GCR May 2019 by Prime Creative Media

MAY/JUNE 2019

COFFEE FINDS A HOME

China’s booming industry and the big names competing for marketshare

COLLATERAL DAMAGE

Nicaragua’s politicial crisis takes its toll

CLOSING THE GAP

New ICO research shows variation in production costs and farm profitability

IN THE EYE OF THE STORM Puerto Rico’s coffee industry gets a new lease on life

SOLUBLE

SOLUTIONS

DIRECTOR OF BUENCAFÉ CONSTANZA MEJÍA ON HELPING INCREASE THE ECONOMIC SECURITY OF MORE THAN 540,000 COLOMBIAN FARMERS www.gcrmag.com

CONTENTS May/June 2019

COVER STORY

CONSTANZA’S COMMITMENT

Buencafé Director Constanza Mejía talks about 33 years of devotion to Colombia’s premium soluble coffee supplier and why global demand remains strong for freeze-dried coffee.

IN THIS ISSUE FEATURES

10 LEADING LADY

Buencafé Director Constanza Mejía on the growth and demand for Colombia’s soluble coffee production

15 COFFEE FINDS A HOME

A look at the booming Asian market and the big names competing for marketshare

21 CLOSING THE GAP

I nternational Coffee Organization research shows variation in production costs and farm profitability

24 UAE’S COFFEE HQ

The Dubai Multi Commodities Centre has inaugurated the first coffee centre of its kind in the Middle East

28 COLLATERAL DAMAGE

Nicaragua’s political crisis takes its toll on the nation’s coffee industry

33 DESPERATE TIMES

Colombian Coffee Growers Federation CEO

Roberto Vélez on why Colombia might leave the New York Stock Exchange

PROFILE

36 SETTING THE SCENE

Hemro Group’s Ilan Maimon on how usability and connectivity will guide the future of coffee grinding

38 QUESTIONS AND ANSWERS

How MPE has created a suite of evolutionary and revolutionary products by asking customers, ‘what if?’

40 GOOD MORNING, VIETNAM

Tinnghia Group has inaugurated a US$30 million instant coffee plant, with the help of Neuhaus Neotec and Devex

42 CONNECTING THE CHAIN

The World Coffee Producers Forum will bring together the entire coffee production chain to address the industry’s most challenging issues

46 THE NEXT GENERATION

My Coffee World addresses the market’s waste issue with biological coffee capsules

OPINION

48 SIMPLICITY IN A COMPLEX WORLD

“THE KEY HAS BEEN TO LEARN FROM DIFFICULT TIMES, TO LOOK AT CHALLENGES WITH OPTIMISM, AND TO KNOW HOW TO INTERPRET WHERE WE SHOULD GO, WITHOUT LOSING OUR ESSENCE AND OUR NORTH.” Constanza Mejía

Director of Buencafé

Eversys Chief Commercial Officer Kamal Bengougam on why the natural expression of origin is at risk

ORIGIN

50 IN THE EYE OF THE STORM

Puerto Rico emerges from of the brink of natural disaster and into a future of optimism

LAST WORD

58 OUT OF THIS WORLD

One small step to brew coffee in space, another giant leap to roast it

REGULARS 04 EDITOR’S NOTE 07 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

CALL ME? MAYBE There are some people you know as an online acquaintance. Perhaps it’s the nature of our digital age or the speed of response, which admittedly is quicker than sending a formal letter, but many relationships these days begin with an email that says “To Mr X” and ends with “Kind regards”. When the rare opportunity to meet face-toface presents itself, it offers an opportunity to get to know someone beyond their online demeanour. Such was the case when I got to spend time with Eversys Chief Commercial Officer and GCR contributor Kamal Bengougam in Melbourne. Although we had met each other at trade shows around the world, dinner at a local restaurant saw us talk for hours beyond a few paragraphs that typically sits “unread” in your inbox. We talked about the industry, leadership, faith, wine, and marriage anniversaries. The only digital interaction we had was a selfie for a lasting memory. Over in China, however, it’s technology that’s bridging the gap between coffee and consumers. Coffee companies such as Luckin and Starbucks have invested significantly in tech, a driver of China’s consumer market, to reach their target audience with apps for ordering, payment, bonuses, a virtual store, and even social engagement (see page 15). At the other end of the scale, sometimes it’s just good old-fashioned communication that resonates when it matters most. With a 16hour time difference between Australia and Colombia, an early morning call with Roberto Vélez, Chief Executive Officer of the Federación Nacional de Cafeteros de Colombia, had me on the verge of tears as Vélez spoke candidly

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about the struggles of Colombian farmers. His emotion was evident as he explained Colombia’s desperate situation where prices paid to the growers simply do not cover the cost of production. Vélez’s comments came on the same day that the World Coffee Producers Forum declared the need for urgent action on international coffee prices as they fell to the historical low of US$0.95 per pound on 22 March. Further to the declaration, Vélez has planned the months ahead just “moving and talking” to help find a solution to one of the industry’s greatest problems. Sometimes, we take our conversations for granted. Sometimes, we need to hear emotion in order for a message to be relayed and understood, and in the case of our producing countries and friends around the world, we need to listen. As I prepare to fly from Australia to the United States to attend this year’s Re:co symposium and Specialty Coffee Expo, I take comfort in the fact that I can disconnect from the digital world for 23 straight hours. God forbid I have to talk to the passenger next to me and interact in a conversation. Then again, I might just meet someone worth staying connected with.

Sarah Baker Editor, Global Coffee Report

Alexandra Duffy alexandra.duffy@primecreative.com.au 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, Christoph Saenger PHOTOGRAPHY Julian Madrid, Johnny De Los Santos 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

Global Coffee Report Magazine is available by subscription from the publisher. The rights of refusal are reserved by the publisher.

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.

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.

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NEWS In brief

NEWS DRIPBYDRIP EUROPE While Europe and East Asia (Japan and Korea) dominate freeze-dried soluble consumption, Buencafé says demand has been more rapid in emerging markets, such as China, India, and the Middle East. According to LMC International data research in the Global Markets for Soluble Coffee Report for Western Europe, freeze-dried has a large soluble market share in Switzerland at 80 per cent, while in Germany and France the share is around 50 and 45 per cent respectively. In the United States, freeze-dried coffee is now estimated to account for 12 per cent of the soluble market. Buencafé exports its production to 60 countries on five continents, with its main clients in Russia, the US, the United Kingdom, and Japan. See page 10. MyCoffeeWorld, an investment vechicle from Pascal Schlitter, supports and invests in companies to help revolutionise the coffee industry. This includes the Droops Coffee Maker concept, which produces coffee using dissolvable capsules designed by Singaporian industrial designer Eason Chow. The casing – a combination of coffee, water, and biological material – is dissolvable. Once launched, Droops plans to make its pods customisable, resembling logos or shapes that represent the coffee. See page 46.

AMERICAS At the 124th Session of the International Coffee Council, which took place during the last week of March 2019 in Nairobi, Kenya, the International Coffee Organization

Eversys Chief Commercial Officer Kamal Bengougam says the evolution of flavour is masking our senses and putting the natural expression of origin at risk.

unveiled in-depth farmer-level data, collected as part of the Transsustain research project from the University of Münster in Germany on the distribution of costs and profitability across farmers in Colombia, Costa Rica, and Honduras. The results found that the average production cost in Honduras was US$0.79 per pound compared to Colombia at US$1.39 per pound and Costa Rica at US$1.31 per pound The highest fraction of labour costs is found in Colombia at 75 per cent. See page 21. As of July 2018, human rights group Asociacion Nicaraguense Pro Derechos Humanos put the death count of Nicaraguan protests at 448. An estimated 700 people have been arrested, with half of them still detained. Due to the political unrest, the Alliance for Coffee Excellence announced the temporary cancellation of the

2019 Nicaraguan Cup of Excellence competitions. Prices have been low for the past three or four years. The cost of production in Nicaragua is approximately US$140 per quintal (100 pounds). See page 28. The World Coffee Producers Forum declared the need for urgent action on coffee prices on 26 March, when organisers released an official declaration calling for serious and immediate action to be taken on the historically low international coffee price of US$0.95 per pound as of 22 March 2019. Thirteen coffee producer groups, including the the Federación Nacional de Cafeteros de Colombia (FNC), Colombia’s largest rural nonprofit organisation, were listed on the declaration. Roberto Vélez, Chief Executive Officer of FNC, says the Colombian coffee communities are at a point where the coffee value chain, as a whole,

8.5%

The percent at which Allegra World Coffee Portal’s Project Café Middle East 2019 report estimates the number of branded coffee outlets in the UAE increased in the past year.

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NEWS In brief

cannot continue without serious outcomes. It’s at risk of becoming a humanitarian crisis. The industry is estimated to be worth between US$250 billion and US$300 billion. Out of that, Vélez says coffee farmers get less than 10 per cent. See page 33. Modern Process Equipment (MPE) has grown over 50-fold since 1982, with 97 per cent of its products new. Its goal is to continue to grow, and in another 37 years, have the majority of its products be those not yet invented. Its most recent development is the In Situ grinder, a small roller grinder but with all the same technology incorporated from MPE’s large grinders. As such, it can sit on top of capsule packaging machines and supply an optimal grind. See page 38. In its second edition, the World Coffee Producers Forum will take place in Campinas, Brazil at the Royal Palm Hall from 10 to 11 July. This year, the two-day event will see a panel of industry leaders highlight challenges within the coffee community and offer solutions through a variety of forums and workshops. Forums will be centered around three pillars of sustainability (social, environmental, and economic), climate change, and productivity levels. See page 42. The Puerto Rican coffee industry is rebuilding after hurricanes wiped out 80 per cent of the island’s crops, causing a loss of US$780 million in agriculture yields according to the US Department of Agriculture. World Coffee Research estimates that about 20 million plants would be needed for farm renovations

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and that they could probably get there in three years. See page 50. California-based start-up Space Roasters is aiming to produce the first batch of coffee roasted in space. The company’s space roasting capsule is the brainchild of International Space University graduates Anders Cavallini and Hatem Alkhafaji. Space Roasters aims to make its first sub-orbital launch in late 2019 or early 2020. The company is in contact with a number of launch providers to make this a possibility. See page 58. Hemro Group Managing Director of Innovation and Technology Ilan

ASIA PACIFIC Maimon helped established grinder manufacturer Heycafé to cater to anticipated market growth in China and its surrounding countries.

Heycafé began production in 2006, and quite quickly became the strongest brand in Asia for entry-level coffee grinders. The brand grew quickly in Thailand, the Philippines, Malaysia, Indonesia, and China.” The Hemro Group took notice of Heycafé’s success and formed a partnership with the brand in 2016. Heycafe joined Mahlkönig, Anfim, and Ditting as a full-fledged member of the group in late 2018. See page 36. Vietnamese green coffee trader Tinnghia Group has inaugurated a US$30 million instant coffee production plant using technology from Germany-based Kahl Group subsidiaries Neuhaus Neotec and Devex. Located just outside Ho Chi Minh City, the plant – in its initial production phase – produces 350 kilograms of instant coffee per hour, or a yearly output of 3200 tonnes. By the end of 2019, Tinnghia plans to increase

production to 5000 tonnes per year, with the goal to increase local consumption. See page 40. According to Allegra World Coffee Portal’s Project Café Middle East 2019 report, the number of branded coffee outlets in the United Arab Emirates increased 8.5 per cent in the past year to 1265. Today, Starbucks, Costa, and Tim Hortons are the top three market operators by outlet numbers in the UAE, at 169, 150, and 95, respectively. Coffee consumption has jumped from an estimated 1.4 billion cups per day in 2012 to an estimated 3.4 billion cups per day in 2016. Capitalising on this market growth, the Dubai Multi Commodities Centre inaugurated its new 7500-square-metre Coffee Centre in late February at the annual Gulfood international food and beverage expo. See page 24.

