Young says. “People are putting their business plans

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FEATURE Brexit

Robin Abrams of Trade Finance Global predicts that multinational companies will start scaling back their UK investments and redeploying resources.

on hold because they don’t know what’s going to happen and, therefore, are not growing as rapidly as they would otherwise.” There’s also been a slowdown in financing available to smaller businesses as lenders and insurers become more cautious, adds Abrams. “With smaller credit lines, businesses purchase and store lower volumes of stock from their supply chains, [potentially] reducing economic activity and leading to more supplier defaults.”

LABOUR LAMENTS For some coffee companies, limited credit or stalled growth means hiring freezes or worse, labour cuts. A bigger impact on labour, though, is the high number of foreign workers in the United Kingdom. “The UK economy relies heavily on inward migration of EU workers, and the current negotiating position suggests that free movement will end after Brexit,” BCA’s Stemman points out. “This will prove problematic for all industries, not least the coffee sector, making ‘business as usual’ significantly harder – or even damaging if companies can’t fill specific roles.” As of September 2018, the number of EU nationals working in the United Kingdom had dropped nearly 6 per cent in 12 months, according to the Office for National Statistics (ONS) – representing the largest annual fall since 1997. Whether non-UK nationals leave ahead of Brexit or are pushed out, coffee businesses are faced with diminishing staff and hiring pools. The flow-on effect is “higher wages, which will lead to higher costs for coffee businesses considering wages are such a significant part of operations”, Young explains. “The whole coffee industry is very predicated on the use of foreign labour. In London, for example, [up to] 90 per cent is foreign labour, and 50 per cent of those are from the EU. So how are you going to replace 50 per cent of your workforce?”

ONLY UNCERTAINTY IS CERTAIN Even though it’s early days, these concerns are already impacting growth in the UK coffee industry. “This is probably the first time – even greater than the 2008-09 global crisis – that the industry seems to be slowing down faster than we imagined,” Young admits. “In my 20 years of analysing the UK market, this might be a time where the average middle-market consumer that has gotten used to a couple cappuccinos a week could end up cutting those out because coffee is a luxury

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“FIRMS WITH INTERNATIONAL LINKAGES ON EITHER THE MARKET OR SUPPLY SIDE NEED TO BE AWARE THAT BREXIT MAY DISRUPT TRADING PATTERNS NOT ONLY BETWEEN UK AND EU COUNTRIES, BUT ALSO BETWEEN UK AND THIRD COUNTRIES.” Jens Roehrich Professor of Supply Chain Innovation at the University of Bath School of Management

and it gets expensive.” Before they cut it out completely, experts estimate that UK coffee consumers will shift to drinking cheaper coffee at home, which could prove detrimental to UK coffee shops, such as the “big three”: Starbucks, Costa, and Caffé Nero. While opposing sides see pros and cons to the various scenarios, the majority predicts two things: Brexit won’t likely get cancelled, and there won’t be a “no deal” Brexit. Young estimates a 60 per cent chance that it’s pushed back by extension of Article 50, but “what won’t be pushed back is the feeling of malaise that huge swathes of the British population feel about their place in society and how they feel about isolation and nationalism”, he says. “This is all very doomsday, and it may not play out as badly as we expect, but there’s a huge amount of emotion around Brexit and a lot of misguided and irrational thinking at the moment. “Fortunately the coffee industry has always been pretty buoyant and optimistic.” G C R

ECONOMICS Report

EXPLORING PRICES I

ECONOMETRIC ANALYSIS CONFIRMS A STABLE LONG-TERM RELATIONSHIP BETWEEN FUTURES AND PRODUCER PRICES, BUT WHAT IS THE ROLE OF THE TRADING MARKET?

nternational coffee prices have been experiencing a downward trend since December 2016. The I nt e r n a t ion a l C of fe e Organization (ICO) composite indicator reached 98 US cents per pound in September 2018, the lowest price recorded in almost 12 years, since October 2006. The current low level of coffee prices imposes short- and long-term challenges for the global coffee sector and its stakeholders. In

the short term, the earnings of coffee growers are severely affected, impacting the most vulnerable, and potentially increasing poverty and deprived living conditions. Low prices also lower the incentive to invest in coffee plantations today. The resulting under-investment, combined with the impact of climate change on productivity and the rise in global demand at 2 per cent per year, represents a threat to the availability of coffee in the long term. Conscious of the risks that low coffee prices pose for the short- and long-term sustainability of the coffee sector, member governments of the ICO approved the Resolution 465 during the 122nd session of the International Coffee Council (ICC) in September 2018. Resolution 465 gives the ICO the mandate to implement a series of actions to address the challenges of the current low prices. One such action already underway is the ICO’s research into the determinants of price movements and volatility, and the impact of trading activities at the coffee futures market

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ECONOMICS Report

Figure 1. ICO composite indicator monthly prices

Note: Shaded areas are periods of downward trend in coffee prices. Source: ICO

For the forthcoming 124th session of the ICC in Nairobi, Kenya, in March 2019, the ICO Secretariat is preparing an additional study, titled ‘Coffee futures markets: the role of non-commercial traders’. The objectives of this new research includes analysis of the development of trading indicators in the Arabica and Robusta futures markets over time, and the identification of a potential influence of speculative activity on the behaviour of spot coffee prices. The presence of financial investors in commodity markets has increased significantly over the past two decades. Volumes traded at futures markets rose faster than the global production of most commodities. This phenomenon has been coined as the ‘financialisation’ of commodity markets. Coffee is not alien to this phenomenon. From 1994 to 2018, the volume of futures contracts traded almost tripled in the Robusta futures market and rose five-fold for Arabica. Over the same time period, output of Arabica grew by 64 per cent, while Robusta production rose by 144 per cent. This supports the hypothesis that the coffee market has been subject to a significant process of financialisation over the past two decades, with an inflow of capital comparable to that of the market for grains, prior to the sharp

on coffee spot prices (see page 25). As part of this analytical work, an ICO study published in August 2018 titled ‘The role of the coffee futures market in discovering prices for Latin American producers’ – a result of collaboration between the ICO and Georg-August University of Gőttingen, Germany. This research was presented to the ICC in September 2018 on the suitability of futures markets as a basis for decision making for coffee growers. Combining ICO coffee market data with advanced econometric methods, the study examines the role of futures markets as a price discovery mechanism in six coffee-producing countries in Latin America: Brazil, Colombia, Guatemala, Honduras, El Salvador, and the Dominican Republic. The econometric analysis of the price data confirms the existence of a stable long-run Figure 2. Evidence of speculation influencing prices relationship between futures and producer prices, indicating that both series react to the same set of external information on the market. The analysis of the role of the futures market as a price discovery mechanism has provided mixed results. In Brazil, Colombia, and the Dominican Republic, local producer prices appear to incorporate new information faster than the futures market. This can be attributed to factors such as the size of the market (Brazil, Colombia), the existence of a sufficiently liquid exchange in the country (Brazil), and strong domestic consumption (Brazil, Dominican Republic). In Guatemala and Honduras, however, the New York futures market indeed dominates price discovery, suggesting that producers in these two countries may benefit from making their decisions based on futures contracts price information. Note: Positive numbers on vertical axis show evidence of influence. Source: ICO

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for Robustas

increase in grain prices in 2008. Using proprietary data on coffee spot prices and trading indicators, combined with data obtained from the Intercontinental Exchange and the United States Commodities Futures Trading Commission, the ICO Secretariat is using time series analysis to evaluate the causal link between speculative activity and spot prices. Statistical tests have been computed in an initial set of 23 econometric models associating spot coffee prices for Arabica and Robusta with six indicators of speculation: monthly volume of futures contracts, monthly open interest in futures contracts, the ratio of volume to open interest, the ratio of long and short positions held by non-commercial traders to total reportable positions, and the index traders’ net positions (long-short). Initial results of these causality tests seem to show no clear evidence of a long-term predictive power of speculative activity for Arabica prices (Colombian Milds, Other Milds, and Brazilian Naturals). In the case of Robusta, some indication of a long-term influence of speculative activity on price behaviour is found. The ICO Secretariat is currently performing further 4047 tests of short-term causality. The final results will be presented to ICO Members at March’s International Coffee Council. Figure 2 is a snapshot of the first results of those short-term causality tests. It indicates that monthly open interest of futures contracts exerted some influence in the behaviour of Robusta coffee prices between March 2004 and October 2006, and between April 2012 and November 2015. These initial findings seem to confirm that speculation might influence spot prices in short periods of time, but not in the long term. This conclusion is consistent, for example, with the body of literature on the 2008 price crisis in the market for grains. The results also suggest that in the long run, fundamentals such as demand trends and supply shocks prevail as determinants of price developments. G C R

This article is written by Dr Marcela Umaña, an Economist at the International Coffee Organization (ICO). The ICO works through international cooperation to strengthen the global coffee sector and promote its sustainable development in economic, social, and environmental terms. Its member governments represent 98 per cent of the world’s coffee production and over two-thirds of world consumption, providing a unique forum for the global coffee community.

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COFFEE AFTER BREXIT The big implications for the UK coffee industry

EXPLORING PRICES

What will disrupt the trading market in the long run?

DITIVES tion TRENDS INculAD ture of customisa The emerging

RESOLUTION 465

DATA GAP to end GENDER atio n is needed

ICO takes strong action to address the international price crisis

Why inform lity gender inequa

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Private and public sectors turn attention to the Chinese province

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FEATURE Resolution 465

RESOLUTION 465 THE INTERNATIONAL COFFEE ORGANIZATION IS TAKING STRONG ACTION TO ADDRESS THE INTERNATIONAL PRICE CRISIS, STARTING WITH INCREASING LOCAL CONSUMPTION, CONSUMER EDUCATION, AND ROASTER SUPPORT.

ver its 56-year history, the International Coffee Council (ICC) – the governing body of the International Coffee Organization (ICO) – has adopted 466 policy resolutions to help change the course of our coffee landscape for the better, but it’s Resolution 465 that is currently generating the most interest. With the international coffee trading price at a 12-year low on 18 September 2018, falling below US$1 per pound, an immediate action plan to address the damaging effects of low coffee prices was a key item at the ICC’s 122nd session meeting in September 2018, manifested in Resolution 465. “The ICC meeting was very much focused on concerns of export countries on the impact of low coffee prices. There was strong recognition from all our members that something needed to be done. This gave the ICO a clear mandate to respond to the current price crisis,” says Gerardo Patacconi, Head of Operations at the ICO. While there are other platforms addressing the price crisis, the ICO provides a unique international forum that brings together

exporting and importing countries at government level. “We represent two distinct but cohesive partners, and we are impartial in the sector. We are what is often referred to as an ‘honest broker’ – bringing together and countries, and mobilising all the different stakeholders across the coffee value chain, as well development partners, to come up with strategies to support the sustainability of the global coffee sector, and to implement them,” Patacconi says. At the ICC’s September session, ICO members discussed the fact that current market price levels do not allow coffee growers to cover their production costs, compromising their economic sustainability, and that current prices do not reflect the physical market fundamentals. For this reason, Resolution 465 includes the development of a global communications plan, targeted at consumers, together with producers, the coffee industry, opinion makers, and other stakeholders. The goal is to show the economic reality of what’s happening in the coffee sector today. ICO Executive Director José Sette has already met with top marketing experts. The ICO is seeking the involvement of industry leaders, such as illycaffè, to best utilise their communication services and promotional strategies to attract the attention of consumers, including millennials and Generation Z. More than ever, the patterns of coffee consumption, now and in the future, need to be understood. “A focus is around sensitising consumers to the economic challenges faced by farmers in the producing communities,” Patacconi says. “We’re in the early stages of identifying how we do that, whether through social media or videos, but importantly, this plan involves all links in the coffee value chain. Consumers are very important stakeholders in the international coffee sector. More than ever they needed to be considered as part of the solution and cannot be forgotten.” But how do you sensitise the consumer? How do you motivate consumers about where their morning coffee comes from? And how willing will they be to pay a premium to support the most vulnerable in our value chain – the farmers? These questions remain unanswered. “To be very frank, the point is that many small farms are struggling. The risk everyone shares is that [farmers] will abandon production. If they shift to other crops and start migrating, it will impact the coffee sector and their families – then the high risk is that we will lose the diversity of origins

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ICO Resolution 465

– areas that are not profitable to grow coffee. Consumers need to be aware of this,” Patacconi says. Since 2016, the coffee market has experienced a continued downward trend. Today, according to the ICO, coffee prices are 30 per cent below the 10-year average. Many of the more than 20 million coffee farmers worldwide are facing losses as they struggle to cover their operating costs. While prices decrease, inputs, compliance, and transaction costs rise. As a result, farm incomes are dwindling and the livelihoods of coffee-producing households, the majority of which are smallholders in low- and middle-income countries, are increasingly at risk. The economic and social consequences for producing countries can be severe. They include social unrest, national and international migration, the abandonment of coffee growing, or even switching to the production of illicit crops. The ICO says the lack of investment in the maintenance and modernisation of coffee farms poses a serious threat to future supply, exacerbated by growing demand for coffee worldwide. To help guarantee the economic viability of the coffee chain, the ICO is also encouraging exporting members to adopt programs to further raise internal coffee consumption levels. For this reason, the ICO is already looking to update its ‘Step-by-Step Guide to Promote Coffee in Consumption in Producing Countries’. This document was launched in 2004 and is considered an essential resource across the sector to support the promotion of coffee consumption in established and emerging markets. “The experience of some producing countries, like Brazil and others, shows that increasing domestic consumption increases demand. Countries that can face over-supply can revert some part of production to local consumers,” Patacconi says. “It also provides opportunities for value addition. The moment you develop a local market, such as Brazil and Ethiopia, they move up in the value chain – from just exporting a commodity, green coffee – to becoming a producer for the local market first, then eventually to the international market. De-commoditising coffee is not at the centre of our conversations, but I think it will be. It is an impact of increasing local consumption. There are local roasters now in Brazil and Ethiopia, for example, who were not there before.” The ICO’s impartiality, outreach, and ability to catalyse support are key factors in an effective response from the global coffee community.

“THE RISK EVERYONE SHARES IS THAT [FARMERS] WILL ABANDON PRODUCTION. IF THEY SHIFT TO OTHER CROPS AND START MIGRATING, IT WILL IMPACT THE COFFEE SECTOR AND THEIR FAMILIES – THEN THE HIGH RISK IS THAT WE WILL LOSE THE DIVERSITY OF ORIGINS... CONSUMERS NEED TO BE AWARE OF THIS.” Gerardo Patacconi

Head of Operations at the International Coffee Organization

Strengthening ties with the international roasting industry is also a matter of urgency in order to gain support for the implementation of Resolution 465. “We’ve had a positive and encouraging talks with all the major roasters, and they are all very keen to strengthen their cooperation with the ICO,” Patacconi says. “Most admit that they do a lot, but are not so good at promoting what they do. We need their support and additional resources to assist. For this reason we are also engaging in bilateral meetings with international organisations and financial institutions. To be blunt, we need partners to provide additional resources to push the global communications plan forward.” The ICO is inviting large roasters to its September Council meeting in London. Patacconi urges the whole coffee sector

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to catalyse support from governments, partnering organisations and the development community are key factors in an effective response from the global coffee community. What’s different this time around, Patacconi says, is that there is a greater understanding of market conditions in terms of demand and supply. The ICO says the slight strengthening of the Brazilian real against the US dollar, particularly since September 2018, has lent some support to coffee prices early in the New Year. However, it’s not a time to be complacent. In March 2019, during the ICC’s 124th session in Nairobi, Kenya, a top priority will be an assessment of the current economy, a look at ways to set up a system for monitoring pricing, and creating an early warning system. “It exists for other commodities but not for cash crops like coffee and cocoa,” Patacconi says. “We’ve been involved in a huge debate on creating an observatory on coffee prices, which means having an independent system to monitor pricing levels and provide statistics on prices. However, there is no mechanism yet to link this with actual production costs and what action can be taken. It’s a very different structural approach. The resolution is one thing, but we need to be even more innovative to find other solutions within the framework of the International Coffee Agreement to understand the factors driving economic sustainability of coffee production.” As Patacconi points out, the ICO’s actions are not just about addressing the problems of today, but also of the future, with true transformational change to ensure the industry is resilient to price and climate shocks. “The situation we find ourselves in is dramatic and concerning, but we need to remain positive about the future, and Resolution 465 is that way forward.” G C R To help support the ICO, contact projects@ico.org

e ew d h

to contribute to the debate involving highlevel decision makers in the industry, sector stakeholders and development partners, to tackle the impact of low coffee prices and its volatility on smallholder farmers, and to foster the long-term sustainability of the sector. “We are here to provide support but roasters should make an effort to identify all possible solutions available,” Patacconi says. The industry faced an even graver pricing situation in 2001-02 when prices fell below 50 US cents per pound. Ample crops worldwide and an extremely weak Brazilian real were large contributing factors. At the time, the ICO concentrated on advocacy in international forums. Today, the ICO is taking an even more robust approach to find additional solutions in the current price situation. “I believe [the ICO] has a strong and powerful role. We are confident we can really contribute to the current price debate with win-win solutions,” Patacconi says. The ICO’s impartiality, outreach, and ability

ed co

RESEARCH Kew

Age of EXTINCTION RESEARCHERS FROM THE ROYAL BOTANIC GARDENS, KEW HAVE DETERMINED THAT MORE THAN HALF OF ALL WILD COFFEE SPECIES ARE IN DANGER OF EXTINCTION. DR AARON DAVIS TELLS GLOBAL COFFEE REPORT WHAT THIS MEANS FOR THE WIDER COFFEE INDUSTRY.

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r Aaron Davis was not sure what he would find when he joined an expedition into the wilderness of Sierra Leone in December 2018. The Head of Coffee Research at the Royal Botanic Gardens, Kew travelled to West Africa to search for the fabled highland coffee of Sierra Leone, known to the scientific community as Coffea stenophylla. The coffee had not been seen since the 1950s, and after lengthy communications with Professor Jeremy Hagar of the University of Greenwich, the men became determined to find it. “This coffee from Sierra Leone is something that I’ve been interested in for many years, and so have other people,” Davis tells Global Coffee Report. “The interest is mostly founded on books from the late 1800s and early 1900s, which clearly state this is a coffee with an incredible flavour. There is one account that says it tastes better than Arabica. “Immediately, the bells start ringing, ‘something better than Arabica? Really?’ That instantly makes anyone interested in coffee excited, and it’s a really compelling story. I’ve always wanted to go to Sierra Leone to see this coffee, where it grows, and as a coffee drinker, taste it.” Davis and Hagar’s search began at farms in the area, where they hoped to find a fruiting coffee plant from which they could test the coffee. After multiple unsuccessful attempts, Davis knew they had to start looking in the wild to find the elusive coffee. “There has been a lot of deforestation in Sierra Leone, so Jeremy and I knew we may not find it. We tried lots of different routes to reach the wild places where this coffee was last seen, and eventually, we found one plant,” he says. “One plant is exciting, but if you remember your coffee biology, apart from Arabica, most species are self-incompatible, meaning it needs another individual to cross-pollinate with to produce fruits. You can’t produce coffee from one tree.” The team continued its search, eventually discovering a small population of the highland coffee several hours east of the first location at the exact same altitude. “The unfortunate thing was that there was no fruit, so we could not evaluate the sensory

“WE’VE GONE BACK EVERY 30 YEARS OR SO FOR SOMETHING FROM THE WILD. IN THE CASE OF ROBUSTA, WE WENT BACK TO AFRICA AND ADOPTED A WHOLE NEW SPECIES.” Dr Aaron Davis

Head of Coffee Research, Royal Botanic Gardens, Kew

Dr Aaron Davis joined an expedition in Sierra Leone to locate Coffea stenophylla.

attributes of the coffee,” Davis says. “We were able to take some material, which is now being grown in Sierra Leone. It looks like we may have to wait at least four years before we can do our evaluation.” C. stenophylla is one of the 75 wild coffee species Kew revealed was under threat of extinction in research published in Science Advances in January, 2019. Two coffee species, Coffea arabica and Coffea canephora , commonly known as Arabica and Robusta, dominate coffee production, making up approximately 60 and 40 per cent of commercial crops respectively. But these are only two of the more than 120 species of coffee that can be found in the wild. Other species include Coffea ambongensis and Coffea pterocarpa , or the Ambongo and wing-fruited coffees of Madagascar. Kew conducted an extinction risk assessment using the categories and criteria laid down by the International Union for Conservation of Nature (IUCN) Red List of Threatened Species for all 124 confirmed coffee species. The study determined that 13 species are Critically Endangered, 40 are Endangered, and 22 are Vulnerable. Fourteen species were not assessed due to a lack of data and were unlocatable by Kew. Some of these 14 may already be extinct. The study says the main drivers for the extinction risk are small distribution sizes and a low number of places where the species grows in the wild, in conjunction with ongoing threats such as habitat loss. Davis says the study also examines what this means for the future of commercial

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RESEARCH Kew

coffee production. “Some people will say wild coffee species have little or nothing to do with [the coffee industry], but the coffee consuming and production landscape would look very different if we hadn’t been able to go back and supplement from wild stock to overcome problems like coffee leaf rust and other diseases,” he says. “We’re looking at coffee species that could bring something to the development of better climate and disease resilience in Arabica and Robusta.” Davis adds that climate resilience is not the only attribute wild coffee has to offer the industry. “If you look at the history of coffee cultivation, we have adopted wild species to ensure the sustainability of the industry. A really good example is Robusta, a more or less unknown plant 100 years ago. Now it’s a multibillion-dollar commodity,” he says. “It’s something we often take for granted, but studies show that we’ve gone back every 30 years or so for something from the wild. In the case of Robusta, we went back to Africa and adopted a whole new species.” Included among the coffee species under threat of extinction is the wild counterpart to Arabica coffee. In a second report, published in Global Change Biology in January 2019, Kew and