Vietnamese coffee company Tinnghia has invested US$30 million in an instant coffee production plant using technology from Devex and Neuhaus Neotec.

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COVER STORY Buencafé

Leading lady CONSTANZA MEJÍA, DIRECTOR OF BUENCAFÉ, IS FOCUSED ON HELPING INCREASE THE PROFITABILITY AND ECONOMIC SECURITY OF MORE THAN 540,000 COLOMBIAN FARMERS THROUGH ONE OF THE WORLD’S PREMIUM SOLUBLE COFFEE SUPPLIERS.

n a society driven by ambitious youth seeking new opportunities and monetary gain, it’s rare to find employees committed to long-term company loyalty, but not at Buencafé. Constanza Mejía has contributed 33 years of professional work to the development and service of Colombia’s leading gourmet soluble coffee suppliers. Operating as part of the Federación Nacional de Cafeteros de Colombia (FNC), Buencafé is not just a job for Mejía – it’s a personal responsibly she has to the development of Colombia’s coffee producers, and making Buencafé one of the most innovative and progressive companies in soluble coffee. “I really enjoy my work. I learn every day,” Mejía says. “We managed to materialise dreams. But above all, our work makes sense because we know that our effort benefits coffee families.” Mejía says the different positions she’s experienced at the company has given her multiple opportunities to contribute to the wider community, and this, she says, fulfills her as a person. Mejía has watched Buencafé evolve and transition since she started in the staff development division in 1986, one month after graduating as an industrial engineer. A year later, Mejía was promoted to Head of Information Technology, and then to Managing Director, before serving as the company’s General Director since 2009. “I have accompanied the history of this organisation for 33 of its 45 years of life,” Mejía says. But as is the case for so many Colombians, coffee was entrenched in Mejía’s life from a young age. She grew up drinking filter coffee, but says from the moment she tried Buencafé’s

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Images: Julian Madrid

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COVER STORY Buencafé

freeze-dried coffee, she was a fan. Even now, Mejía carries sticks of Buencafé coffee in her handbag when she travels. “The smell of coffee marks the beginning of each day’s activities. In my region [Manizales in the state of Caldas], coffee has been the pillar of development,” Mejía tells Global Coffee Report. “I grew up in a region where coffee is at the heart of the economy. It is the conversation topic. It is hope. It is pride.” Mejía is passionate about keeping that conversation alive through Buencafé’s partners and customers. Since 1927, Colombia’s coffee institution, the FNC, has worked to uphold the economic and environmental sustainability of coffee, and improve the quality of life and income of Colombian coffee growers. Considered one of the biggest rural non-governmentorganisations in the world, the FNC owns and works with several entities to help secure the wellbeing of Colombian coffee growers and their communities. This includes Cenicafé, the Manuel Mejía Foundation, Almacafé, Cooperatives Committees, and Buencafé – all of them working in an inegrated way. FNC established Buencafé in 1973 to add value to the most celebrated product of the country, and generate further welfare for coffee growers by transforming green beans into freeze-dried soluble coffee. The profits from the exported products are invested into benefits for 540,000 Colombian coffee growers’ families to help secure the present and future of the coffee activity in Colombia. Mejía says Buencafé has become a leading premium soluble coffee supplier due to five key pillars: the fact that it uses quality raw 100 per cent Colombian Arabica coffee, sophisticated and careful slow roasting, specialisation in freeze-drying, expertise in logistics, and the connection to its people – the producers. “We feel proud and motivated by the fact [we are] working for Colombia’s coffee growers in a producing country where more than two million people work around this product, a flagship for the country,” Mejía says. Buencafé has specialised in freeze-drying coffee for the past 45 years. It has the only

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freeze-dried coffee factory in Colombia, and is one of the largest in the world under the same roof. Today, the company can process 13,500 tonnes of concentrated coffee extract and freezedried coffee each year, with raw material purchased from coffee growers throughout Colombia. During the freeze-drying process, the coffee extract is frozen at -50°C to avoid the loss of aromas and attributes of the fruit. When subjected to a vacuum, less than one 1000th of the atmospheric pressure, Mejía says it is possible, by adding marginal heat, for the water remaining in the frozen extract to pass directly from the solid state (ice) to the gaseous one (vapour), a process known as sublimation. “The fact that the product remains at very low temperatures and without contact with hot air [in vacuum conditions] allows the delicate aromas to remain in the freeze-dried coffee grains, thus generating a beverage of excellent features and quality that has earned international recognition,” Mejía says.

“WE FEEL PROUD AND MOTIVATED BY THE FACT [WE ARE] WORKING FOR COLOMBIA’S COFFEE GROWERS IN A PRODUCING COUNTRY WHERE MORE THAN TWO MILLION PEOPLE WORK AROUND THIS PRODUCT, A FLAGSHIP FOR THE COUNTRY.” Constanza Mejía

Director of Buencafé

Buencafé’s concentrated extract is also considered one of its most popular products, commonly used as a base in ready-to-drink beverages. Buencafé exports its production to 60 countries on five continents, with its main clients in Russia, the United States, the United Kingdom, and Japan. Buencafé provides its customers with holistic solutions in all stages of product development, from developing an idea to delivering a final product anywhere in the world. This can include personalised labelling to complement customers’ retail offering or for industrial purposes. “Russia and the UK are the largest soluble coffee consumers in the world,” Mejía says. According to 2018 LMC International data research, the freeze-dried proportion of in-home soluble sales in Russia grew from around 40 per cent in 2005 to more than 60 per cent in 2013 as urban incomes rose and consumers sought more expensive and higher quality products. A 2016 Nielsen Global Premiumisation Survey says the premium sector is experiencing strong growth in several markets around the world, and is outpacing total growth for many categories of fast-moving consumer goods. According to the report, between 2012 and 2014, the premium segment grew 21 per cent in South-East Asia, more than double the rate of the mainstream and value tiers (eight and 10 per cent respectively). Premium products grew 23 per cent over the same period in China. In Latin America, growth in the premium segment outpaced total fast-moving consumer goods growth in every market except Mexico over the 12 months ending June 2016. The Organization for Economic Cooperation and Development predicts the global middle class will increase from 1.8 billion in 2009 to 4.9 billion by 2030, with the bulk of this growth coming from emerging markets, particularly Asia.

With more money available in the middle class, Buencafé says many people are already trading up for products and services they couldn’t previously afford. In addition, globalisation has given consumers access to a broader assortment and access to premium products, including freeze-dried coffee. According to the LMC International Global Markets for Soluble Coffee Report for Western Europe, freeze-dried coffee has a large soluble market share in Switzerland at 80 per cent, while in Germany and France the share is around 50 and 45 per cent respectively. In the US, where soluble coffee has in the past been viewed as a “budget option”, freeze-dried coffee is now estimated to account for 12 per cent of the soluble market. “Australia and other countries, such as the US, that previously believed soluble coffee was of poor quality, are finding rich coffee alternatives like ours, of excellent raw materials, cutting-edge technology and the best flavour, combined with the practical lifestyles that consumers in different countries demand,” Mejía says. To help strengthen that message and respond to a new world of demanding consumers, Buencafé set itself the task of understanding how it could better respond to a premiumised world. Buencafé presented the challenge to its team of technical experts and advisers. More than four years later and an investment of several million dollars, the result is Sensoria, a new cutting-edge technology present in all stages of the production process of freeze-dried coffee. Sensoria, a reality as of 2019, will give Buencafé more versatility to expand its portfolio with a new family of full-tasting and high-quality products, and more diverse cup profiles. This technology will help extract and preserve the aromas and flavours from roasted coffee. While Europe and East Asia (Japan and Korea) dominate freeze-dried soluble consumption, Buencafé says demand has been more rapid in the emerging markets, such as China, India, and the Middle East. This is largely a result of “third wave” or even the “fourth wave” coffee roasters launching freeze-dried soluble products made from

specialty coffee or single origins. As such, the FNC and Buencafé understand the demand from global markets and will use its new Sensoria technology to expand its product offering throughout international markets. Mejía says Buencafé is poised for this grow th with recent enlargements of the factory to increase production and guarantee the availability of products year-round. To further support this growth, Buencafé will use 2019 to focus on its customers and how they can play a role in the industry’s value chain. Buencafé will also focus on blending its coffee with other functional products and ingredients that are good for health and consumer well being, and capitalising on the popularity of cold brew and the “fashionable” bubble coffee. “The world market is increasingly demanding in terms of the products that are consumed, so quality, safety, and impact of processes on the environment [must be] taken into account when purchasing them. That is why environmental, product, and management systems certifications have become a seal of guarantee, consistency, and trust for consumers of Buencafé products,” Mejía says. Twenty years from now, Mejía hopes to be in a space surrounded by a lot of nature, cultivating a garden, or an orchard, perhaps with some grandchildren. As for Buencafé, Mejía envisages a company that continues to remain relevant with a range of innovative premium products and a culture that connects the brand even more so with consumers. “I [still] feel like I have a lot to give,” she says. “We want to permeate the society that surrounds us with our optimism, with the certainty that an open and friendly attitude makes the problems look different.” Those challenges include Colombia’s production capacity growth, the emergence of new markets, customer satisfaction, and the social, environmental, and economic sustainability of the sector. Mejía says it’s been difficult to find ways for Buencafé to deliver good results in various economic scenarios, for the company to project itself into the future, and to contribute to the development of coffee growers, workers, and the region. However, Mejía is most proud of how Buencafé has managed to reinvent itself, “because the setting of its creation is very different from today’s and tomorrow’s. “The key has been to learn from difficult times, to look at challenges with optimism, and to know how to interpret where we should go, without losing our essence and our north,” Mejía says. “We want to be increasingly better in what we do, that this be a place where people want to work and contribute, that we continue building for the wellbeing of coffee growers and the country.” G C R Constanza Mejía says Buencafé approaches Colombia’s production and economic challenges with optimism.

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FEATURE China

Coffee finds a home in China RISING INCOMES AND AN EXPANDING POPULATION OF INCREASINGLY ASPIRATIONAL AND DIGITAL CONSUMERS ARE HELPING A VIBRANT COFFEE CULTURE FLOURISH IN A COUNTRY THAT STILL LARGELY PREFERS TEA.

hile coffee growing in the Yunnan Province in southwestern China is experiencing quite the renaissance, coffee consumption on the other side of the country is also seeing significant action. The predominantly tea-drinking country has developed a strong appetite for coffee, with both consumption and the number of offerings increasing at rapid rates. According to a 2015 report (latest data available) from the International Coffee Organization (ICO), coffee consumption in China increased an estimated 16 per cent per year on average

in the 10 years to 2015. While the growth is significant, China’s massive population of 1.4 billion people brings down the country’s global ranking of coffee consumption at the per capita level. Although the vast majority of that consumption has been instant, according to ICO, “the rising popularity of coffee shops

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FEATURE China

and coffee culture in general is promoting growth in fresh roast and ground coffee”. Coffee’s third wave has been taking a greater hold in recent years, with Chinese coffee consumers increasingly interested in high-quality coffee and exceptional café experiences. As China’s consumers have been turning their attention toward third wave coffee, investors and foreign coffee brands have been turning their attention toward China. Starbucks was first to open shop in China back in 1999. Today, it has 3600 stores and nearly 50,000 employees in more than 150 cities. While the company has steadily expanded there despite skepticism over entering a tea-drinking country, Starbucks has recently ramped up growth plans in line with growing consumer appetite. China is now the company’s fastest-growing market, with a new store opening every 15 hours, according to the Seattle-based company. Chinese consumer market analyst Joel Bacall attributes some of China’s coffee boom to Starbucks itself. “It’s such a strong success story here in that it really did drive the category,” says the Associate Director at The Silk Initiative in Shanghai, a brand strategy consulting firm specialising in food and beverage. “They have done really well not only with their product

mix, but also with selling the experience and the lifestyle, which is really driving the emotional bond with the consumers here.” With Starbucks and Peet’s Coffee responsible for introducing the high-quality coffee movement to the United States in coffee’s second wave decades ago, the progression has been happening similarly in China, albeit delayed. Starbucks is now a household name in the country, while independent artisanal shops open as the third wave gains steam. “The Starbucks and Nestlés gained dominant positions in the China market

China is Starbucks’ fastest growing market, with a new store opening every 15 hours. It currently has 3600 stores in more than 150 Chinese cities.