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Ethiopian partners analysed the role climate change The threatened Ambongo plays in the endangerment of wild Arabica. species (inset) produces beans twice the size of Arabica coffee. When initially evaluated with the IUCN Red List, the assessment suggested Arabica was not threatened with extinction. However, after factoring in climate change, its status moved upwards from Least Concern to an Endangered species. Kew has extensively studied the effect climate change will have on Arabica in Ethiopia. This provided much of the necessary information not available for the other 123 species to project how the plant will fare in the future. In 2012, Kew predicted the number of locations where Arabica grows in the country could decrease as much as 85 per cent by 2080. In 2017, it turned its attention to the influence of climate change on coffee farming, showing that up to 60 per cent of the land used for Ethiopia’s coffee production could become unsuitable by the end of the century. The 2019 paper looked exclusively at the extinction risk for Arabica in the wild. “If you applied that data to all other coffee species, you would almost certainly see them move up into a higher risk extinction category as well. Sixty per cent is alarmingly high, but it can be viewed as conservative because we haven’t factored in climate change to the same extent for all those other species,” Davis says. Though the IUCN Red List deems 40 per cent of wild coffee species are not at risk of extinction, Davis says it is important not to prioritise strengthening these species over those in danger. “They are generally species that have very wide distributions, like Robusta in the wild, which occur over very large areas. What you wouldn’t want to lose is a diverse genepool in the wild. It’s not just a question of losing a species, it’s about losing genetic diversity,” he says. “For example, if you look at where Gesha occurs in Ethiopia, there’s almost no forest left. If we don’t do something soon, Gesha will be lost in the wild. These wild-type plants are almost unchanged since they began being commercially developed.” Davis says protected areas and national parks need to incorporate and improve management plans so these species can be conserved, such as those established in Ethiopia. “The Ethiopian government has designated reserves for the conservation of wild Arabica coffee,” Davis says. “They have production forests which surround pristine forest areas, conserving the most important reserves for wild C. arabica in Ethiopia.” Kew works with Union Hand-Roasted Coffee in the UK to help farmers adjacent to these protected areas to improve the quality of their coffee. This results in higher prices that improve income, putting value into the forests where the coffee is grown, and buffering the wild Arabica coffee nearby. “When we started talking to the farmers and the community in this protected area, they were saying ‘you’ve got your protected area, but what about us? We’re looking after the forest but there’s no payback The endangered Coffea pterocarpa grows winged fruits, which may aid in dispersal. for us.’ The objective [of this project] is to address that

Kew works with Union Hand-Roasted Coffee to help farmers preserve coffee in protected areas.

imbalance,” Davis says. If conservation practices prove insufficient, Davis warns that greater lengths will need to be taken to protect wild coffee, such as assisted migration. “If, for example, one forest was cut down or was faltering because of a changing climate, hypothetically you could move that coffee to higher altitudes of better suited areas,” Davis says. “This is largely theoretical, but it has been done with certain plant species. The problem is it’s very expensive and there is no financial incentive. Why we suggest it as a possibility is because it would be a last resort.” Davis says that although he is unsure if understudied wild species, such as the highland coffee of Sierra Leone, can assist in improving coffee crops’ resistance to disease and climate change, it is important the industry finds out, and quickly. “[C. stenophylla] occurs in hotter, drier places than robusta. Could it have climate resistant potential? We don’t know, but unless we start looking at these things and other possibilities now, our options will rapidly diminish,” he says. G C R

EEWORL

CONNECTING THE COFFEE WORLD

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FEATURE Lavazza

A rare exception LAVAZZA TALKS TO GLOBAL COFFEE REPORT ABOUT ITS CONNECTION TO ONE OF THE WORLD’S MOST SACRED AND OLDEST COFFEE PLANTATIONS, AND WHY THE AUSTRALIAN MARKET HAS BEEN GIVEN SPECIAL PERMISSION TO MAKE HISTORY.

eep into the Ethiopian forest is one of the world’s most precious and original sources of Arabica coffee. Located about 460 kilometres southwest of Ethiopia’s capital Addis Ababa is the Kafa Biosphere Reserve, the birthplace of wild Arabia, dating back around 850AD. The biodiversity hotspot contains close to 5000 wild varieties of wild Arabica, which have grown spontaneously with minimal intervention from the region’s inhabitants for centuries, according to the United Nations Education, Scientific and Cultural Organization. It’s this unspoilt terrain and the region’s low yielding coffee production, however, that makes Kafa Forest coffee one of the most exclusive and premium beans on the market. Cristiano Portis, Asia and Pacific Coffee Research and Development Manager and Licensed Q Grader for Lavazza, recalls the sacred nature of the Kafa region when he made his pilgrimage to coffee’s holy land in 2001. “Coffee has such a beautiful history and Kafa is a true reminder of where it all began. I remember spending time with a local family who invited me to a traditional Ethiopian coffee ceremony,” Portis recalls. “They roasted the coffee on a saucepan over a flame, like the way we roast chestnuts in Italy. A mortar and pestle was then used to grind the coffee before putting it into a bunna – a traditional brewing vessel, like an old moka pot. The bunna was put on the fire and we waited for the water to boil before small cups of coffee were served, first to the oldest member of the family. The remaining coffee was then served in rounds. With each round you could taste a deeper, more complex, and developed flavour.” This tradition is engraved in Ethiopian history, much like Lavazza’s tradition for roasting coffee, which it has done since 1895.

The Italian roaster has demonstrated its commitment to the Ethiopian coffee-producing community for more than 30 years, including the sourcing of its 100 per cent Arabica Kafa Forest Coffee. While it’s not new to the Lavazza coffee portfolio, what is, however, is its decision to roast the Kafa Forest single origin outside of its Italy base. “Australia is the first and only country the Lavazza family has ever permitted to replicate and roast one of its iconic coffee’s outside of Italy,” says Silvio Zaccareo, APAC Business Unit Director and Lavazza Australia Managing Director. “The quality of Kafa is the same as Italy’s, but the roasting process and roasting time is different. Lavazza has the credibility. It has 120-plus years of history among the top coffee players leading the Italian market. Lavazza is focused only on coffee, it’s our specialty, but we also know in a humble way that we need to

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FEATURE Lavazza

respect Australia’s sophisticated and knowledgeable consumer and get closer to that market. It’s all about finding the balance.” Zaccareo says that around the world, Lavazza is respected for its heritage, authentic Italian quality coffee products and story. Now, it needs to hear the stories of its consuming audience in order to connect with their coffee-drinking prerequisites. “Since the beginning, Australia has been a very important market for us. It’s the fifth-largest market outside of Italy,” Zaccareo says. “The level of sophistication from the Australian consumer’s point of view is really high. It’s a consumer that knows about coffee and quality, and they’re looking for a story, which is what Kafa embraces as the most premium single origin coffee in the Lavazza portfolio.” To make that connection, back in Australia, Portis was the man tasked with the role of testing the ideal roasting profile that would respect the identity of the original Lavazza Kafa single origin, but also reflect the Australian market’s penchant for delicate roasting. “I went through many different batches and roasting profiles. We didn’t bother using a small roaster. We went straight in and used a large-scale 120-kilogram roaster to find the perfect blend, roasting 100 kilograms at a time,” Portis says. “I selected five different roasting profiles and after two weeks of maturation, did a blind cupping at the Lavazza Australia training centre. I got a fair amount of judgement, but took my favourites to Italy for a blind cupping with the Lavazza family – the family always has the final say.” With a few further tweaks to reduce the acidity in the cup, the outcome was a slow 15-minute roast to preserve Kafa’s organoleptic profile. Portis says this is the secret to Kafa’s perfect balance of aroma, taste, and body, and the key to Giuseppe Lavazza asking him for a cup of his “Australian roasted Kafa” each time he returns to Torino. “The coffee in Melbourne is very fresh so we have chosen to roast a bit lighter and brighter compared to the way we roast Kafa in Italy, which is a bit more rounded. The result is a more aromatic cup profile with fruity, floral tones,” Portis says. “Farmers have the ability to make an impact on cup profile in the different processing methods they use, and it’s the same from the roaster’s end. You can roast the same coffee in so many different ways and achieve so many different results. It’s incredibly powerful to the barista’s and consumer’s coffee experience.” Before moving to Australian in 2015 to support the establishment of Lavazza Group’s associated company Lavazza Australia and its local roasting procedures, Portis says he, like many Europeans, was sceptical about the Australian consumer’s devotion to high quality milk-based coffee, which makes up more than 90 per cent of the market share. “I’d often wonder, ‘why are the Aussies so fussy about their coffee? They add a lot of milk to it anyway.’ Then when you realise people drink high quality coffee with milk, and try it for yourself, you can taste the difference in the cup. It really is a unique way of complementing the coffee,” Portis says. As such, Lavazza’s Kafa Forest coffee is suited to both milk-based and black coffees. However, its low yield is what makes it an exclusive and premium coffee with an intense richness, best reserved for fine dining establishments and venues wanting to offer customers the ultimate specialty coffee experience. Silvio Zaccareo is the APAC Business Unit In Lavazza’s 120-plus years of history, Portis Director and Lavazza Australia Managing Director. is the company’s only registered Q Grader. He 34

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Cristiano Portis is the Asia and Pacific Coffee Research and Development Manager and Licensed Q Grader for Lavazza.

has an eye for detail and palate for flavour, but says it’s only through the evolution of the Specialty Coffee Association and Coffee Quality Institute that he has been able to develop a common lexicon to critique coffee. Lavazza does not use a grading system to assess its coffees. Rather, Portis says the company has practised strict quality control measures long before there were mandatory practice. This ensures Lavazza purchases specialty coffees 80 points and above that naturally do not carry any primary defects, and only allows for a limited number of secondary defects. “We buy about four to five containers of fully natural processed, hand-picked Kafa, dried naturally in the sun. You can buy Kafa coffee from other people but it’s not the Kafa we buy. Ours is prepared just for Lavazza. We know it’s good quality. We buy all our coffee against our standards. Then it’s just a question of in-cup quality,” Portis says. Lavazza buys a lot of coffee. It has a history of more than a century, and it tastes coffee every single day. It understands defects, sizing, and quality. “We’ve been so strict with our processes for so long that our quality control is just normal practice we’ve done from day one,” Portis says. Being one step ahead also means that Lavazza continues to support Ethiopia’s agricultural economy and the beauty of its Kafa Forest, which is now under threat from climate change and disease.

“It’s a scary reality how much longer we’ll be able to enjoy the beauty of Kafa coffee. Research is showing that in some countries, changes are already happening, much earlier than what was expected,” Portis says. “What climate change will mean, for example, is an inability to cultivate coffee at the same altitude. In places like Ethiopia, you can [grow coffee at] higher altitudes but this is also a social problem – noone wants responsibility for tomorrow’s problem.” The community is at risk of one day losing its exclusive crop, but until then, Zaccareo says Lavazza will continue to highlight its commitment to spreading quality and authentic coffee experiences worldwide, like it’s done for the past 120 years. “Lavazza is connected to its consumers like never before, evident through its commitment to roasting Kafa specially for the Australian market,” Zaccareo. “It is this devotion to our different markets and our dedicated consumers that drives us to continue the pursuit of quality like we’ve always done, and will continue to do.” G C R

The Kafa Biosphere Reserve in Ethiopia contains close to 5000 wild varieties of Arabica.