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The Cartesian Capital Group plans to open more than 1500 Tim Hortons cafés throughout China over the next decade.

“TECH PROBABLY PLAYS MORE OF A ROLE IN CHINA THAN IN OTHER COUNTRIES, SO SOME OF THE BETTER PLAYERS IN SHANGHAI PLAY UP TO THAT SELFIE CULTURE.” Joel Bacall

Chinese consumer market analyst

first, but now Chinese consumers [and] a growing crop of local purveyors are entering the market at a time when the global coffee industry en masse is shifting to specialty beans and higher quality,” reports Damian Ma, Director of MacroPolo, a think tank focused on the Chinese economy. To continue progressing with consumer preferences, Starbucks has opened a number of stores in China that put a stronger focus on the third wave market, including its Reserve Roastery in Shanghai. The 2800-square-metre Roastery is Starbucks’ second Roastery and its largest store in the world. Meanwhile, other household coffee chains from around the world have also been tapping into China’s booming consumer market. The United Kingdom’s Costa Coffee, China’s secondlargest foreign coffee chain, first entered in 2009. By 2017, it had more than 400 stores. Ramping up activity, Costa plans to triple that number by 2022. In February, Canadian chain Tim Hortons opened its first Chinese location in central Shanghai. “China’s population and vibrant economy represent an excellent growth opportunity for Tim Hortons,” President Alex Macedo tells Global Coffee Report. “We have already seen Canada’s Chinese community embrace Tim Hortons and now have the opportunity to bring the best of our Canadian brand to China with established partners that have expertise in the industry and the country.” In July 2018, the company entered an exclusive franchise joint venture agreement with Cartesian Capital Group to open more than 1500 Tim Hortons cafés throughout China over the next decade. “With more than 20 years of experience in building businesses in China and around the world, we could not think of a better partner than Cartesian to help us bring Tim Hortons to China,” Macedo says. “As we expand [in China], its expertise in the local markets will be a tremendous asset in ensuring we stay connected to guests’ local tastes and preferences.” Those aforementioned local purveyors include both independent and popular local chains, like Seesaw and Luckin Coffee, the latter making a significant effort to rival foreign chains in the past two years since launching. In that time, Luckin has opened 2000 outlets across

China, which largely consist of small booths that support the startup’s app-based delivery service. Right out of the gates, Luckin has invested significantly in technology, another driver of China’s consumer market, particularly among young consumers. Customers order and pay strictly through the Luckin app, as well as earn bonuses and engage socially. “The other factor helping China’s coffee culture would be the rise of tech and, in particular, the selfie culture,” adds Bacall, pointing to both Luckin and independent shops. “Tech probably plays more of a role in China than in other countries, so some of the better players in Shanghai play up to that selfie culture.” In addition to the massive growth opportunity, the tech aspect has caught the interest of digital giant Tencent Holdings. In September 2018, Tencent announced a partnership with Luckin that will support expansion of 4500 outlets by the end of 2019. The announcement came only two months after Luckin’s previous funding round of US$200 million and one month after Starbucks and partner Alibaba announced plans to start coffee delivery service

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FEATURE China

Coffee companies are catering to the Chinese consumer’s preference for technology.

across China. Starbucks has also put a greater emphasis on technology in its Chinese business, boosting its app offerings and activity, and launching a virtual store. Supporting the dynamic Chinese consumer’s increasing interest in quality experiences and products that leverage technology and seamlessly fit into their lifestyles is an expanding population and

strengthening incomes, particularly in the urban centres, where coffee consumption and the number of coffee shops is significantly higher. “As the economy of China continues to grow, the pool of consumers with disposable income expands and demand for coffee rises accordingly,” reports the ICO. “As disposable incomes rise, consumers tend to ‘trade up’ to a more premium product.” MacroPolo’s Ma also points out future demand potential for coffee with the “Chinese middle class projected to become bigger than the entire US population”. That expanding consumer base is on top of the fact that tea is still China’s hot beverage of choice. “When it comes to domestic consumption, tea still overwhelmingly dominates,” he writes in MacroPolo’s latest report on the industry. “But its low base also means that coffee is far from a saturated market in China.” Altogether, this equates significant future growth potential and plenty of room for competition, experts say. “China is a big place and there are so many other consumers out there with so many other needs, flavour preferences and more,” Bacall tells GCR . “As such, I think coffee will become more segmented to cater to those different consumers, different needs, different regions.” He also sees technology continuing to play a significant role in helping coffee fit into the Chinese consumer’s lifestyle. “Who knows where tech will take coffee with delivery, production, maybe even sourcing and ingredients?” he says. “People’s lives are changing quickly and they’re earning more money. China is a very fast-growing market, so it’s a pretty exciting place to be for coffee.” G C R

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FEATURE ICO report

CLOSING THE GAP NEW RESEARCH SHOWS VARIATION IN PRODUCTION COSTS AND FARM PROFITABILITY. THE INTERNATIONAL COFFEE ORGANIZATION REVEALS PLANS TO GLOBALLY BENCHMARK COSTS TO HELP FARMERS ADDRESS LOW COFFEE PRICES AND THEIR VOLATILITY.

nternational coffee prices have been falling since 2016, with the International Coffee Organization (ICO) Composite Indicator breaking through the US$1 per pound mark in September 2018. Since then, the market has remained broadly at this level, which is almost 30 per cent below the average coffee price over the past decade. This is bad news for farmers around the world. Low prices result in dwindling farm incomes and puts rural livelihoods at risk, especially those of smallholders. Prolonged periods of low coffee prices hamper growers’ ability to invest in productivity-increasing technologies and climate change adaptation. In the long run, production

volume and quality may suffer, with serious implications for future supply. Low prices for coffee increase pressure on high-cost origins and tend to accelerate concentration of production in a small number of highly competitive regions. Today, the top five producers already supply over 70 per cent of the world’s coffee. If the consolidation

M AY /J U N E 2 019 | GCR

FEATURE XXX ICOxxx report

trend of previous years continues, this share could reach more than 80 per cent over the next decade or so. Less spatial diversification of production exposes the global coffee sector to greater supply risks. With fewer origins producing coffee, the likelihood increases that extreme weather events, infrastructure failure, or political instability in major growing areas could dramatically disrupt global supply. We know that some coffee growers cope better than others with the cyclical downturn of coffee prices. At a global level, this tendency is a result of variations in production costs across countries. But we also find differences between regions within countries and even within the same village or cooperative. As a result, some farmers break even while others are unable to cover their cost of production at current price levels. But what are the drivers of farm profitability? Can we learn something from carefully studying the most efficient producers? Are there ways to harness characteristics and success factors of top producers to help less profitable farmers to catch up? These are key questions economists have to answer in order to devise strategies that help to increase incomes derived from coffee production and to improve household welfare. Despite the importance of production costs as a determinant of farm profitability, the available literature on this topic is surprisingly scarce. Many of the existing studies have methodological shortcomings. For example, ignoring the opportunity cost of labour in family farms and other items required to calculate the full economic costs of coffee farming understates costs incurred by growers. Small or unspecified samples limit the extent to which findings can be generalised. If costs and profitability are calculated and assessed for an average producer, this clearly fails to take into account the heterogeneity of millions of coffee farmers. In a newly published ICO study, co-authored by economists Andrea Estrella and Steve Boucher of the UC Davis Coffee Centre, and ICO economists, such issues are addressed, and new empirical evidence on profitability of coffee production in Latin American countries is revealed. This economic analysis is part of the implementation of Resolution 465 on coffee price levels, which was adopted by the International Coffee Council (ICC) in September 2018. ICO member countries and sector stakeholders discussed the first publication of the ongoing project at the 124th Session of the ICC, which took place during the last week of March 2019 in Nairobi, Kenya. The in-depth farmer-level data, collected as part of the Transsustain research project

from the University of Münster in Germany, examines the distribution of costs and profitability across farmers in three important coffee origins: Colombia, Costa Rica, and Honduras. The study authors then took advantage of a large sample that contains detailed information on almost 2000 farming households, demonstrating a high level of heterogeneity and variability across individual growers. Three results are striking. First, in this sample of Arabica-producing countries, a large variation in production costs between countries was found. In Honduras, the average production cost was US$0.79 per pound compared to US$1.39 per pound in Colombia and US$1.31 per pound in Costa Rica. Second, the breakdown of production costs into labour (paid and unpaid), inputs, and fixed costs demonstrates that labour represents by far the highest share of costs for each of the countries. The highest fraction of labour costs is found in Colombia at 75 per cent, followed by Costa Rica at 57 per cent and Honduras at 56 per cent. This illustrates one of the key challenges faced by these production systems. In all three origins, terrain and farm size make it difficult to mechanise or, in more technical language, substitute labour by capital. Rising labour

SHARE OF SAMPLE FARMERS THAT WERE MAKING 2015/16 SHARE OFLOSS SAMPLE FARMERS THAT WERE LOSS MAKING 2015/16

Colombia Honduras Costa Rica FIGURE 1: SHARE OF FARMERS THAT CANNOT COVER PRODUCTION COSTS* 53%

Colombia 34%

Honduras 25%

53%

28% 10%

34%

25%

*Expressed in terms of gross margin 2015/16: price/lb – costs/lb G C R | M AY /J U N E 2 019

9% 28%

10%

Costa Rica

*Expressed in terms of gross margin 2015/16: price/lb – costs/lb

costs will inevitably make coffee from these countries more costly if labour productivity does not increase. One way out is to tap into higher-value market segments, a strategy pursued with some success by Costa Rica, and Colombia. The third key result from the report is the break-even analysis. Figure 1 shows that Colombian farmers, in particular, struggle to cover their costs. One-third of the farmers in the Colombian sample did not cover their cash outlays, as indicated by negative gross margins. When the full costs of producing coffee are considered, a staggering 53 per cent of farmers were operating at a loss. These producers thus face both short- and long-term challenges to profitability. Farmers in the other two countries are doing slightly better. There will be much to learn over the next months as the work continues. The research team will extend the econometric analysis by taking advantage of the rich dataset to explain observed differences in production costs and profitability between individual producers within and across the three Latin American countries. But how do we extend the analysis to other coffee-producing regions? The discussions at the Council session in Nairobi clearly showed that there is a need to close the data gap with regard to production costs and farm profitability. Hence, members decided that the ICO will start a global benchmarking of production costs. To systematically gather reliable and independent estimates of farm costs is a complex and costly enterprise. However, partnering with value chain actors, including traders, roasters and input suppliers, will enable us to collect and analyse the data and to make it available to the global coffee community, thereby providing the knowledge necessary for taking actions and helping farmers to address low coffee prices and their volatility. G C R

This article is written by Christoph Sänger, a Senior Economist at the International Coffee Organization (ICO) in London, conducting research on coffee value chains in Africa, Asia, and Latin America. Prior to joining the ICO, Sänger was an economist at the European Bank for Reconstruction and Development, where he carried out sector and project evaluations to support the design of agribusiness investments in Eastern Europe, Central Asia, and Northern Africa. He has previously worked in the Division for International Cooperation at the Federal Ministry of Agriculture in Berlin. He received his MS degree

from University of California, Davis, USA, and holds a PhD in Agricultural Economics from Georg-AugustUniversität Göttingen, Germany.

N OV E M B E R /D EC E M B E R 2 018 | GCR

FEATURE DMCC Coffee Centre

UAE’s coffee HQ

A NEW STATE-OF-THE-ART COFFEE CENTRE AND AN INCREASING NUMBER OF BRANDED AND LOCAL COFFEE SHOPS ARE CATERING TO DUBAI’S BURGEONING COFFEE SCENE.

s part of a greater movement to establish Dubai as a trading epicentre, the Dubai Multi Commodities Centre (DMCC) inaugurated its new 7500-square-metre Coffee Centre in late February at the annual Gulfood international food and beverage expo. Conceptualised in 2016, the centre finally opened for operations in November 2018 after a year of planning and construction. The state-of-the-art centre is located adjacent to the DMCC Tea Centre in the Jebel Ali Free Zone. Deemed the “world’s flagship

G C R | M AY /J U N E 2 0 19

Free Zone”, the DMCC was built to spur and support a global marketplace for commodities, while driving trade through Dubai. The new Coffee Centre will further that mission with a focus on the global coffee supply chain and its strategic location between major coffee producing and buying countries. “The DMCC Coffee Centre will connect the fast-growing, high-value consumer markets in the Middle East and Europe to some of the world’s major coffee producing nations,” says Executive Chairman Ahmed Bin Sulayem. “It will benefit a wide range of stakeholders, [from] coffee farmers to retailers. We are confident that the centre will create infinite new trading opportunities and become the preferred hub for specialty coffee traders and producers.” The inspiration for the centre was also driven, in part, by Dubai’s burgeoning coffee scene and the immense success the DMCC has seen with its Tea Centre. “In the Middle East, coffee [is not only] an integral part of the history and culture, [but] also a growing industry,” Bin Sulayem tells Global Coffee Report. “This growing demand, coupled with Dubai’s strategic location and our experience with the DMCC Tea Centre, prompted us

to develop the facility. Until now, the region simply did not have the capacity, equipment, or expertise to facilitate global coffee trade on this scale.” The temperature-controlled facility, which is projected to handle up to 20,000 tonnes of green coffee bean annually, offers core services including warehousing, logistics, green coffee cleaning, contract roasting, and packing. The centre houses a coffee quality laboratory, three fully outfitted cupping rooms, and a Specialty Coffee Association premier training campus, as well as five sample roasters that can accommodate specialty and commercial coffee for customers to conduct quality assessments. Even before breaking ground on the centre in 2017, DMCC was already building its coffee trade network. In 2016, it signed a major agreement with Yunnan State Farms Group and trading partner Mega Capital Halal Group to export up to 140,000 tonnes of green coffee from the Yunnan Province in China. “Dubai offers a unique trading ecosystem, including its air and maritime links, world class facilities, regulations, services, and

The Dubai Multi Commodities Centre Coffee Centre will connect markets in the Middle East and Europe to some of the world’s major coffee producing nations.

networks and most importantly, its centrally accessible location,” explains Bin Sulayem. “From this vantage point, the new DMCC Coffee Centre is posed to connect coffee traders from Africa, Asia, the Pacific, and Latin America to the Arabian Peninsula and beyond.” That central location has opened the DMCC as a gateway for other major global commodities, including gold, diamonds, base metals, and tea. The strategic pivot toward coffee highlights

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FEATURE DMCC Coffee Centre

the growing importance of the beverage in the United Arab Emirates (UAE), as well as the greater Middle East. Although a love for coffee has long been central to the Middle East’s history and culture, third wave coffee is taking hold in the region at a rapid rate, with Dubai at the forefront. In lock step, coffee consumption and the number of coffee shops have been climbing year over year. According to Allegra World Coffee Portal’s Project Café Middle East 2019 report, the number of branded coffee outlets in the UAE increased 8.5 per cent in the past year to 1265. “We see the UAE as one of the most sophisticated coffee shop markets in the Middle East, with Dubai driving much of the regional innovation,” says an Allegra representative. “The UAE was one of the earliest markets for western branded chains in the Middle East, which has catalysed consumer interest in café concepts nationally and across the region. Today, Dubai is home to a highly developed independent and branded chain coffee shop market and is a leading regional influencer.” Allegra attributes some of the growth in foreign brands to the large international expat

The new temperature-controlled facility can handle up to 20,000 tonnes of green coffee beans annually.

G C R | M AY /J U N E 2 0 19

population that has cross-pollinated the UAE market: “Aspirational western brands benefited from the large expat population in urban centres during the 1990s, but their popularity among local populations is crucial to these businesses today.” Dunkin was the first to debut in 1997, with Costa Coffee following in 1999, and Starbucks in 2000. Today, Starbucks, Costa, and Tim Hortons are the top three market operators by outlet numbers in the UAE, at 169, 150, and 95, respectively. Domestic specialty brands have also been popping up to tap the booming market, including Coffee Planet, Orbis Coffee Roastery, and Tom & Serg. At the same time, there is a steadily expanding pool of consumer dollars to be spent in coffee shops. In fact, coffee consumption has jumped from an estimated 1.4 billion cups per day in 2012 to an estimated 3.4 billion cups per day in 2016. “The main reason for the significant rise in coffee consumption is that consumers are becoming more knowledgeable about coffee,” the DMCC’s Bin Sulayem tells GCR . “Local and traditional coffee shops are rapidly transforming into modern outlets with a specific emphasis on ambience and customised service offerings, which is [driving] interest in specialty coffee in the UAE. “Today, the young populat ion across the UAE has greater awareness about what specialty coffee is and they are interested in the experience that it offers. Initially, it used to be commercial coffee that set the pace for growth in the industry, but now consumers are interested in the more refined sensory experience of specialty coffee.” To gain better access to that expanding pool of coffee consumers, in 2017 Nestlé built a US$150 million factory in Dubai – its 18th in the Middle East. “It shows our confidence in Dubai and the UAE as a dynamic, stable, and competitive business hub, and our long-term commitment to the people of the Middle East,” said Marco Settembri, Executive Vice President Nestlé SA and Head of Zone Europe, Middle East,

and North Africa. And in February, Italian espresso machine manufacturer Gruppo Cimbali opened its UAE headquarters in Dubai on the DMCC campus. “The new Dubai office is an important step in our Middle Eastern growth strategy,” Gruppo Cimbali CEO Franco Panno said in a statement, adding that the office allows the company to be closer to its clients in the UAE, where the company’s traditional professional coffee machines hold 30 per cent of the market. Despite the steady penetration and resulting strong competition, Allegra, which is hosting the first Europe & Middle East Coffee Symposium in Dubai in November, forecasts significant sector growth over the next five years. About 88 per cent of the industry leaders surveyed for its 2019 report believe there is still plenty of growth potential in the

“DUBAI OFFERS A UNIQUE TRADING ECOSYSTEM, INCLUDING ITS AIR AND MARITIME LINKS, WORLD CLASS FACILITIES, REGULATIONS, SERVICES, AND NETWORKS AND MOST IMPORTANTLY, ITS CENTRALLY ACCESSIBLE LOCATION.” Ahmed Bin Sulayem

Executive Chairman, Dubai Multi Commodities Centre

UAE’s branded coffee shop market. On the trade side, Bin Sulayem also anticipates continued growth in the coffee sector. “We have already received immense interest from global players looking to utilise the centre as a platform to expand their operations, in the region and beyond,” he says. “Looking ahead, we anticipate further growth in the coffee industry and, especially with the establishment of the centre, we are optimistic about increasing trade flow of coffee through Dubai, in return, boosting the national economy.” G C R

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FEATURE Nicaragua

Collateral damage

THE POLITICAL CRISIS IN NICARAGUA HAS RESULTED IN UNFORESEEN CONSEQUENCES ON THE NATION’S COFFEE INDUSTRY, GOING BEYOND THE SUSPENDED 2019 CUP OF EXCELLENCE.

n 18 April 2018, protests erupted across Nicaragua in response to President Daniel Ortega’s unpopular social security reforms that would see taxes rise and benefits fall. Protesters bore Nicarauga’s national flag, its blue and white background contrasting with the red and black of Ortega’s Sandinista National Liberation Front party. Authorities met protesters, initially consisting of a large number of students and the elderly, with large amount of violence. After five days, approximately 30 people were reported dead and Ortega announced the cancellation of his reforms. However, it did little to extinguish the spark that had been lit among the Nicaraguan community and protests continued. Specialty Coffee Association of Nicaragua (ACEN) President Carlos Alberto Bendaña tells Global Coffee Report after protests began, it was two months before he could safely travel to his farms in Dipilto. “Road blocks were put up around major cities and police would put you in jail if they saw you on the street. From April to September, it was chaos,” Bendaña says.

G C R | M AY /J U N E 2 0 19

“The United States and European community have helped a lot, having conversations with the Nicaraguan government. But even then, I still can’t display my country’s flag. If I do, I will be put in jail.” As of July 2018, human rights group Asociacion Nicaraguense Pro Derechos Humanos put the death count of the protests at 448. Bendaña estimates 700 people have been arrested, with half of them still detained. In order to avoid arrest, Bendaña says protests have taken to “express protesting”. “They protest in one area for an hour or so, then before cops come in, they take off. They go to another city or neighbourhood, do

same thing for about half an hour, and run to another place,” Bendaña says. “This new form of protesting is part of why we have been seeing lower levels of violence recently.” While violence has de-escalated, it has already had large ramifications for the Nicaraguan coffee industry. Only a week before protests began, the Alliance for Coffee Excellence (ACE) completed judging of the 2018 Nicaragua Cup of Excellence (COE) in Matagalpa. The following political turmoil forced the not-for-profit organisation to immediately export award-winning lots to the United States in June 2018. ACE Executive Director Darrin Daniel says the situation put undue pressure on Nicaraguan coffee producers. “We had to have all of the award-winning lots driven to the coast overnight because there were so many barricades put up during the days,” Daniel tells GCR . “Farmers were not paid as fast as they should have been because we had to ship the coffee to the US and then again to the rest of the world. “The producers were very upset. I think a lot of buyers were panicked, so we didn’t experience a very strong auction that year.” Daniel says issues with exporting crops were not unique to COE participants, and may have hurt other coffee producers. “I’ve spoken to other exporters and importers who had trouble getting shipments out of the country last year. The delays were at their worst during the peak of the season – May to July – when most coffees are shipped out of Nicaragua,” Daniel says. Bendaña says road blocks seemed to have stopped for the time being, with protestors and the government coming to the conclusion they are mutually detrimental. “Within the next few months, I don’t foresee Nicaragua having another problem with roadblocks. The government will not allow it. They will kill you if you try,” he says. “Also, Nicaraguans are concerned about the economic situation and know the only way of getting any money into the country is to export products. We’re getting the products for exportation – sugar, coffee, meat, and cattle – out of here as soon as possible.” Despite this, and due to fears of a reprise, the ACE announced the cancellation of the 2019 Nicaragua COE. Daniel says he could not risk

“BANKS ARE NOT GIVING OUT LOANS BECAUSE THEY CONSIDER IT TOO MUCH OF A RISK DUE TO THE INSTABILITY OF THE COUNTRY... PRODUCERS HAVE TO TAKE WHAT LITTLE THEY HAVE SAVED UP AND INVEST RIGHT NOW. MANY ARE PAYING WORKERS WITH CROPS, BECAUSE THEY JUST DON’T HAVE MONEY.” Carlos Alberto Bendaña