SCA XXX Yannis Apostolopoulos xxx

SCA gets a new Chief AS RIC RHINEHART STEPS DOWN TO PURSUE THE SPECIALTY COFFEE ASSOCIATION’S PRICE CRISIS INITIATIVE, NEW EXECUTIVE DIRECTOR YANNIS APOSTOLOPOULOS LOOKS TO EXPAND THE GLOBAL SPECIALTY COFFEE COMMUNITY.

n paper, Yannis Apostolopoulos’ introduction to the coffee world came in 2009 when the Greek wine and spirits distribution business he was running decided to make a foray into coffee. The truth, however, is that Apostolopoulos has a long history with coffee simply by being Greek. “Greece has a huge coffee culture and it’s been that way since the early ages,” he tells Global Coffee Report, making sure to note that

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his home country has the highest number of world coffee champions. “We’re really passionate about it. As a culture, we drink coffee to socialise. It’s not just a functional drink for us.” In fact, high-end coffee beverages are served at hip venues right alongside the wines and spirits his company represented, so expanding into coffee was a natural choice. That business venture into coffee ended up being a game-changer for both the distribution company and for Apostolopoulos. The company’s coffee division grew to be very successful within a few years, and Apostolopoulos discovered a passion that ultimately led him to the Specialty Coffee Association of Europe (SCAE). As the company, WS Karoulias SA, pursued the coffee business, Apostolopoulos strove to learn as much as he could about the product and its industry. “The further I got into coffee and the more I learned about the value of coffee, the more it

“I FULLY EMBRACED THE VALUE OF SPECIALTY COFFEE BECAUSE I SAW IT AS SOMETHING THAT COULD MAKE A REAL IMPACT ON OTHER PEOPLE’S LIVES. THAT’S WHEN I FELL IN LOVE WITH COFFEE.” Yannis Apostolopoulos

Executive Director, Specialty Coffee Association

spoke to my sweet spot,” he says. “I fully embraced the value of specialty coffee because I saw it as something that could make a real impact on other people’s lives, and so the fact that I could give something back to the community was really important to me. That’s when I fell in love with coffee.” In 2012, Apostolopoulos started volunteering with the SCAE, and in 2013 became a certified Q Grader. That same year he joined the board, helping set up the first Barista Guild of Europe in collaboration with former SCAE President Cosimo Libardo. He then established the Roasters Guild of Europe with help from Sonja Björk Grant, a renowned barista, roaster, and trainer, and one of the pioneers of the various championships World Coffee Events hosts. In 2016, he left Karoulias to join SCAE as Deputy Executive Director. Fast-forward to today, and Apostolopoulos has been named Executive Director of the Specialty Coffee Association (SCA), the global entity formed when SCAE merged with the Specialty Coffee Association of America (SCAA) in late 2016. At the end of 2018, former Executive Director Ric Rhinehart stepped down to pursue the organisation’s new Coffee Price Response Initiative. As Deputy Executive Director, Apostolopoulos stepped into the vacancy. He says his transition into this role was always part of the plan following the unification, with Rhinehart intending to serve up to five years in the role to see through the integration of the two organisations. However, given the current price crisis in the global coffee industry, that plan changed upon conception of the SCA’s latest initiative. “It was made apparent at the SCA board meeting in Berlin in September that the way coffee prices were [trending], we needed to take immediate action, so the board came together to discuss potential ideas,” Apostolopoulos explains. It was there that the Coffee Price Response Initiative was born. “Ric is truly the best person to lead it with his knowledge and connections. He has done great coffee work all around the world and he truly understands the problem.” Rhinehart was named Executive Director of SCAA in 2008, a role in which he established himself as a voice and a leader in not only the US coffee industry, but also the global coffee industry. According to Apostolopoulos, he was one of the major proponents of the unification between SCAA and SCAE, seeing it as a way to have a bigger voice and bigger impact for specialty coffee. “Ric has proved a great leader for the specialty coffee community, especially in the United States, but also all around the world he has demonstrated great leadership and has spearheaded initiatives to advance the specialty coffee agenda,” Apostolopoulos says of his predecessor. Since the unification, Apostolopoulos has been responsible for ensuring that the operational components of the two organisations, from finance and human resources, to memberships and guilds, integrated as smoothly as possible. “During a merger process, everyone is working on everything, so I wouldn’t say I had a single responsibility other than to make sure that this merger was successful,” he tells GCR , acknowledging that odds weren’t especially in their favour. “The truth is that at least 75 per cent of global mergers fail, so we have to make sure that we don’t fail. It has been very challenging.” Now at the helm, Apostolopoulos is responsible for “taking SCA into the future and accomplishing the many critical projects and objectives laid out in our strategic plan”, the SCA announced in a member newsletter in December.

“For the past two years we were mostly facing inward to make sure everything was running smoothly,” he says, “but now what we as an executive team are focusing on are initiatives that will have an impact on coffee communities around the world. And if we want to make an impact on the livelihoods of people, we need to have a bigger voice and create a stronger network of professional individuals that embrace the same values – that’s how we make an impact at the end.” When asked if there are any platforms he’s passionate about or any specific issues he hopes to focus on, Apostolopoulos is quick to acknowledge the many issues that need to be addressed, and the many SCA team members working on them. “There are many issues that we need to be engaging in, including developing better listening mechanisms and being more inclusive,” he says. “And it’s not only about me – it’s about a team of people. We have a great team working at SCA and I’m very honoured to be named the Executive Director of such a talented executive team.” Just like the communities it serves, that hard-working team spans the globe. Following the unification, SCA is registered in Southern California as a 501(c)(6) nonprofit, while its main Europe office is located just outside London. From South Korea and the United States to the United Kingdom and across Europe, “we have staff working all around the world”, Apostolopoulos says. “The executive team actually works on a cloud, because they’re all over the place.” Leveraging their wide reach, they can work together to advance that aforementioned agenda on a truly global scale. “We all have our passions of topics and ideas, but we all know what our purpose is: to make coffee a sustainable, equitable, and thriving activity for the whole value chain,” Apostolopoulos tells GCR . “For me, the next three to five years will be focused on finding ways to make SCA more relevant, and creating strong communities around the world to make SCA like a supportive canvas to connect, grow, and educate.” G C R

M A R C H/A P R I L 2 019 | GCR

MAY/JUNE PROMOTIONAL FEATURE

GRINDER TECHNOLOGY March/April 2019

COFFEE AFTER BREXIT The big implications for the UK coffee industry

EXPLORING PRICES

What will disrupt the trading market in the long run?

RESOLUTION 465

ICO takes strong action to address the international price crisis

EYES ON YUNNAN

Private and public sectors turn attention to the Chinese province

FORWARD

THINKING HEMRO GROUP SPEAKER OF THE MANAGEMENT BOARD MARCEL LEHMANN ON CASTING A VISION FOR THE COFFEE GRINDING INDUSTRY www.gcrmag.com

GlobalCoffeeReport

January/February 2019

NEW YEAR, REAL CHALLENGES Industry leaders share their 2019 predictions

DO YOU HAVE TO BE LOUD TO BE HEARD? Coffee brands get creative in a saturated market

AGE IS NO BARRIER

Nespresso’s Future Farmer Program supports farmer retirement

INDONESIA’S COFFEE NETWORK

Navigating a complex value chain

LEGENDARY January/ February 2019

Quality coffee relies on the finer details – precision grinding. As technology advances, roasters, baristas and coffee houses need to enhance their technical capabilities in order to keep up with consumer demands. This series of special features will look at the technical grinding solutions being offered by the world’s leading coffee grinder manufacturers to cater to this growing need.

TRUNG NGUYÊN LEGEND RESEARCH AND DEVELOPMENT DIRECTOR TRINH TY ON MAKING A STRATEGIC SUSTAINABLE COMMITMENT

www.gcrmag.com

TO BOOK IN GLOBAL COFFEE REPORT CONTACT CAMILO MOLINA NOW Camilo.Molina@primecreative.com.au | 0481 736 890 HURRY – LIMITED SPACES AVAILABLE!

YOUR COFFEE NEWS – WORLD WIDE www.gcrmag.com

FEATURE Specialty Coffee Expo

New kids on the block ALL EYES WILL BE ON THE SPECIALTY COFFEE EXPO THIS APRIL, BUT THE WORLD COFFEE CHAMPIONSHIPS WON’T BE THE ONLY EVENT IN THE SPOTLIGHT. A FLEET OF NEW PRODUCTS ARE MAKING THEIR GRAND DEBUT AND COULD BE STEALING THE THUNDER.

t’s been said that winning the World Barista Championship (WBC) is the best platform to secure yourself as a household name on the competition circuit. In some cases, winning the prestigious event entitles the winner to a year of trade show appearances, sponsorship opportunities, travel, and ambassador roles. It’s not uncommon to find the winner’s face enlarged on a giant billboard for a new model grinder or line of milk pitchers. However, being awarded the Specialty Coffee Association (SCA) Best New Product has a similar effect, and it’s longer lasting. “The Specialty Coffee Expo has become the place people come to preview their new product or innovation,” says SCA Chief Research Officer Peter Giuliano. “Specialty coffee is about excellence, it’s what drives our whole industry, so it’s natural that companies and individuals want to celebrate the excellence in the products they bring, and those coming to the show are always very interested in what the most excellent new products are.”

The Best New Product Awards have been a long-running feature of the Specialty Coffee Expo. Each is judged on their quality and value to the specialty coffee and tea industry in one of the award’s 10 categories. It includes commercial or consumer coffee or tea preparation, service equipment, coffee accessories, specialty beverage and flavour additive, packaging, food, and open class. The judges look for a product that embraces creative excellence in innovation, industry improvements, design, education, M A R C H/A P R I L 2 019 | GCR

FEATURE Specialty Coffee Expo

agro-economy, and science. This year’s entries must be new to a company since 23 April 2019. SCA Chief Events Officer Cindy Cohn says this year’s line-up of products already promises some interesting new inventions from the technology and coffee preparation categories. “Lots of people are debuting new products, but there is one tech entry I think will be spot on – technology is one area that keeps getting better. I would also keep your eyes on the coffee preparation category, which is always interesting,” Cohn says. “Equally, I think the collections of information and app development are giving cafés more valuable information they can use to help run their business with, so when it’s available, it makes for an interesting product.” The other popular category Cohn says is reflective of the current market trends is the developing interest in cold brew products, which five years ago was “nearly non-existent”. “It’s a really progressive category,” Cohn says. “The awards have been running for about 15 years now and it’s always interesting to see the volume of entries in each category. However, our product standards remain. Last year there was no winner in one of our categories. Regardless of quantity of entrants, we won’t award a product that is not deserving of SCA’s high standards. “[The SCA is] putting its name alongside the products to endorse them and support them. It’s huge to have that SCA Best New Product seal for a year. For emerging new businesses, winning gives them an incredible lift in the market.”

Bonavita’s 1900 is a SCA Certified Home Brewer and a contender to win the 2019 Home Brewer Program Award.

One such business that knows the impact of winning the SCA Best New Product (Technology) and Best of Show Product Award is Coffunity, a smartphone app that provides instant information and reviews for coffee consumers around the world. “Winning both awards was really exciting. It was kind of a pat-on-the-back for us from the specialty coffee community telling us ‘we know what you’re doing and we love it, so keep going’,” says Andrea B. Pacas, CEO and Co-Founder. “It not only confirmed that what we are doing with Coffunity is something that the coffee industry needs and wants, but that they are willing to support us in doing it. It changed life for us in a sense of making us want to be better every day.” When Pacas first read the application requirements for the awards, she knew Coffunity could be a strong contender. “I got really excited because we had excellent answers for all the questions they asked. Our project is more than an app, but a platform that can unite, educate, and improve the coffee industry world wide in many ways. We knew our product was worth displaying in that way,” Pacas says. Her advice to new innovators who want to enter the awards is to focus not so much on having the perfect exhibit display, but an impactful pitch to show attendees and judges. Show passion and present a project that contributes in more than one way to the coffee industry. “There are a lot of good things in the market, but having a product that is driven by improving the industry is most special,” Pacas says. Since winning the Best New Product Award, Coffunity has been featured on online and print magazines, and was presented during the 2018 US Coffee Championships. The Coffunity website also proudly wears the Best New Product logo, a “very important validation”. “[It’s given] us a lot of leverage when presenting our startup to new investors, as well as being different than other businesses that are trying to do something similar,” Pacas says. Andrea Pacas, CEO of Coffunity, proudly displays the SCA Best New Product The other award set to gain attention at this year’s SCA (Technology) and Best of Show Product Award at the 2018 Specialty Coffee Expo. Expo is the SCA Certified Home Brewer Program.

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“IT’S AMAZINGLY DIFFICULT TO BECOME CERTIFIED. BUILDING A SMALL APPLIANCE THAT SITS ON YOUR COUNTER AND CAN ACHIEVE THAT TEMPERATURE PRECISION IS AN AMAZING FEAT OF ENGINEERING.” Peter Giuliano,

SCA’s Chief Research Officer

SCA’s Giuliano, in charge of running the Home Brewer Program, says most people are unaware of the rigorous requirements to become a certified home brewing machine. SCA has based these requirements on decades of industry knowledge and research. They work with engineers at University of California, Davis Coffee Center, to test against these standards. All SCA Certified Brewers have met these requirements, which are based on proper water temperature, brewing time, and ability to brew within the SCA Golden Cup recommendations. If a brewer passes all of the tests, it is recognised as an “exemplary home brewer” and joins the shortlist of SCA Certified Brewers on display at the Specialty Coffee Expo. Brands already featured in the lineup Bonavita, Oxo, Bunn, Cuisinart, Behmor, Breville, and Technivorm. “It’s amazingly difficult to become certified. In order to gain certification, home brewing machines have to perform within a narrow temperature of 92°C to 96°C – it has to reach 92°C within a minute of the brew cycle and can’t exceed 96°C. It’s a tight window,” Giuliano says. “Building a small appliance that sits on your counter and can achieve that temperature precision is an amazing feat of engineering.” It takes about 30 hours to test each brewer. Tests from the SCA are performed in collaboration with the UC Davis Coffee Center engineering department. This includes a detailed uniformity of extraction evaluation procedures to determine how good or bad the brewer extracted the coffee. “Most of the time the brewers don’t pass. It’s a miracle when they do,” Giuliano says. “There is an adjustment period so the brewers can be resubmitted for testing. It just goes to show that when you see the machines on display at the Specialty Coffee Expo, which at present is about 13 models, you can appreciate what they’ve gone through. It gives you confidence they’re the best on the market, and also an indication how many have failed. There’s a big difference in the market between those that are certified and those that are not.” Giuliano says the volume of entrants in the home brewing category is evidence of the growing consumer market. “Our main mission is to make better coffee available to more people including better quality equipment, so this category really touches consumers and that’s special for us. It’s also been lovely to work with companies making excellent coffee brewers. A lot of the time they haven’t had exposure to the principles of coffee we have in our industry, the things we know that make great filter coffee,” Giuliano says. “We get to be an advocate for those standards and principles, and increasingly it’s been a collaboration with the manufacturers to help them in the design of the machine. They have made a big commitment to produce a brewer that presents excellence in coffee over convenience or affordability. These are the brewers for people who are focused on coffee flavour.” For the first time, attendees to the Specialty Coffee Expo in Boston can sample filter coffee direct from the certified home brewing machines on the show floor. SCA’s Cohn says this is one example how the Specialty Coffee Expo is giving coffee enthusiasts the opportunity to come into the dedicated coffee world, watch the World Barista and Brewers Cup Championship, try some impressive coffees, explore the Design Lab and Roasters Village, observe the latest new grinders and brewers for the home market, and “embrace coffee excellence in their life”.

“The SCA creates a unique place of relevance for casual coffee drinkers but there is a volume of sophisticated coffee enthusiasts. This space has been growing the past seven years. Although we are a focused trade show, we recognise people are doing home roasting and brewing with elaborate machines and spending huge amounts, so why not celebrate coffee with us?” he says. From 12 to 14 April, the Specialty Coffee Expo is expected to welcome some 13,000 attendees from more than 75 countries. Many come to North America’s largest coffee expo as an annual pilgrimage, some just for the coffee championships, but Giuliano promises the sold-out exhibition space will indeed unite the international coffee community.

The Breville Precision Brewer is a SCA Certified Home Brewer.

“It’s not an American show at all. Specialty coffee is global by its nature. That’s what we love about it,” he says. “We try to frame things for the international community as much as we can. We want to welcome everyone and really celebrate the international diversity community that makes specialty coffee.” G C R The Specialty Coffee Expo takes place from 12 to 14 April in Boston, Massachusetts, United States. For more information, visit coffeeexpo.org M A R C H/A P R I L 2 019 | GCR

MELBOURNE MICE

MADE IN

MELBOUR 42

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AUSTRALIA’S COFFEE CAPITAL WILL WELCOME THE WORLD COFFEE CHAMPIONSHIP S DOWN UNDER IN 2020. GCR EXPLORES A CITY BURSTING WITH PRIDE FOR ITS COFFEE CULTURE AND A COMMUNITY READY TO EMBRACE THE NEXT PHASE OF ITS COFFEE EVOLUTION.

ustralia’s coffee consumers are very connected to the coffee industry. It’s not uncommon to overhear friends making weekend plans to try a new café, a home brewer asking a barista to grind their newly purchased beans for AeroPress, or Australians complaining about how hard it is to find good coffee overseas. Not surprising then, a recent comment on the city’s train service opened another line of conversation: “Have you heard the news? Melbourne is hosting the World Barista Championship (WBC) next year.” The message is out, the news confirmed, and the reaction is excitement from industry and die-hard coffee fans alike. Melbourne will become the first city outside of the United States to host the 2020 World Barista and Brewers Cup Championships together for a second time. More than 85 licensed national barista champions from across the world will descend on Australia’s coffee capital when the prestigious coffee competitions take place at the Melbourne • M elbournians’ coffee of choice is the latte, International Coffee Expo (MICE) from 4 according to the 2018 Square Australia to 7 May, 2020. Coffee Report. “We can’t wait to welcome the global • Melbourne last hosted the World Barista coffee community to Melbourne,” says MICE Championship in 2013 where Pete Licata of Show Director Simon Coburn. “Australia is a the US took the title. Licata has announced renowned coffee destination, and now we’ll he will be making Melbourne home when he get to present our sophisticated coffee culture joins the Nomad Coffee Group as its Research to a global audience. If Melbourne’s coffee and Development Coffee Consultant. culture wasn’t already on the world map, • F inding a coffee is no problem it will be after we host the World Coffee with 1389 cafés operating out of the CBD. Championships.”

Five Melbourne coffee facts:

CULTURE EVOLUTION Less than 100 years ago, coffee was virtually unheard of in the country. Australia was a typical British colony of tea drinkers. A small amount of coffee was grown in Australia in the early 1880s, but that died with the rising costs of labour. Although many of Australia’s neighbours grow coffee, it is fairly isolated from the esteemed farms in Latin America that are popular among the specialty coffee field.

• T he first McCafé was launched in Melbourne in 1993, a concept that is now spread around the globe. • Melbourne’s milk-based coffee culture has influenced major global coffee chains like Starbucks and Costa Coffee with the Australian favourite flat white now on their menu.

M A R C H/A P R I L 2 019 | GCR

MELBOURNE MICE

Melbourne hosting the World Barista Championship is another example of Australia’s coffee culture influencing the world coffee scene.

The industry is made up of passionate individuals and companies. However, the country’s success as a popular coffee consuming nation is not about the availability of quality coffee, but the result of a series of lucky circumstances. This includes Australia’s first green bean trader, Austrian Ernest Singer, importing quality Arabica coffee from neighbouring Papua New Guinea; the huge wave of Italian immigrants and their love for espresso in the 1950s; the third wave specialty coffee movement; and rising Australian incomes resulting in high annual growth of 2.2 per cent in the café and coffee shop market, estimated to be worth about A$9.8 billion according to a 2018 IBISWorld report. What really sets Australia’s coffee MICE will host the World Brewers industry apart, however, is the vast majority Cup from 4 to 7 May, 2020. of independent coffee shop operators. The challenge that Starbucks had trying to set up in Australia is a good example of this. In 2008, the US coffee giant had to shut down 61 of its 85 Australian shops when its shops lost US$143 million over eight years. By the time Starbucks entered in July 2000 with a selection of sweet drinks, the country had already established a strong network of small, independent cafés boasting espresso-based beverages. The result of this is an incredibly competitive industry of roasters and café operators that continue to push forward and service a population of just over 24 million. The winner from this rich Australian history of coffee is the consumer, who has access to such a broad range of quality coffee. Today, Melbourne is a melting pot of coffee

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shops hidden in laneways, tiny shop fronts, and clothing stores. Its reputation as a dedicated coffee city is thanks to its educated and passionate baristas and the consistent high standards found in million-dollar establishments to a temporary caravan popups. Most of all, its the discerning consumers who push businesses to bring their best. They know the difference between good and bad coffee, and are acutely aware that coffee is a crucial part to Melbourne’s cultural identity.

WBC RETURNS Every year, the seven World Coffee Championships head to different cities across the globe, going to the Specialty Coffee Expo, World of Coffee, and other trade shows. World Coffee Events (WCE), an event management organisation, selects each host city through a solicitation and vetting process designed to evaluate level of community interest, host preparation and support, and suitability under the Events Site Criteria framework. Just like the host cities of the World Cup and the Olympics, a huge global audience of baristas and coffee professionals is expected to descend on Melbourne for the 2020 event, and to explore the city’s unique coffee culture. “Melbourne is the epicentre of sports and

cultural events. It makes complete sense to have the World Coffee Championships hosted in the city that has led, in many ways, the global coffee renaissance. What better choice to host the competitions than a city that treats its coffee as seriously as its sports?” says ST. ALi Owner Salvatore Malatesta. Unofficially dubbed “the Coffeelympics’, the WBC is the preeminent international coffee competition. It focuses on promoting excellence in coffee, advancing the barista profession, and engaging a worldwide audience with an annual championship event that serves as the culmination of local and regional events around the globe. 2015 World Barista Champion and Ona Coffee Founder in Canberra Sasa Sestic says the announcement of Melbourne hosting the WBC is another example of Australia’s coffee culture influencing the world coffee scene. “The Australian specialty coffee community is among the most innovative and inspiration in the world. We are so proud and excited to once again host the WBC to share our love of specialty coffee with the world,” Sestic says. Australia will also host the World Brewers Cup (WBrC) competition, highlighting the craft of filter coffee, manual coffee brewing, and service excellence. While milk-based coffees represent more than 90 per cent of Australia’s coffee orders (flat white, latte, cappuccino), Managing Director of Veneziano Coffee Roasters Craig Dickson says that filter coffee is gaining traction thanks to more roasters providing quality filter roasts and baristas educating consumers on this tasty alternative to dairy or plant-milk beverages. “Australian baristas serve some of the best filter coffee on the market. Visually, there’s nothing more appealing than walking past a café with a barista pouring into a V60 or agitating a syphon. For this reason, it’s extremely exciting to have the world’s best brewers in town next May. No doubt it will build the profile for filter coffee even more,” Dickson says. For coffee professionals globally, hosting the World Coffee Championships is a dream come true. Melbourne hosted the industry’s premier event for the first time in 2013, and Dickson says to see it return in 2020 to a city so rich in coffee culture is an honour.