President of the Specialty Coffee Association of Nicaragua

the safety of his employees. “Our head judges spend as much as three weeks at origin doing pre-selection. We were concerned about their welfare, especially considering how we’re coming up on the anniversary of last year’s violence,” he says. “If we had held last year’s event just one or two weeks later, we probably wouldn’t have been able to get our people out of the country. “We even looked at conducting the COE at our headquarters in the US, but if there is another uprising, we could have a problem getting the coffee out of the country.” On top of these concerns, the ACE and ACEN struggled to find funding for the COE to take place. “The COE relies heavily on the support of government bodies in many countries. We’re a small not-for-profit. Financially, we can’t run the program and pay for all of the expenses ourselves,” Daniel says. Though the Nicaraguan government has supported the COE in previous years, Bendaña says it has become less willing to assist the private sector, and farmers cannot cover the costs. “Producers have to give a commission of the coffee we export to a government-run organisation for ‘promotion’,” Bendaña says. “Since the government is not helping out the private sector, they said they’re not going to pay for the COE anymore. “That fund has accumulated to about US$21 million a year. We could be using this money to hold the COE or attend more fairs around the world, things we should be doing to promote our crops.” Daniel says though the 2019 Nicaragua COE had to be cancelled, it is only a temporary suspension. “I would very much like to see us come back in 2020. Nicaragua is one of the countries that most needs the COE. Unfortunately, the country doesn’t receive some of the prices you see in Guatemala or other countries,” he says. Bendaña adds the COE is particularly beneficial for smaller producers, who don’t have access to the internet or ability to travel to sell their crops. “The COE is the only opportunity they have to sell their good quality coffee at a better price,” he says. “That extra money improves their life, production, productivity, and helps send kids to school and university. “Then, once they sell their coffee to COE, roasters can go directly through them to buy future crops. This helps them maintain a sustainable profit.” Unfortunately, the aftermath of the political crisis for coffee farmers goes beyond the cancelled COE. Bendaña says due to continued uncertainty, banks are unwilling to provide producers with the credit needed to hire workers and transport their coffee to ports. “Banks are not giving out loans because they consider it too much of a risk due to the instability of the country,” he says. “Producers have to take what little they have saved up and

M AY /J U N E 2 0 19 | GCR

FEATURE Nicaragua

invest right now. Many are paying workers with crops, because they just don’t have money.” A lack of finance is also putting the health of Nicaragua’s coffee crops at risk. While many origin countries face the threat of new strands of coffee leaf rust, Bendaña says Nicaragua is particularly vulnerable to the pest. “Nicaragua has struggled with rust for the past few years,” he says. “It has been getting worse for the past few months and I think it will get worse throughout the year. A lot of farmers are abandoning their farms and leaving them to fester, or they’re not applying fungicide because they can’t buy it.” Coffee farmers’ financial hardships have not come exclusively from within the country. Falling coffee prices have placed pressure on many origin countries, and Nicaragua is no exception. “Prices have been low for the past three or four years. The cost of production in Nicaragua has been around US$140 per quintal (100 pounds). If you’re selling your coffee at a price of US$100 – it’s actually US$96 right now – you are losing US$40 per 100 pounds,” Bendaña says.

G C R | M AY /J U N E 2 0 19

“This is not a recent problem either. We’ve been struggling with low prices for years. You can take a risk one year and make it up the next, but it doesn’t work so many years in a row.” Bendaña says the low coffee price situation in Nicaragua is set to worsen, with production costs set to increase in 2019. “In March, the government passed a new law raising taxes by 15 per cent on industrial businesses, including coffee production. The cost of production, which was US$140 per quintal last year, is now more than US$160. There’s no way producers can continue to be sustainable in the market,” he says. “Hopefully, there will be a change in the government and political rules that are going to take out that tax raise.” A key demand of Nicaraguan protesters is for an early election to be called for 2020, with international bodies providing oversight. Ortega’s third consecutive five-year term began in 2016. Just weeks prior to the election, the Nicaraguan Supreme Court ousted opposition leader Eduardo Montealegre in favour of the pro-Ortega Pedro Reyes Vallejos who had sued for control of the party. International critics, including the Catholic church, condemned the move, saying it essentially led to a one-party election. “Things will change as soon as the President confirms there will be an election next year. Everyone will have a different attitude,” Bendaña says. “I don’t think we’ll even have to wait until we have another party in power to have a change. It will happen as soon as we hear it’s possible.” As for the coffee industry, Bendaña asks the community to lay a hand by increasing its purchase of Nicaraguan coffee and pay higher prices so producers can palliate the crisis. “In the northern parts of the country, coffee is the main product and many communities live 100 per cent off it. If the coffee industry is not well, these communities won’t be either,” he says. “Selling more coffee will allow us to generate more revenue, contribute to the community, and invest in the future.” G C R

M AY /J U N E 2 0 19 | GCR

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FEATURE FNC

Desperate times CHIEF EXECUTIVE OFFICER OF THE FEDERACIÓN NACIONAL DE CAFETEROS DE COLOMBIA ROBERTO VÉLEZ IS DEFLATED BUT NOT DEFEATED. HE SPEAKS CANDIDLY WITH GCR ON THE GLOBAL INDUSTRY’S CO-RESPONSIBILITY FOR A SUSTAINABLE CHAIN.

ccording to Roberto Vélez, Chief Executive Officer of the Federación Nacional de Cafeteros de Colombia (FNC), Colombian coffee producers have two options: stick with their profession in hope of change, or leave. “We are in an absolute state of desperation. When you don’t have enough money to feed yourself or your family, pay your debts, or earn enough to send your kids to school, it’s a really dark outlook. We are struggling,” Vélez says. “The situation is the same for almost all coffee farmers around the world. We are in a desperate situation where prices paid to the growers do not cover the cost of production.” Vélez’s comments came at the same time that the World Coffee Producers Forum (WCPF) declared the need for urgent action on coffee prices on 26 March, when organisers released an official declaration calling for serious and immediate action to be taken on the historically low international coffee price of US$0.95 per pound as of 22 March 2019. Thirteen coffee producers’ groups, including the FNC, Colombia’s largest rural non-profit organisation, were listed on the declaration. “With Colombia in a leading role, 35 coffee-producing countries from Africa, Asia, and Latin America are calling on all members of the coffee supply chain to act quickly and responsibly to address the current international pricing crisis that is devastating coffee-producing communities around the world,” said Silvia Pavajeau, Director of Communications at the FNC US-based office, in the declaration.

Vélez says the Colombian coffee communities are at a point where the coffee value chain, as a whole, cannot continue without serious outcomes. It’s at risk of becoming a humanitarian crisis. “It’s necessary that the global industry is informed about this situation. The industry is estimated to be worth between US$250 billion and US$300 billion. Out of that, coffee farmers around the world get less than 10 per cent. Some people are making tonnes of money out of it, while our farmers are starving,” Vélez notes. “At these price levels, there is no true sustainability in coffee. You cannot talk about coffee being ‘only’ sustainable if it has social or environmental values. Everyone loves talking about birds, trees, clean water, and gender equality, but no-one truly cares

M AY /J U N E 2 0 19 | GCR

FEATURE FNC

Roberto Vélez, CEO of the Federación Nacional de Cafeteros de Colombia, says focus on economic sustainability is vital to securing the future of Colombia’s coffee producing industry.

about the income of coffee farmers. One of the most important aspects of sustainability is the economic dimension. The farmer must be paid correctly for the job he or she is doing.” Currently, Vélez says, farmers are earning much less than a minimum wage. The International Coffee Organization (ICO) estimates that about 25 million families – mostly smallholders – produce coffee in the world. However, Vélez says an approach based on the principle of co-responsibility and total transparency must be implemented to ensure that all the links of the value chain, including the weakest one – the farmers – are profitable and healthy. “The guys selling coffee in developed countries, from supermarkets to large roasters, are all making money. The only ones who are not are the producers, the ones producing the raw material that is indispensible for the industry for survival,” Vélez says. “We are very glad the coffee market keeps on growing at 2 per cent a year, which is a marvellous thing, but we need everybody to understand that we are all part of the same chain, and we must all do well if we want to survive in the future. If we can do that, we can be an example of how a whole chain can work together.” If it doesn’t, the FNC has discussed the possibility that Colombian coffee, together

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with other washed Arabica coffee producing countries, could stop trading on the New York Stock Exchange. The “C” futures contract was created as the price reference for a basket of mild Arabica coffees of similar quality known as “Centrals”. Today, with several changes introduced over time, it is widely acknowledged that the C futures contract-based price does not cover production costs for most producers due to “speculation by hedge funds that do not understand or care about the coffee industry”. “Given that the New York C coffee market is reflecting a much more superlative position of large hedging funds plus we’re seeing large Brazilian crops [of 60 to 65 million bags], we are considering the possibility that we will not take the C market as a price reference for Colombian coffee,” Vélez says. Rather, Vélez elaborates, there should be a fairer system for farmers to be paid the cost of production. “It’s only 20 cents more from where we are now. We are not asking to double the cost of what people are paying, we’re just saying that instead of paying US$1.20 or US$1.30, pay US$1.50,” he says. “This doesn’t just apply to Colombia but all of those who produced washed Arabica coffee.” According to the WCPF, in 1982 the price of coffee fluctuated between US$1.18 and US$1.41 in the international market, and a cup of coffee averaged US$1.10 in the United States. In 2018, the price of a pound of Arabica coffee in the international market averaged US$1.01. As of 22 March 2019, the price dropped to US$0.95. As a result of the price drop, it is estimated that coffee producers have lost more than 80 per cent of their purchase capacity in the last few decades. On the consumption side, the ICO estimates that the world drinks 1.4 billion cups of coffee every day. According to German statistics database Statista 2018 data, consumers pay anywhere from US$3.12 per cup in the United States to US$4.60 in Shanghai and US$6.24 in Copenhagen. But that’s not enough, especially with Colombia’s producing industry on the brink of despair. The reason Colombia’s coffee is so unique in many ways, Vélez says, is because of its fertile land, privileged climatic location, quality, and the availability of coffee year-round, each with different cup profiles specific to its region – qualities too valuable to ever see abandoned. Until the current economic climate changes, Vélez says there is no reason Colombian youth would be encouraged to uptake the coffee farming profession. Vélez himself owns a farm, his father used to grow coffee, as did his grandfather, but he doesn’t expect his kids to continue the tradition. “They understand perfectly that there’s no future in coffee anymore,” Vélez says. “It’s a very tough and painful situation.” The current pauperisation process of coffee producers is destroying the social fabric in the rural areas of more than 40 countries in Africa, Asia, and Latin America, leading to increased criminality in producing nations, poverty, and massive migrations. Vélez says there’s already an increased flow of people travelling illegally from Central America to the US and from Africa to Europe – a large portion coffee growers who no longer see a source of income in coffee. In some countries, the current crisis has become an incentive to shift to illegal crops because farmers cannot make a living from coffee alone, including Colombia, where there’s been an increase in the country’s cocaine production. For the past two to three years, the FNC has been in contact with the Colombian government,

including its current President, Iván Duque, asking for support and funding, even subsidies from public taxes. At the time of print, an FNC delegate had presented at the International Coffee Council in Kenya in March. Vélez himself was preparing for a trip to Japan to discuss the current Colombian situation. He will also present at the WCPF in Brazil in July, followed by a coffee growers summit in New York in September on the sidelines of the United Nations General Assembly with heads of state to address the “unfair” state of the industry’s coffee prices. “There’s not much more I can do but keep moving and talking,” Vélez says. “We are trying to figure a solution but it is not easy. We have to keep asking governments for support, addressing the topic internationally, and trying to bring consensus among producers.” When Vélez started working at the FNC more than 30 years ago, his goal was to bring sustainability to the forefront of the coffee industry so that coffee growers could increase their income and be more efficient. That goal is still within reach, but for now, Vélez is proud of Colombia’s resilient coffee producers. “They keep producing despite the unfavourable international situation of the past two to three years,” Vélez says. “It is my hope that one day we have an industry that really understands the economic situation of our coffee growers, and commits to their sustainabilty, because the industry as a whole pends on it.” G C R

Colombian coffee is praised for its fertile land, privileged climatic location, and availability year-round.