“It’s the ultimate celebration of the Australian coffee industry,” he says. “Australia has a proud history of podium placings in the world coffee competitions, and 2020 proves an incredible opportunity for one lucky Australian to fly the flag for their own country on the world stage, in front of a home crowd.” MICE2020 will take place at the Melbourne Convention and Exhibition Centre and host the WBC and WBrC over two stages. MICE has become the largest dedicated coffee show in the Southern Hemisphere. The event launched in 2012 with the purpose to connect buyers and sellers, and bring industry members together in a dedicated space. The 2019 event, which concluded in February, saw the highest daily record attendance figures in the event’s eight-year history. Total attendance for MICE2019 across the three-day event was 11,978, an increase over the previous record year in 2018, and that number is expected to climb with the show floor already selling fast. With an already impressive coffee culture, some may ask, ‘where to now for the Australian coffee market?’ but the answer is simple: Melbourne in 2020. G C R

MICE2020 Exhibition space for MICE2020 is now available. Don’t miss your chance to book a premium position. Contact MICE organisers at event.organiser@primecreative.com.au or +61 3 9690 8766. For more information, visit www.internationalcoffeeexpo.com A Brazil and Colombian coffee cupping attracts the crowds at MICE2019.

M A R C H/A P R I L 2 019 | GCR

ADVERTISING FEATURE mycoffeeworld.com

FRESH PERSPECTIVE US-BASED COFFEE CHAIN ROASTING PLANT HERALDS THE END OF STALE COFFEE WITH ITS NEW JAVABOT SMART AUTOMATION SYSTEM.

yCoffeeWorld Founder Pascal Schlittler has an eye for innovation. From how coffee is traded to how it is consumed, MyCoffeeWorld supports and invests in companies helping revolutionise the coffee industry. One company that has captured Schlittler’s attention is Roasting Plant. Using its patented Javabot system, Roasting Plant is the first multi-unit coffee operation to efficiently roast in every store. “Roasting Plant is a premium coffee shop that perfectly encapsulates the third wave of coffee’s focus on quality and freshness,” Schlittler says. “Javabot is a masterpiece of engineering. It provides an automated, consistent, and scalable way to roast a huge number of combinations of high-quality coffee on demand, which is absolutely unique.” Roasting Plant is the brainchild of Mike Caswell. With a background in industrial and manufacturing engineering as well as management consultancy, and an early stint at the seminal Coffee Connection in Boston, Caswell became a coffee industry executive when Starbucks recruited him as Director of Profit Improvement. In this role, Caswell reported directly to the Chief Financial Officer and analysed all aspects of Starbucks’ business profile to find ways of making it more efficient while also maintaining the brand. “I had an amazing experience working for Starbucks and it has done great things for the industry.

Javabot provides an automated, consistent and scalable way to roast a combination of coffees on demand.

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Over time though, as an engineer, I grew a little frustrated following a retail model that hasn’t changed in decades, and I knew that there must be a better way,” Caswell says. He set out on a personal mission to see if he could re-engineer the retail coffee model to be more than just an Americanisation of the Italian coffee house. “The challenge I gave myself was to see if I could find a way to offer high-quality, freshly roasted coffee with a choice of beans, and do it in a way that was easy and efficient for customers. Javabot was born out of this challenge and it allows us to offer just-roasted coffee in every store all the time,” he says. Roasting Plant assembled a team of experts including software and hardware engineers, to bring Caswell’s vision to life. Of course, its process begins with sourcing the best possible specialty coffee beans. The company’s Roast Master works directly with farmers to ensure the careful and sustainable selection and sourcing of coffee from the producers. The Roast Master then defines the best possible roast profiles used across each Roasting Plant café. Once imported, green beans are held in a series of nine storage towers, and can be automatically transferred via pneumatics as needed for roasting. The beans travel from the towers to the roaster through a series of clear tubes visible overhead by customers. The Javabot roasts in micro batches according to the Roast Master’s precise profiles, automatically accounting for changing ambient environmental conditions such as temperature and humidity. Roasted beans are used within seven days to ensure maximum taste and freshness. “While we are huge advocates of fresh coffee, we also understand that coffee is not at its peak of flavour immediately out of the roaster. We

let the coffee to rest before we brew it, so we’re always roasting ahead of demand by somewhere from 12 to 48 hours,” Caswell says. When a customer has selected their beverage, Javabot sends the exact amount of roasted beans needed to the barista to prepare the drink. This allows Roasting Plant to customise orders and post-blend on demand to suit individual customers’ tastes. “Regular customers become more curious as they hear beans fly through the tubes. As they ask more questions, the baristas might recommend a single origin bean or blend of up to four that they think the customer might like based on their tastes,” Caswell says. “We use four different categories based on how the coffee tastes, kind of like wine – strong and bold, aromatic and complex, mild and smooth, and sweet and delicate – to make it easy for the customer to make a selection.” Once satisfied with the consistency and quality of the Javabot, Caswell set out to create an identity and concept around the use of the technology. “We debuted and tested the Roasting Plant model in New York, in a small store on what was at the time a side street. We kept the venue under the radar as we worked out the kinks,” he says. “We went from New York to Detroit, Michigan where we developed our first fully branded flagship store. From there, Roasting Plant spread to Minneapolis, Denver, and San Francisco.” Chief Marketing Officer Tom Hartocollis says Roasting Plant is able to enact a business model previously thought of as impractical, if not impossible. “There have been small mom-and-pop roasters who started [roasting in each venue] but as they open more stores, they find the expertise required is too great. They begin distributing from their initial store and before you know it, they start distributing coffee beans to multiple stores and it becomes very challenging to maintain a fresh supply,” Hartocollis says. “Javabot is more than just a roaster. It allows us to ship green beans to the store, pour them into the system through an automated entry point, and deliver on demand to a roaster, and finally to the brewers and baristas in the exact quantity required by the cup.” Hartocollis says the most important aspect of Roasting Plant’s business model is its emphasis on freshness and its role in coffee quality. “Alfred Peet, the founder of Peet’s Coffee, said in 1966 his philosophy was that there should be

the shortest time possible between the roaster and the customer, to taste the full flavour and aroma of the coffee. He was fixated on this idea that people are missing out because coffee stales quickly,” he says. “The importance of freshness was always subjectively known, but a lot of research has since validated that concept. The latest clear documentation that’s available is the Specialty Coffee Association and Zurich University of Applied Sciences (ZHAW)’s The Coffee Freshness Handbook published in April 2018. It’s an exhaustive analysis of coffee freshness and various methods for trying to preserve roasted beans.” According to the handbook, roasted coffee beans are highly volatile, and rapidly oxidise and stale. ZHAW Coffee Excellence Center Head Dr Chahan Yeretzian identifies three attributes that ultimately determine cup quality: freshness, customisation, and consistency. “Freshness means getting the best out of our beans. It is at the heart of what we value within the speciality coffee community and can mean the difference between a truly unique experience versus a mediocre one,” he says. “Customisation begins with listening to the customers, and offering opportunities to find their very personal preferences. Then, consistency reflects the skills and training of those involved in preparing the customer’s individual cup.” Hartocollis says these three concepts are at the centre of Roasting Plant’s philosophy. “The parameters we use for roasting and brewing are tightly controlled and reflect the freshness philosophy in the book,” he says. Roasting Plant’s US success has provided the company with the means to expand even further, establishing its first international location in London, England in January. In the near future, Roasting Plant intends to strengthen its presence in its current markets, while steadily introducing the concept to new areas. Schlittler and his team are currently focusing on defining market strategies for the European market. “We always act with the customer in mind, and what’s best for them varies from market to market, so we want to make sure we land the retail experience correctly,” Hartocollis says. “We’re trying to improve the coffee-lovers experience and are mindful not to do things just because it’s the way things have always been done.” G C R

“Roasting Plant is a premium coffee shop offering a wide selection of high-quality coffees that can be roasted individually or blended in a huge variety.” Pascal Schlittler MyCoffeeWorld Founder

Mike Caswell FOUNDER/CEO Tom Hartocollis CHIEF MARKETING OFFICER Roasting Plant has a mission to become the world’s first choice in just-roasted coffee. The company’s proprietary Willy Wonka-like Javabot system micro-batch roasts coffee beans in every café, gives customers a choice from a wide selection of the highest quality specialty beans in the world and makes each custom cup to order. For more information, visit www.roastingplant.com

Pascal Schlittler MYCOFFEEWORLD FOUNDER MYCOFFEEWORLD.COM is an initiative & investment vehicle around Pascal Schlittler. The mission is to power and grow the future of innovation and business networks in the coffee industry. For more information, visit mycoffeeworld.com

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OPINION Kamal Bengougam

THE POWER OF

COMPETITION

EVERSYS CHIEF COMMERCIAL OFFICER KAMAL BENGOUGAM EXPLAINS HOW COMPETITION, THROUGH THE POWER OF INVENTION, ENHANCES PRODUCTS, LIVES, AND BOTTOM LINES.

his is the story of Aaron Avner, a farmer who grows excellent quality corn. Every year, Avner won the award for the best-grown corn. One year, a newspaper reporter interviewed him and learned something interesting about how he grew it. The reporter discovered that Avner shared his seed corn with his neighbours. “How can you afford to share your best seed corn with your neighbours when they are entering corn in competition with yours each year?” the reporter asked. “Why sir,” said the farmer. “Don’t you know? The wind picks up pollen from the ripening corn and swirls it from field to field. If my neighbours grow inferior corn, cross-

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pollination will steadily degrade the quality of my corn. If I am to grow good corn, I must help my neighbours grow good corn.” This parable seems to go against current thinking trends. People want to win at any cost and, if having weak competitors helps in achieving this goal, then so be it. The end seems to justify the means in this school of thinking, but what has weak competition ever contributed to the advancement of society, the common good, apart from the promotion of mediocrity? In the realm of individual sport, be it tennis, golf, or track and field events, we cannot fail but notice that competition is the elixir that spurs true athletes to stretch towards levels of performance that seem beyond the grasp of human possibility. Usain Bolt, Tiger Woods, Roger Federer, Cristiano Ronaldo, and Serena Williams are some examples that would not have achieved what they did were it not for the handful of aspiring challengers, which spurred them on to greatness. Even if history is not so kind, it fails to remember and honour those who had the courage to finish second and third. The thing with competition is that your best effort’s glass ceiling is called talent, a genetic lottery that separates the great from the greatest. If one cannot exceed inner potential, our role should just be to fulfill it and be content with that. We are extremely grateful in our little industry of super automatic espresso machines to be constantly challenged by some great organisations. Companies that believe that quality matters, people who are willing to challenge the status quo – the historical domination of

THE STRONG WILL ALWAYS SURVIVE WHILE THE WEAK WILL FADE AWAY. THE DEFINING FACTOR WILL NOT BE COMMITMENT NOR EFFORT, AS ALL OF TODAY’S COMPANIES HAVE THOSE. \ traditional machines, developing intelligent products and solutions, compelling us to strive towards even greater perfection in search of this elusive chalice we call the ‘perfect cup’. Technology should exist to enhance our daily lives, enabling us to focus on what matters most, as long as the master/slave relationship has been clearly defined upfront. Artificial intelligence should never supersede what was created either through divine intervention or a giant blast. Artifice means a copy of the original and while copies can come quite close to the root, it could never usurp it. A replica painting could never match the original the same way a cover song fails to capture the passion, intelligence, and spirit of its composer. A replica is nothing more than an accepted and honourable simile, a sort of half-truth, which while not a lie, is not a truth either. The same paradigm exists in the coffee world. Machines are not there to replace the barista. They are there to complement them, providing greater consistency, productivity, and connectivity. The barista can now remove their ‘factory workers’ apron and replace it with a painter’s easel, create new concoctions, and engage in dialogue with other fellow humans, a novel approach in some of our current institutionalised coffee chains. In my September/October 2018 column in Global Coffee Report , called ‘The Misery of