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PROFILE Hemro Group

Setting the scene HEMRO GROUP MANAGING DIRECTOR OF INNOVATION AND TECHNOLOGY ILAN MAIMON DISCUSSES HOW USABILITY AND CONNECTIVITY WILL GUIDE THE FUTURE OF COFFEE GRINDING.

hen Mahlkönig first unveiled its E65S grinder at World of Coffee Amsterdam in 2018, the German manufacturer and its parent company Hemro Group called it the “next generation of espresso grinding”. With an emphasis on usability, the E65S’s simple interface, multifunctional turn- and push-button, and removeable powder chute to facilitate cleaning are designed to improve the barista experience. However, Hemro Group Managing Director of Innovation and Technology Ilan Maimon says the E65S is only the beginning. “If you think of the E65S as the successor to the Mahlkönig K30, we want to do the same across our portfolio,” Maimon says. “We aim to completely reinvent our line of products. Within the next few years, none of our grinders will stay the way they are today.” Since entering the coffee industry 15 years ago, Maimon has displayed the ability to identify and capitalise on growing trends in the industry. After moving to China in 2002, he saw potential for coffee to rise in prominence. “There were a few start-ups, but it was not what you would really a coffee scene,” Maimon says. “However, in countries around China such as Korea, Taiwan, and Hong Kong, which in my mind were of a similar culture and taste for food and beverages to China, coffee cultures were already established. “I thought it was fair to assume that the coffee scene would spread there as well.” Maimon established grinder manufacturer Heycafé to cater to this anticipated market, and it wasn’t long before his prediction proved accurate. “Heycafé began production in 2006, and quite quickly became the strongest brand in Asia for entrylevel coffee grinders,” Maimon says. “We didn’t receive much attention from Europe at first, but Heycafé quickly grew in places like Thailand, Philippines, Malaysia, and Indonesia, and, of course, China.” The Hemro Group took notice of Heycafé’s success and formed a partnership with the brand in 2016. Heycafé joined Mahlkönig, Anfim, Mahlkönig first unveiled the E65S grinder and Ditting as a full-fledged member at World of Coffee Amsterdam in 2018. of the group in late 2018. It was at this

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time that Maimon transitioned to his current innovation and technology position within the company. “I come from an engineering background. Sales and finance are not my most favourite subjects. Joining Hemro provided me with fruitful ground where my accumulated ideas throughout the years can come true,” Maimon says. “When you run your own start-up or smallto medium-size company, you always have to consider the amount of resources you can invest in a project. With the Hemro Group, it’s a totally different game. It is a strong, successful company with what feels to me like endless resources for development.” In his role, Maimon oversees a large engineering team, who have started a program that aims to “change the ways grinders work and people use them”. “For the past 30 to 40 years, grinders have made small step-by-step developments, adding and improving features with each new model. As dramatic as it sounds, we hope to create a revolution,” Maimon says. “We have started from scratch to make a grinder that will fit our modern environment. The machine has to do more than just grind coffee – it needs to be able to provide information about its maintenance, dosage, accuracy, and grind size. It needs to be able to do this remotely as well as through a small screen on the unit.” Hemro Group has focused its developments on two key criteria: usability and connectivity. Maimon says it is important the industry take full advantage of new technologies to facilitate a greater flow of information. “We are entering a new era of technology with concepts like the Internet of Things and artificial intelligence gaining more

Ilan Maimon joined Hemro Group in 2018, when Heycafé became a full member.

prominence. Grinders will become more clever, less dependent on the barista, and more self-contained with the knowledge and ability to inform the user of its condition and performance,” he says. Maimon says these advancements could prove beneficial to baristas in different markets in separate ways. While baristas in established coffee scenes, such as Europe or Australia, will appreciate a greater level of control, consistency, and emphasis on recipe development, users in developing markets will enjoy the ease of use. “An appreciation for coffee is something people learn from drinking it. It’s like sitting next to your parents and watching them while they drive a car. When you start driving for yourself, you almost know what to do,” Maimon says. “Some regions in Asia don’t have this previous connection. Just 10 years ago, people didn’t really drink coffee. Now, thousands of coffee

shops open every year. You have to wonder: ‘How did they get professional baristas to run their equipment? How do they make coffee just as well as other places in the world?’ The only way to overcome this lack of experience is to make the machines smarter and more user friendly.” Though these features may prove beneficial to both markets, Maimon says it is important to remember that they may also have different requirements. The is where Hemro Group’s four brands are able to differentiate themselves. “Growing markets have different needs in terms of grinding and commercial ability. Most new shops don’t know if they’re going to make money selling coffee, so they don’t want to invest in highend equipment. This is where an entry-level alternative is valuable,” Maimon says. He compares the strategy to that of the Volkswagen Group, which produces cars under multiple brands including Audi, Porsche, Škoda, and Seat, as well as its namesake. “When you buy a Seat, you expect a car that will serve you well for a long time. With an Audi, you expect the same thing with a bit more luxury or additional features,” Maimon says. “We look at our four brands in exactly the same way. Our grinders will always be accurate and create an even particle distribution, but different brands will provide this with more luxury, digital solutions, and complexity.” Through Hemro Group’s brands’ more than 100 years of accumulative experience, Maimon says the company is well positioned to create a higher standard for coffee grinding. “The world is moving, and it is time for coffee grinding to catch up. The generation of customers is changing, with younger people joining and influencing the coffee industry,” he says. “To maintain our dominance in the market, it is vital we continue to lead the world with innovation.” G C R

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PROFILE MPE

Questions and answers MODERN PROCESS EQUIPMENT CORPORATION IS ONE OF THE WORLD’S LEADING MANUFACTURERS OF COFFEE GRINDING AND CONVEYING EQUIPMENT, ALL BECAUSE IT’S ADDRESSED ONE VERY IMPORTANT QUESTION.

hen developing a new product or service, Modern Process Equipment (MPE) Corporation is driven by one core question: “What if?” What if there was a way to make a better product, a better technology, or a better process to improve what’s available on the market, or for the most part, what’s not available? That very question has driven the Chicago-based gourmet and industrial coffee grinder manufacturer and conveyor production facility since brothers Daniel and Philip Ephraim took over the company in 1982. “Ninety-seven per cent of the products that we sell today were either not in our wheelhouse nor invented 37 years ago,” MPE Co-Owner Daniel Ephraim says. “We like to think that over the next 30 or 40 years most of what we sell are things that have not been invented yet. In this way, we know that we have provided the technology to service our customers.” Ephraim, an engineer by trade, was Vice President at one of the largest institutional coffee companies in the United States before becoming President of MPE in 1982 when he and his brother MPE President Daniel Ephraim with the company’s new In Situ grinder.

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purchased the company. “We decided it was time to jump out on our own and run our own show. Modern Process, at that time, was a company I did business with [specialising in the reconditioning of roller-style coffee grinders]. Founded in 1957, it was a small company with a stellar reputation. We begged, borrowed, and stole until we were able to buy the company and see what we could do. I had a strong entrepreneurial urge,” Ephraim says. “I like to think the business had a lot of kinetic energy when we bought it, and it proved to be a good nucleus. Our customers gave us a chance to grow with them.”

In the early 80s, Ephraim says there were only really three companies who controlled nearly 60 per cent of coffee production in the US: the major canned coffee brands. The industry was very much a “generic one”, with the specialty industry yet to really make its presence known. When it did, however, MPE saw the opportunity to support its growth by making grinders for a multitude of applications, including instant and coffee capsules. “Nobody foresaw the capsule or pod business. There’s no question that more coffee is ground for filter type of applications than any other. However, the equipment demand is more towards single serve for pods and capsules, the most technical and scientific type of grinder application, and we lead the world with those types of grinders,” Ephraim says. Much like the expansion of the capsule industry, Ephraim says the next big evolution will be something unexpected. “The one thing that is here to stay is convenience. People also want better quality products, so if these two things combine, they will create great opportunities down the line,” he says. MPE has always created products and services that push the boundaries. Ephraim says three quarters is evolutionary, one quarter is revolutionary. One of the first revolutionary products was MPE’s Model 888 FT Turkish Granulizer, which Ephraim describes as a “revolutionary development in the production of Turkish coffee utilising modern technology”. Before the FT, stone grinding was used to produce the world’s Turkish coffee supply. These grinders would typically develop a lot of friction, become extremely hot, and burn the coffee. Most of the “good” volatiles and aromatics boiled off at the low temperature of 40°C, but the stone grinders heated up to 100°C, and would regularly have to be turned off to cool. However, by using a super hard material eight times as hard as chrome, developed by the National Aeronautics and Space Administration, as well as other technologies essential to producing 150 billion particles of coffee particles hourly, MPE developed a stateof-the-art grinding technology. Ephraim says MPE became the overall product leader in the world for Turkish coffee grinders. Ephraim has Lebanese customer George Najjar of Cafe Najjar to thank for the inception of this grinder technology.

“He sent a fax asking us to make him a grinder for Turkish coffee. I didn’t hear back until a year later. Within the intervening year he’d gone out and talked to all the other coffee grinder manufacturers in the world. Eventually he said, ‘I’m ready now. No-one can make me a Turkish coffee grinder worldwide so I want you to do it.’ I didn’t know if we could but George challenged us,” Ephraim says. “He said: ‘you Americans can do anything.’ I felt patriotic so I said, ‘OK let’s do it’. We ended up replacing Cafe Naijar’s 80 stone grinders with a single FT.” Within five years, MPE’s technology became the standard for virtually every major Turkish coffee manufacturer in the world, and Naijar become the leading Turkish coffee producer in Lebanon and the Middle East. On the other end of MPE’s revolutionary products list is its more recent development, the In Situ grinder, an idea borne again for customers asking “what if?” What if a coffee grinder could be placed on top of a packing machine? Ordinarily, ground coffee for capsules or pods is supplied via a larger grinder at the floor level and coffee is transferred through conveying systems to the packaging machine. Alternatively, the customer resorts to a disc-style grinder. However, rather than placing a large three-tonne grinder on top of a packing machine, MPE has developed a small roller grinder a quarter of the size, but with all the same technology incorporated from its large grinders. As such, it can sit on top of capsule packaging machines and supply an optimal grind. MPE has grown over 50-fold since 1982, with 97 per cent of its products new. Its goal is to continue to grow, and in another 37 years, have the majority of its products be those not yet invented. Ephraim attributes the growth of the company to its ability to generate new products and services in all categories of coffee grinding, such as soluble, espresso, capsules, three-in-one coffee, and ultra fine coffee types. More than just a grinder manufacturer, Ephraim says the company’s expansion into conveyors is a big contributing factor to its growth. Again, in response to being asked “what if?”, nine years ago MPE developed the Chain-Vey conveyor system, designed for the gentle and effective transport of green and roasted whole bean or ground coffee. This system delivers coffee from grinders to packaging machines without degradation and in the most gentle way possible. The Chain-Vey conveyors have contributed to Starbucks Reserve’s Willy Wonka-inspired fit-out with models helping direct beans in overhead tubing as customers stare at the futuristic transporting model. “The Chain-Vey has become an overwhelming favourite for customers all over the world,” Ephraim says. “It came about as a result of a customer complaint about the conveyers available on the market at the time, which is generally how new ideas evolve. We talk to customers every day around the world. Our close relationships and interaction with our customers have provided MPE with a treasure chest of ideas over the years.” That includes the impetus for MPE to expand into processing systems, a complete solution to take coffee beans from the dock, to silos, to cleaners, to roasters, and then to the grinder. MPE has since become one of the leading providers of coffee production facilities. It installed its first processing system about 17 years ago, and in 2008, was involved in building the North American Processing Plant of the Year. “We believe that our company has a strong reputation for designing and manufacturing high quality products for the coffee industry because we are engineering-centric. Nearly all of our staff have engineering degrees, from our salespeople to our engineers, factory workers to management staff,” Ephraim says. “We love designing and we are committed to providing our customers with the ‘golden rule’ level of service.” That golden rule largely stems from the family-run company that treats its employees and customers as an extension of its family. “The integrity of our company has always been of paramount importance. Integrity is not something you build in a day. It is something you can lose pretty quickly if you’re not careful,” Ephraim says. “We really strive to maintain our culture and practices and make sure that we keep up the integrity of the business for our customers – perhaps that’s part of the secret sauce of why our customers feel comfortable working together with us on projects to help make their lives easier.” As for Ephraim, he feels pretty lucky to have fallen into an industry that has provided him with an exciting career path that’s “anything but just a commodity product”. G C R