Choice’, I refer to the competitive landscape of coffee shops. I suggest that in order to thrive, espresso houses have to reinvent themselves into a community, an eco-system that could provide the magic thread that links us all. It is my belief that the whole of the retails industry, in order to survive, will have to re-invent itself too and focus more on human matters at the expense of products. Environments that promote emotional touch points will prosper and replace clever structures and processes. The components of success are often associated with products, but metal or plastic is often cold and devoid of emotion. It is the human touch that moves us into making decisions, engaging with life. The machine should be the tool – the instrument, which enables the artist to create rather than being the centrepiece, the defining matter of choice. I now use an electric toothbrush instead of a manual one but it is still I who needs to do some of the work. However, if that vibrating head enables me to do a better and more consistent job, it is bound to save me time, pain, and money with my local dentist. In a competition we have two choices: trash talk as in boxing, or let the results speak for themselves. I tend to compliment our rivals, as I know how much work it requires to excel in a competitive landscape. They deserve our unreserved respect and admiration for their commitment. It is they who compel our team each and every morning to drive innovation forward, to acknowledge pain as a friend and to seek perfection in all that we do. But do we still want to beat them? The answer is a resounding “yes”. We not only want to compete but win as well. However, we do not believe that the end justifies the means and that we should win at all costs. In order to excel, we need our competition to be strong and hopeful, and in my industry experience, they are. But I can see some of them wilting against the upcoming challenges while others are also thriving in the heat of competition. The law of nature will eventually prevail. The strong will always survive while the weak will fade away. The defining factor will be neither commitment nor effort, as all of today’s companies have those. The magic thread will be talent in all facets of the work. So it is with our lives and those who want to live meaningfully and well, to help enrich the lives of others. The value of a life is measured by the lives it touches, and those who choose to be happy must help others find happiness, for the welfare of each is bound with the welfare of all. GCR

Eversys Chief Commercial Officer Kamal Bengougam says competition needs to be strong and hopeful in order to progress the industry further.

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ORIGIN China

Eyes on Yunnan THREE DECADES OF EFFORT FROM THE PRIVATE AND PUBLIC SECTORS ARE FINALLY PAYING OFF AS COFFEE COMPANIES AROUND THE WORLD TURN THEIR ATTENTION TO THE YUNNAN PROVINCE.

lthough China has been growing coffee for more than 100 years, and especially so in the past few decades, the reality is that the country is still not widely known as a coffee producer. But the Chinese government, local producers, multinational roasters, industry organisations, and more are working to change that through efforts including greater international promotion, farm level programs and trainings, and investment in infrastructure and other resources. Meanwhile, the Yunnan Province, which produces more than 95 per cent of the country’s coffee, has helped China quietly become the 13th coffee producer globally and the numbernine Arabica producer, according to 2018 data from the US Department of Agriculture Foreign Agricultural Service. March’s Pu’er International Specialty Coffee Expo is one such effort to highlight the region’s burgeoning coffee industry and its specialty coffee sector. “As the region started to producer greater quantities and better qualities, we were looking at how to launch China into the international coffee market,” explains Tom Mitchell, Founder

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of Seattle-based consultancy Strategic Coffee Concepts, which is helping put on the annual forum and expo with the Yunnan International Coffee Exchange (YCE) and the Coffee Quality Institute (CQI). “We decided to host a forum to try to get some global recognition for what [the region is] doing and share information about the global coffee market with the local market.” Similarly, Tim Heinze, who has been working in the local industry for the past decade, wanted to bring more attention to the region, particularly for its emerging specialty coffee market.

with fermentation and honey processing (washed is the most common process currently). While farmers aren’t locked into tradition, they lack generations of tradition to reference as a young coffee producing region. “Because it doesn’t have the long history, there isn’t the experience that comes with having third- and fourth-generation coffee farmers,” Heinze points out, “so the government, along with internationally certified training programs, is providing opportunities for exchange of information and dialogue that can bridge that experience gap.” He doesn’t discredit Yunnan’s centuries of experience in other agricultural products. In fact, Pu’er is renowned for its tea production, a crop that conveniently harvests on the opposite schedule as coffee. But as global coffee demand expands and Yunnan coffee increasingly moves into the spotlight, more farmers have started growing coffee, too.

INVESTMENT DRIVES GROWTH

“When we started Yunnan Coffee Traders, a big vision for us was to put Yunnan on the map as a specialty coffee origin,” he says, attributing its absence largely to China’s relative newness to the global coffee industry. Even though European missionaries introduced coffee to Yunnan in the late 19th century, the crop didn’t gain traction until the late 1980s when the Chinese government, in association with the World Bank and the UN Development Programme, and Nestlé devoted time and money to the industry. Heinze says Yunnan’s youth compared to other producing regions is both a benefit and a limitation. “Farmers are excited to innovate and experiment,” he tells Global Coffee Report. “Whether it’s growing or processing methods or equipment, they’re definitely willing to hear about and consider different options. We don’t have the ‘this is how we’ve always done it’ mentality, which can be challenging to break.” Some recent examples in the region have included trialling new cultivars and experimenting

Seeing potential in Yunnan and supporting a government poverty alleviation initiative, Nestlé invested significantly in the region starting in the late 1980s. It started buying Pu’er coffee in 1992 and began providing farm-level technical assistance in 1994. By 2002 Nestlé was buying all of its Yunnan coffee direct from farmers. Over the decades it also developed an experimental and demonstration farm and constructed the Nescafé Coffee Center. “Nestlé has been a significant player in buying and driving volumes in the region,” says Heinze. “It has also done a great job of providing resources and tools to farmers who want to get started producing coffee.” More recently, Starbucks has also invested in the region. In 2012, it opened a Farmer Support Center in Pu’er, and last year it dedicated a significant grant to helping farming communities in line with the China Foundation for Poverty Alleviation. After years of work at the farm level, Starbucks released its first single-origin Yunnan coffee in 2017. Meanwhile, the government continues to invest in bringing attention and notoriety to Yunnan at an international level. In 2003, Pu’er launched the Coffee Industry Federation of China, later renaming it the Pu’er Coffee Association. In 2014, the YCE was created

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ORIGIN China

to support trade of Chinese green coffee, as well as develop farmer support programs and infrastructure, and implement quality control and grading systems. Since the big push in the late 1980s, Arabica production in China overall has been increasing exponentially – nearly 20 per cent per year on average, according to the YCE. At the same time, coffee companies big and small have been flocking to the region. “Over the past decade-plus we’ve seen most of the major green bean trading companies and import companies of the world moving in either through joint ventures with local companies or independently setting up their own offices,” explains Heinze. “There are more people talking about Yunnan than ever before.” The Pu’er International Specialty Coffee Expo highlights the region’s burgeoning coffee industry and its specialty coffee sector.

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THE POTENTIAL FOR SPECIALTY

As the greater Yunnan coffee industry expands, so does its specialty sector – though still comprising less than 10 per cent of total coffee production. Last year, China was the Portrait Country at the Specialty Coffee Association’s annual expo. There, the YCE announced a collaboration with CQI to develop 10 model farms across Yunnan devoted to increasing coffee quality through improved farming and processing practices. “Results have been promising [so far], with the country’s best coffees earning Q scores that rival coffees from some of the world’s most celebrated origins,” says YCE General Manager Shu Yang. “We believe the proportion of specialty coffee in Yunnan and the linkage to international markets will increase through expansion of the project.” Some of those roasters flocking to Yunnan are particularly interested in the burgeoning specialty market as they look to new, exciting coffee origins. But some skeptics question Yunnan’s potential in the specialty scene considering the region’s reputation for inconsistency and widespread use of Catimor, a variety that carries the stigma of being a commercial-grade variety and, thus, not capable of specialty-grade quality. Nestlé is also responsible for Catimor’s dominance in Yunnan, having widely distributed the variety early on, less for its quality and more for its hardiness, high yield, and resistance to disease.

While those characteristics are true and contribute to Yunnan’s healthy production volumes, Heinze also describes Yunnan Catimor as full bodied and creamy with chocolate notes and citrus acidity. It can be a “standout choice for a specialty espresso blend”, he says. “The coffee plays well with others by providing a solid base and fantastic mouth feel, and enhancing the notes of other coffees blended with it.” What’s keeping Yunnan from achieving large-scale specialty production, however, is largely its reputation for inconsistency. Strategic Coffee Concepts’ Mitchell says the entire industry has been “plagued by inconsistency” during its brief history because farmers “never really learned how to produce high-quality coffee.” So part of YCE’s work with CQI is to help farmers improve consistency. “Besides teaching farmers how to grow specialty coffee, it’s equally important to teach them how to produce good coffee consistently,” he tells GCR . Heinze says Yunnan also lacks the quality control standards necessary for consistent, specialty-grade coffee. Yunnan Coffee Traders has spent the past several years working with farmers to improve quality control and work toward producing large volumes of specialty coffee. There is still a long way to go, he says. “However, we continue to drive forward and work to put in place better quality-control parameters and provide training to improve quality as well.” Starbucks has opened a Farmer Support Center in Pu’er and donated a grant to help Chinese farming communities.

Yunnan is one of few global coffee regions experimenting with the optical coffee cherry sorter.

In addition to farmer training, Yunnan Coffee Traders has implemented China’s first optical coffee cherry sorter to improve efficiency and consistency, and to get more value out of the nearly seven tonnes of cherries that particular mill sees per day.