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PROFILE Neuhaus Neotec

Good morning, Vietnam VIETNAMESE COMPANY TINNGHIA GROUP HAS INAUGURATED A US$30 MILLION INSTANT COFFEE PLANT, WITH THE HELP OF NEUHAUS NEOTEC AND SISTER COMPANY DEVEX.

ietnam is the world’s second largest coffee producer, with the country’s General Statistics Office estimating its coffee exports reached 1.88 million tonnes in 2018. However, due to fluctuating green coffee prices, the Vietnamese Government is encouraging the industry to find new avenues to export its coffee, such as roasted whole beans, pre-ground, and instant. Green coffee trader Tinnghia Group has embraced this idea, inaugurating an instant coffee production plant in December 2018, using technology from Germany-based Kahl Group subsidiaries Neuhaus Neotec and Devex. Construction of the factory started in the first quarter of 2017 and took 20 months to complete, including technical installation and test operation. Tinnghia invested US$30 million in the first expansion phase of the 5.4-hectare site. Located just outside Ho Chi Minh City, the plant – in its initial production phase – produces 350 kilograms of instant coffee per hour, or a yearly output of 3200 tonnes. By the end of 2019, Tinnghia plans to increase production to 5000 tonnes per year, with the goal to increase local consumption. “Vietnam wants to export its roasted coffee to Asian markets, countries primarily known for drinking tea, where instant coffee is gaining popularity,” Neuhaus Neotec Head of Marketing and Vietnam Area Sales Director Lars Henkel says. “We have a massive presence and good reputation in Vietnam and its green coffee traders now want to invest in roasting capabilities. There is a good opportunity for us to cater to this market.” Henkel says multiple factors led to the company becoming involved in the production of the plant. “Our Vietnamese representative, Daisy Trading and Manufacturing, has been working for us for many years now, and has developed good relationships with customers,” Henkel says. “Tinnghia’s head roaster has also worked in the industry for many years and came from another company already working with Neuhaus Neotec’s roasters. So, he knows the system.

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“Ultimately, Tinnghia knew that we already had systems in market, are successful in Europe, and our machines are very efficient regarding service and production capability.” Neuhaus Neotec connected Tinnghia with an existing German client to vouch for its system’s quality. “This producer is a premium German company known for producing a quality instant coffee product,” Henkel says. “Tinnghia spoke with them about their experience with us. They felt that the Germany client was very happy with our roasting system and that supported their decision.” Neuhaus Neotec supplied the plant with its grinder and hot-air roaster, while process technology specialist Devex installed equipment of instant coffee production. They worked closely with Vietnamese partner Vina Nhatrang to construct the plant, which supplied handling systems, storage silos, conveyors and transportation. To roast the coffee, Tinnghia uses Neuhaus Neotec’s Roaster Gourmet (RG) 100, which

features a 100-kilogram batch size and the manufacturer’s signature rotational flexible batch (RFB) technology to roast coffee. “In instant coffee production, you often require a fast-roasting time. Our roasting system is renowned for its capability to roast faster than a traditional drum roaster,” Henkel says. Neuhaus Neotec roasters use convection instead of conduction heating. This method transfers heat from the air directly to the bean, instead of through metal, as with a drum wall. “This can especially reduce the drying period during the process,” Henkel says. This speed allows Tinnghia to quickly produce large amounts of dark roasts which are popular in the Asian market. However, Henkel says this is not the only capability of RFB technology. “Our RFB technology is well established in Europe and the United States for its ability to roast specialty coffee. You have a very fast reaction time with hot air roasting, which allows for a wide range of very interesting profiles,” he says. “There’s also no agitator which can break the beans or produce mechanical stress in the chamber. These are all the advantages of not having moving parts within the roaster.” The key difference between the RG series and Neuhaus Neotec’s RFB batch roasters is the use of a flatbed cooler, which make the system more compact. “Our RFB batch roasters use a cooling chamber the same size as the roasting chamber, meaning it needs more space and height,” Henkel says. “The RG cooler, on the other hand, is an angular chamber with a perforated bottom and suction system on top. Suction of air through the chamber accelerates cooling speed and a multiple-nozzle system adjusts the amount of moisture in the bean.” Once the coffee has been roasted, it is stored for several hours before being sent to the grinder. Tinnghia is equipped with an WMS Series coffee grinder, designed for narrow particle distribution, high capacity, and minimal service required. After grinding, the coffee is again stored before beginning the processes unique to instant coffee production, including drying, evaporation, and extraction. Devex takes its name from these three processes, and develops technology for these applications in not just coffee but also the food

and beverage, pharmaceutical, and chemical industries. Devex Managing Director Ulrich Niesse says it requires extensive and specific knowledge to develop this type of technology. “Our unique performance in terms of roasting, aroma technology and options for setting parameters such as colour, particle size distribution, and bulk density for the final product have set us apart from the competition,” Niesse says. The first stage of instant coffee production is extracting the soluble solids and aromas from the coffee. “The main objective in instant coffee production is to produce a high-quality coffee at a high yield,” Niesse says. “Off and acidic flavours can be generated with a higher yield, so desired aromas and flavours are removed to be reintroduced later in the process.” Post-extraction, the solids are concentrated, and the aromas are reintroduced to adjust flavour. This aromatic, vaporous coffee extract can then be spray- or freeze-dried. “Of the 350 kilograms the plant roasts per hour, about 100 kilograms is freeze-dried and 250 is spray-dried,” Niesse says. “Freeze-dried is considered a higher quality and Tinnghia is the first Vietnamese company capable of producing it.” Freeze drying sees the coffee extract frozen to about -50°C and granulated into the correct particle size. It then dries at low temperatures under a vacuum. “This is done in a way that the frozen water left in the coffee sublimates as it heats, producing vapour without any liquids,” Niesse says. In spray drying, a stream of hot air is run down a tall cylindrical tower into the coffee extract, drying out the water. As the extract droplets fall, they dry, becoming a powder by the time they reach the bottom. Once dried, the instant coffee is ready for packaging and distribution. In order to guarantee optimum and smooth production at the plant, Devex will remain onsite to intensively train Tinnghia’s employees until June 2019. Henkel expects investments in roasting capacities and instant coffee production in Vietnam to remain strong in the next few years and has several more projects underway. “Tinnghia is planning to expand its production in the near future to 10,000 tonnes per year and we’re helping them take that next step,” Henkel says. “We are also preparing new plants for other companies too. Vietnam’s biggest companies trust us and our RFB technology. “We can deliver a complete solution, from green beans coming in to the final product going out.” G C R Prominent members of Tinnghia, the Kahl Group, and the Vietnamese Government attend the inauguration of the Tinnghia instant coffee plant.

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FEATURE WCPF

Connecting the chain THE 2019 EDITION OF THE WORLD COFFEE PRODUCERS FORUM WILL BRING TOGETHER THE ENTIRE PRODUCTION CHAIN TO ADDRESS IMMEDIATE ACTION ON THE INDUSTRY’S MOST CHALLENGING ISSUES.

n 2016, Rio de Janeiro hosted the Summer Olympics, attracting the world’s best athletes to the South American destination in pursuit of greatness and gold. In July 2019, the world will once again descend upon the country, only this time in pursuit of resolutions and action to help secure the future of the global coffee industry. In its second edition, the World Coffee Producers Forum (WCPF) will take place in Campinas, Brazil at the Royal Palm Hall from 10 to 11 July. Created as a platform for producers to voice their concerns on the many issues threatening their livelihoods and production, this year the WCPF will bring together about 2000 attendees representing more than 40 coffee producing countries from Asia, Africa, and Latin America, with members of the wider coffee industry. This will include producers, roasters, exporters and importers, government officials, non-government organisations (NGOs), industry leaders, traders, and multilateral agencies. The forum’s agenda, prepared by coffee growers, will discuss pressing matters of coffee pricing, socio-environmental issues, climate change, economic sustainability, and rising production costs. With 20 years of experience in agribusiness, the Executive Director of the Brazil Specialty Coffee Association Vanúsia Nogueira will host this year’s WCPF, and is one of the event’s main speakers. “We started having discussions about four years ago and realised there are a lot of big conferences around the world that are all organised by consumers and by roasters, but there was no conference organised for the producers. We knew we needed to talk about it,” Nogueira says. “The forum committee decided to create an open discussion where producers constructed an agenda about issues in the coffee sector. From there, the forum committee planned its first WCPF in July 2017, where we had panels about social and environmental change, and Vanúsia Nogueira will host this year’s World economic sustainability.” Coffee Producers Forum in Campinas, Brazil. This year, the two-day event will see a panel

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of industry leaders highlight challenges within the coffee community and offer solutions through a variety of forums and workshops. Forums will be centered around three pillars of sustainability (social, environmental, and economic), climate change, and productivity levels. “Everybody is worried about social and environmental sustainability, but no-one is concerned about economic sustainability. We know this is an issue for producers. This is why this year’s forum agenda will [focus on] economic sustainability. There is no easy solution. If there was, we would’ve applied it [already],” Nogueira says. She adds that having an open platform like WCPF is a unique opportunity for industry leaders and producers to work together and strive for resolutions. “Before the first forum, representatives didn’t talk to other producers that much. We used to act as competitors. Since then, we’ve realised we have to contribute together as we have so many common issues,” Nogueira says. This includes the industry’s vulnerable coffee pricing structure, which reached its lowest price point in 14 years with a low of 97.44 US cents per pound in February 2019, according to the International Coffee Organization (ICO). Nogueira says increasingly, farmers are being challenged due to rising production and distribution costs, price of equipment, climate change and disease management. The first WCPF in 2017 Medellín, Colombia saw support from former United States President Bill Clinton, where he

participated in a forum with then Colombian President Juan Manuel Santos on economic sustainability and rural development to promote global stability and democracy. Clinton told the overflowing audience of more than 1000 delegates about Medellín’s transformation into a global coffee leader and “smart” rural and coffee development. “With Bill Clinton’s presence we got a lot of attention from the press, NGOs, and America. We realised from here we couldn’t stop,” Nogueira says. “This is a learning opportunity, to be a part of an open discussion. We need to have every type of person involved in the coffee supply chain, including NGOs and the media, to help us think about solutions for producers.” This year, the world-renowned expert and leader in sustainable development Professor Jeffrey Sachs of Colombia University’s Earth Institute will be a keynote speaker. He will present his findings from an economic and political study in order to help improve the yields of small coffee producers. “We’ve asked Jeffrey Sachs to conduct a study of a local coffee sector and to present a neutral diagnosis and his results. He will also address major sector issues, such as pricing,” Nogueira says. Along with Sachs, the forum will also see three additional panels discussing topics such as coffee price formulation, and how to protect producers’ incomes and promote and increase consumption, using Brazil as a reference for other producing countries. All conferences and panels will be simultaneously translated into Spanish, English, French, and Portuguese. “The panel we have selected is made of very technical people who can tell us about their participation in the coffee sector and offer advice,” Nogueira says. Industry experts making up the panels include José Sette, Executive Director of the ICO; Carlos Brando, Chairman of the Global Coffee Platform; Sarah Mason, founder of Shift Social Impact Solutions; Annette Pensel, Executive Director of the Global Coffee

Former President of Colombia Juan Manuel Santos and Former US President Bill Clinton attended the inaugural WCPF in 2017.