ALL EYES ON CHINA

Even though there is work to be done to truly bring Yunnan to its potential, the region is drastically further along than it was just 30 years ago – which was on the verge of extinction. According to the YCE, in the 2017-18 harvest season, Yunnan produced 2.3 million 60-kilogram bags of coffee across 120,000 hectares and 1.14 million farmers. As the government and private sectors pour resources into coffee, multinationals set up shop, specialty roasters look for the next exciting origin, and farmers embrace new ways of doing things, that exponential growth is forecast to continue. This is further supported by China’s strong infrastructure, stable economy and expanses of government-owned land open for cultivation – characteristics that are quite the opposite of most coffee-growing regions around the world. “China is on the verge of growing a lot more coffee,” Mitchell estimates. “People are finally awakening to the idea that China actually grows coffee, so there’s been a really strong uptick in interest levels.” Simultaneously, China is also consuming a lot more coffee, which has been driving interest at both ends of the value chain. In fact, China now has more certified Q graders than any other country, and the largest number of Starbucks of any country outside the Unites States. The YCE’s Yang says the Chinese coffee industry is in the midst of a transformation: “Once an afterthought in the global coffee landscape, China is now a burgeoning coffee origin and is poised to play an important role in the green coffee sector in the years to come.” G C R M A R C H/A P R I L 2 0 19 | GCR

DIARY Dashboard COFFEE COFFEE AROUND AROUND THE THE GLOBE GLOBE

GLOBAL COFFEE EVENTS

PU’ER INTERNATIONAL SPECIALTY COFFEE EXPO 2019

YUNNAN PROVINCE, CHINA

13 – 17 MARCH The Pu’er International Specialty Coffee Expo is back for its second year, hosted by the Yunnan International Coffee Exchange and the Coffee Quality Institute. It will introduce participants to the emerging Chinese coffee sector and provide an immersive opportunity to understand the history, culture, and taste of Chinese coffees. A two-day forum at the expo will also bring together more than 300 international and Chinese coffee industry professionals to share knowledge on coffee production, quality, sustainability, pricing, marketing, roasting, and retail operations. www.puercoffeeexpo.com

COFFEE EXPO SEOUL SEOUL, SOUTH KOREA

11 – 14 APRIL Co-organised by Coex and Korea Coffee Association, Coffee Expo Seoul is Korea’s premier coffee industry and equipment trade show, where exhibitors and buyers find new products and trends prior to the beginning of the summer coffee season. The expo will showcase hundreds of varieties of global coffee beans and tea leaves, milks, creams and related dairy products, state-of-the-art coffee machines, equipment and bar accessories, gourmet food, franchise and shop supplies, and more. www.coffeeexposeoul.com

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CAFÉ ASIA 2019

BAYFRONT AVE, SINGAPORE

21 – 23 MARCH Café Asia 2019 and International Coffee & Tea Industry Expo 2019 will be held concurrently to offer the ideal one-stop convenient hub for professionals to source supplies and explore business opportunities with both regional and international counterparts. South-East Asia’s biggest café, coffee, and tea exposition is the perfect place for professionals in the ASEAN region to understand the growth of Asia’s coffee and tea culture. www.cafeasia.com.sg

SPECIALTY COFFEE EXPO

BOSTON, US 11 – 14 APRIL The Specialty Coffee Association’s annual Specialty Coffee Expo will feature hundreds of exhibitors showcasing the latest and most innovative products on the market. Key features of the show include the Best New Product competition, Roaster Village, and Design Lab. Each year, the Expo hosts lectures and workshops, and for the first time in 2019, will welcome the Coffee Skills Program. The Expo will also host the 2019 World Barista Championship and World Brewers Cup. www.coffeeexpo.org

THE LONDON COFFEE FESTIVAL

LONDON, ENGLAND

RE:CO SYMPOSIUM

BOSTON, US 28 – 31 MARCH 10 – 11 APRIL The London Coffee Festival celebrates London’s bustling and vibrant coffee scene. The event, taking place at the Old Truman Brewery, will host a range of exhibits and interactive activities including the Coffee Masters competition, an espresso martini party, latte art live, school of chocolate, genius pods, tasting room, extraction lab, home barista workshops, and the True Artisan Café. Ten per cent of ticket sales will be donated to Project Waterfall to support life-changing water projects in coffee growing regions. www.londoncoffeefestival.com

WORLD OF COFFEE BERLIN, GERMANY

Through a mixture of speakers, interactive experiences and opportunities for conversation, Re:co looks at the specialty coffee market, the challenges ahead, and explores solutions. The event will shine a light on opportunities for growth and development, and delve into how these can be approached. Presentations will cover the coffee pricing crisis, the role of technology, macroeconomic dysfunction, profitability for producers, transparency, and more. www.recosymposium.org

WORLD COFFEE PRODUCERS FORUM

SÃO PAULO, BRAZIL

6 – 8 JUNE 10 – 11 JULY World of Coffee features over 200 of the world’s most innovative coffee industry suppliers, three full days of competitions and awards, inspiring symposiums, more than 40 lectures, educational workshops, and a packed social and networking program. The event will host the 2019 World Latte Art, Coffee in Good Spirits, Cup Tasters, and Cezve/ Ibrek Championships. www.worldofcoffee.org

The second WCPF will continue efforts and consider the actions necessary to solve scenarios that compromise the future supply of coffee. The forum invites the entire coffee production chain to the event with the purpose of acting jointly and co-responsibly. The 2019 Edition of the WCPF will bring coffee-growing nations together for discussions relating to common interest issues, such as the revenue of coffee growers, sustainable economies, environmental issues, climate and sustainability, increasing consumption, and market volatility. www.worldcoffeeproducersforum.com MARCH/APRIL 2019 | GCR

PRODUCTS Marketplace

COFFEE AND WINE In Coffee and Wine: Two Worlds Compared, Morten Scholer compares two popular beverages for readers with a thirst for knowledge. The comprehensive study examines the growing, producing, marketing and consumption of the two beverages – from tree to cup and from vine to glass. Scholer explains the technical topics about the beverages and the sectors using simple language, making the facts and figures accessible for all, from experts and professionals to consumers just enjoying coffee and wine. Speaking about the book, Scholer says, “It covers the topics in depth but is written in a nonscientific language. The reader may be an informed enthusiast or professional of one of the two products who is curious about the other.” Scholer was a senior adviser on the United Nations’ coffee projects in producing countries for 14 years, and is the co-author of several publications. His interest in wine stems from the first time he picked grapes on holiday in France in the 1970s. For more information, visit www.troubador.co.uk and visit its bookshop

VA358 WHITE EAGLE The VA358 White Eagle is consistent, reliable, and efficient. Thanks to Victoria Arduino’s T3 technology, baristas can set different water temperatures, water infusion, and steam per group. This provides the user with greater control of the water supply’s thermal accuracy, which results in temperature stability and ultimately, a perfect espresso. Thermal insulation guarantees the barista’s safety, and provides easier cleaning for greater hygiene. The VA358’s new Cool Touch thermally insulated wand avoids annoying burns and can speed up cleaning of the espresso machine. For more information, visit www.victoriaarduino.com

NEOROAST Neuhaus Neotec has developed a new generation roaster to enable small and specialty roasting companies to profit from the advantages and flexibility of air flow roasting. The new roaster, called Neoroast, will be available in 15- and 30-kilogram batch sizes. Neoroast offers flexibility in batch size, considerably higher than that of traditional drum roasters. Roasting time is flexible too. The Neoroast ensures short roasting times for light roasts, and long-term roasting to optimise flavour and taste development. The compact roaster adopts the hot-air roasting process Neuhaus Neotec’s RFB roaster is well known for, including all the advantages of roasting in the hot air stream. For more information, visit www.neuhaus-neotec.de

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SCHAERER COFFEE SOUL In the Schaerer Coffee Soul automatic coffee machine, Schaerer underlines its wide-ranging coffee expertise and instinct for market trends with its new Hot & Cold technology. Under the motto of “brewed hot, served chilled”, the freshly ground beans are first brewed conventionally. The beverage cooling system then chills the coffee to between 30°C to 35°C while it flows into a glass or cup. This principle opens up whole new possibilities for creating a large range of refreshing coffee specialties to the highest level of taste and quality – with or without ice cubes. For milk-based beverages, Schaerer’s patented Best Foam milk system supplies cold milk as well as baristastandard milk foam in up to four different consistencies. For more information, visit www.schaerer.com

RYCHIGER FS 190 The Rychiger FS 190 is based on a rotary indexing table that can be equipped with individual process modules for a wide range of applications. Thanks to the flexible arrangement of the process modules, the machine can be adapted to many different products, such as Dolce Gusto and Nespresso compatible capsules. For portion packs that require a greater number of process modules, the FS190 can combine two FS 190 machines to form one processing unit. It fills, weighs, and seals capsules, as well as many other product-specific processes. Features of the FS 190 includes an independent lower tool working cycle, tools designed for accurate sealing force adjustment, individual temperature control for each sealing tool, knee-lever sealing system with servo drive, and optional integration of gas-tight section for sealing in shielding gas atmosphere. For more information, visit www.rychiger.ch

WMF 5000 S+ WMF is now able to deliver its unique digital solution packages as standard to customers in a performance class that caters to upscale coffee requirements. To ensure delivery of consistent, high-quality coffee, the WMF 5000 S+ monitors its own operation and automatically adjusts its settings if necessary. The technologies that make this possible include Dynamic Milk Assist for perfect milk management, Dynamic Coffee Assist to ensure consistent high quality of espresso, and the telemetry solution WMF CoffeeConnect. Recommended to suit an average daily requirement of 250 cups and with dimensions of 32.5 x 59 x 71.6 centimetres, this premium fully automatic machine can provide a superior digital coffee experience even in situations where space is tight. For more information, visit www.wmf-coffeemachines.com

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LAST WORD Sawyer

I, SAWYER HENN NA CAFÉ IN TOKYO TAKES THE PRINCIPLES OF AUTOMATIC COFFEE MAKING TO THE NEXT LEVEL, ALMOST OPERATING WITHOUT ANY HUMAN STAFF. SAWYER IS THE SOLE EMPLOYEE OF HENN NA CAFÉ in Tokyo, Japan. Working eight hours a day – nine on weekends – Sawyer prepares every coffee order at the Shibuya Modi department store venue, be it espresso or filter, with a consistency few other baristas could match. Not only does Sawyer do it alone, Sawyer does it with one arm too. Sawyer is a robot. Henn na Café, meaning “strange” or “changed” in Japanese, opened in February 2018 and operates entirely automatically. There is no human barista. Sawyer serves freshly brewed filter and espresso coffee using Melitta equipment. Japan-based travel agency H.I.S. opened Henn na Café following the success of its 12 Henn na Hotels, which also operate without human staff. Instead, robot concierges, and in some cases automated dinosaurs, greet and attend to guests. Jiro Oma, Marketing Manager at Melitta Japan, says Henn na Café is the result of a collaboration between Melitta, H.I.S. and Sawyer’s developer, American robot manufacturer Rethink Robotics. Melitta became involved in the project when H.I.S. reached out regarding an automated filter coffee machine. Melitta provided the Poursteady machine, which is currently used by Sawyer at the café. The pour over device has five individual filter stations that allow coffee recipes to be adjusted one by one. “It only requires the press of a button. The machine is so simple a robot can operate it,” Jiro says. “We also proposed to H.I.S. how the robot could grind the coffee, how it should be brewed, and which fully automatic espresso machine to use.” Melitta suggested its XT4 model be installed due to its simple design and usability. The company also assisted with the development of the venue. “Melitta helped H.I.S. with the coffee shop layout, from where Sawyer should grind the coffee beans to the placement of the fully automatic and pour over machines,” Jiro says. At Henn na Café, guests select and pay for the drink they want at a terminal, then receive a coupon with a QR code. They scan this receipt at the counter and Sawyer starts to prepare their coffee. When customers order drip coffee, Sawyer begins by placing the cup in the automatic pour over station. It then grinds the coffee and pours the grounds into the cone filter. The filled filter is placed back into the station, and the brewing process starts. At the filter station, hot water runs through the ground coffee

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and filters into the cup. Finally, Sawyer serves the beverage at the counter before cleaning the filter for its next use. “When a human prepares pour over coffee, the barista makes their best effort to brew the coffee consistent in quality and taste, but it is very difficult. An automatic machine is a solution to make it simple, stable, and offer good coffee quality consistently,” Jiro says. When an espresso-based beverage is selected, Sawyer places the cup under the Melitta Cafina XT4’s outlet, presses the button for the chosen drink, and serves the filled cup. The fully automatic Melitta coffee machine handles the grinding, brewing, milk frothing, and mixing processes. Jiro says the café has seen a good response, with consumers still very interested in the café more than a year after it opened. “It is a kind of surprise having no staff at the café, and Sawyer and the pour over machine offer great appeal to customers coming to the coffee shop,” he says. Though customers are reportedly satisfied with the quality of Sawyer’s coffees, some say its latte art leaves something to be desired. G C R

Not content with working on an assembly line, Sawyer instead chose to follow its passion in coffee and customer service.

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