“THIS IS A LEARNING OPPORTUNITY, TO BE A PART OF AN OPEN DISCUSSION. WE NEED TO HAVE EVERY TYPE OF PERSON INVOLVED IN THE COFFEE SUPPLY CHAIN, INCLUDING NGOS AND THE MEDIA TO HELP US THINK ABOUT SOLUTIONS FOR PRODUCERS.” Vanúsia Nogueira

Executive Director of the Brazil Specialty Coffee Association

Platform; and Nathan Herszkowicz, Director of the Brazilian Coffee Industry Association. After the completion of the WCPF, it is hoped that attendees return to their respective countries with defined outcomes and solutions of how to work jointly and co-responsibly to make permanent changes to issues that compromise the future supply of coffee. Nogueira hopes the WCPF will “continues to grow, combining the minds of producers and industry leaders alike”. But as the WCPF reiterates in its message to the industry: “It is clear: No action is not an option.” G C R For more information, visit www.worldcoffeeproducersforum.com.br

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MAY 4 - 7 / 2020 MELBOURNE CONVENTION AND EXHIBITION CENTRE WWW.INTERNATIONALCOFFEEEXPO.COM

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Final chance to exhibit THE COFFEE WORLD IS COMING PLATINUM SPONSORS

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PROUD PARTNERS

ADVERTISING FEATURE mycoffeeworld.com

THE NEXT GENERATION SINGAPOREAN INDUSTRIAL DESIGNER EASON CHOW AND SWISS TECHNICAL PARTNERS HAVE COME TOGETHER TO ADDRESS THE MARKET’S WASTE ISSUE WITH BIOLOGICAL COFFEE CAPSULES THAT DISSOLVES AFTER USE.

coffee pod is elegant in its simplicity: a pre-prepared single-portion espresso shot that consumers can brew at the touch of a button. However, Pascal Schlittler, founder of single serve capsule company Mocoffee and investment platform MyCoffeeWorld, says coffee pods have become a problem worldwide. “Today, it’s estimated about 60 billion coffee capsules are produced every year. When I became involved in the single serve industry in 2009, we were at maybe 12 billion,” Schlittler says. “The industry has failed to find a good solution to cope with this scale, the extension of this product on a worldwide base. Many of these products are not disposed of correctly and end up in landfill. This is a huge concern.” Some companies have begun producing recyclable or compostable capsules. However, Schlittler believes these inventions face the same issues plaguing takeaway coffee cups in many countries. “We see large numbers of people still throwing away their capsules, whether they are recyclable or not, because people aren’t aware how to dispose of them,” Schlittler says. “People try to produce biodegradable or compostable alternatives, but these, like recycling, need The Droops Coffee Maker will use dissolvable capsules similar to gumballs to produce coffee.

infrastructure in place to support them. Today, it’s estimated that only one out of five aluminium capsules are really collected for recycling.” Through MyCoffeeWorld, Schlittler supports innovative coffee concepts and companies he believes could revolutionise the coffee industry. A matter close to his heart, Schlittler spent a long time finding someone who could pose a solution to coffee capsule waste. He found it in Singapore with industrial designer Eason Chow and his Droops Coffee Maker concept. “Droops is the one project that ignited a spark in me, that I thought really focused on the topic of next generation coffee beverages. It’s really ahead of the market,” Schlittler says. The Droops Coffee Maker would use dissolvable capsules to produce coffee. Creator Chow says he was inspired upon realising the level of waste coffee pods generate. “I was working in a design agency where everybody was going for coffee three to five times a day,” Chow says. “One day, I went to clean the machine and when I opened up that tray that stores all the empty capsules. It was a shocking scene. There were hundreds of plastic capsules inside that would all go to landfill.

“Droops is the one project that ignited a spark in me, that I thought really focused on the topic of next generation coffee beverages. It’s really ahead of the market.” Pascal Schlittler MyCoffeeWorld Founder

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“It was in that moment I started to think: ‘Why does so much waste need to be generated for peoples’ convenience?’ I started to research it and think of new ways I could approach the issue.” Chow says confusion around composting and recycling prompted him to find an alternative method of disposing of the coffee’s casing. He took inspiration from his favourite candy. “Picture a Gobstopper. It is sweet, with multiple layers and a hard outer shell,” Chow says. “Our pod’s casing isn’t exactly the same material, but it incorporates this idea of a natural shell that is also part of the product.” Once launched, Droops plans to make its pods customisable, resembling logos or shapes that represent the coffee. Chow says in developing the Droops concept, it was important to not solely focus on the machine’s environmental consciousness to appeal to consumers.

“We have to remember it’s really about convenience. If you make it difficult to be sustainable, less people will embrace the waste-free product,” Chow says. “It is effortless to be eco-friendly with Droops. The casing – a combination of coffee, water, and biological material – dissolves so you don’t even need to worry about throwing it out, let alone in the correct bin.” When Chow first published the concept in 2014, it was received with great acclaim. Droops won a Red Dot Design Award in 2015 and received attention from international news organisations. “I met Pascal then, and we really started to dive into this concept, to see how we could fine tune it,” Chow says. Since then, Droops has progressed from the concept phase to product engineering and mass production. Chow says they almost have a turnkey project at hand. “The feasibility study has been made, the proof of concept is here, and now we need to bring this into a production phase. Our next goal is to

establish a production site and develop a variety of products,” he says. “We are looking to work with the right people who really want to be on the forefront of this innovation and build a supporting structure to take my idea and our European partner’s technology to production and distribution.” After Chow developed the concept, Schlittler connected with Swiss partners who had independently created the necessary shape pressing and coating technology. “Together, we have developed technology capable of producing these capsules and a machine that can extract the pod in a way that makes a good espresso,” Schlittler says. “I’ve tested the coffee myself, and at this early stage, it is already just as good as any of the larger supermarket coffees available today. What really struck me was, after the extraction, I could take the casules in my hands, squeeze it, and it would break down so only coffee grounds remained.” Schlittler says Droops’ combination of convenience, sustainability, and quality will endear it to multiple demographics, whose coffee preferences often differ. “With the technology at hand, we have an opportunity to not only appeal to general coffee pod users and sustainable minded consumers, but the wider coffee market,” Schlittler says. “People who drink instant coffee will enjoy the convenience, while specialty or café drinkers will appreciate the quality.” Schlittler says projections suggest that the dissolvable pods could in the long-term work out much cheaper for capsule producers. “An industrial system to produce these new capsules will cost 50 per cent of what it takes to run traditional capsule machines,” Schlittler says. “That’s a huge trigger for the industry, and we’ve received a lot of interest from people who would like to buy or distribute these pods once they reach the market.” Once Droops and dissolvable coffee pod production equipment receives a wide release, Schlittler hopes to share it with the rest of the coffee community. “People are proud when they develop something, put a patent on it, then in 25 years, the industry is blocked because only one guy has the key and is able to sell the product,” he says. “We want to be able to share this technology and make sure everyone is moving in the right direction.” G C R

“It is effortless to be eco-friendly with Droops. The casing dissolves so you don’t even need to worry about throwing it out, let alone in the correct bin.” Eason Chow Droops Coffee Maker Creator

Eason Chow CREATOR Droops began as an idea to revolutionise coffee-drinking culture through the use of fully dissolvable coffee capsules. Beyond being a more sustainable approach, it also aims to reinvent the convenientcoffee experience by taking consumers on an exciting journey as they create their own cup of coffee, likened to the fun of dispensing gumball candies. Chow is an industrial designer who loves coming up with simple yet useful creative solutions to challenging problems. For more information, visit www.easonchow.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

SIMPLICITY IN A COMPLEX WORLD EVERSYS CHIEF COMMERCIAL OFFICER KAMAL BENGOUGAM TALKS ABOUT THE EVOLUTION OF FLAVOUR THAT’S MASKING OUR SENSES, AND WHY THE NATURAL EXPRESSION OF ORIGIN IS AT RISK.

ne day, two portly cows looked over a fence, a stark contrast of black and white set against the green valley below, and saw the words “pasteurised, homogenised, and vitamin A added” on a passing milk truck. One cow said to the other, “it makes you feel a bit inadequate, does it not?” Off they went, back to the business of grazing, shaking their head in disgust at how the inevitable burden, the curse of evolution, is betraying creation’s simple and beautiful order. Is this how we look at life sometimes? We give it our best effort, and then critical feedback

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or judgement comes down on us like an icy shower on a cold winter night. It’s an unwelcome reality check shaking us to our very core, pressing scary thoughts into an already fragmented self-esteem. We tend to dance to other people’s music and form our identities in the colosseum that is life, much like the gladiators of old, waiting for the flick of a thumb to determine our miserable

“GROWN FOR 1407 DAYS, TRANSPORTED 8516 KILOMETRES, ROASTED FOR 27 MINUTES, AND POTENTIALLY DESTROYED IN SEVEN SECONDS.” Kamal Bengougam

Eversys Chief Commercial Officer

fate. And yet we live in hope that we can reverse this trend, this cycle of doom, and retake control of our brilliant destinies. Imagine how coffee growers from faraway lands might feel. They gently prune their treasured beans under the glare of an unforgiving sun, lovingly plucking them to prevent bruising on their delicate skins. They dry them carefully with the help of a fragrant breeze, package them in handmade hessian bags, and bid them goodbye, dreaming of the blessings their little treasures will surely deliver to their Northern Hemisphere cousins. Then, on the other side of the world, in a little neighbourhood coffee shop, comes this strident order with a twang: “Large latte, oat milk and two shots of caramel syrup.” As the golden beans hide in terror, submerged in unfamiliar surroundings, their exotic flavours become lost in a vast cup filled with hot eccentricity. Grown for 1407 days, transported 8516 kilometres, roasted for 27 minutes, and potentially destroyed in seven seconds. In today’s world, accents are being dulled to be replaced by what we call ‘norm’, accepted standards of taste and performance that make us conform into today’s tribe, what we call ‘society’. Our spirits are repressed, our minds depressed, and wings clipped. Our teeth are bleached and skins tattooed in search of that elusive quest we call happiness. But what if, like a coffee bean’s outer skin, happiness was just a bitter illusion? What if it were a poisoned chalice disguised as a holy grail, a bland panacea to keep the tribe in a false sense of security and uniformity to maintain the derisory status quo favoured by today’s inept politicians? They allow us to acquire greater wealth, more freedom in exchange for greater control and higher taxes. And what if, like the bean, what mattered most was the core, the heart, a place of joy where flavour lies hidden? It is a place of unique expression and extraordinary potential where a bean is free to spread its wings of creativity into an unexpecting cup. I am one who believes, rightly or wrongly, that things must be experienced as close to their natural created form in order to be truly recognised, and then appreciated. You may add cream, chocolate, or even black pepper to a ripe strawberry, but as the fruit bursts into life and permeates your craving taste buds, it is the unmitigated flavour of sweet strawberry that overwhelms your senses. It is the strawberry that sends melodic notes through the microphone of your mind, while the other flavours play the role of a mere backing singer. So why do people seek to obliterate the primal taste of origin? Why do they bury it under the burden of foreign particles, unwelcome intruders that disguise the true magic that lies within? The various milks and syrups are only symptoms, a mask that disguises the real reason, the root cause of this anomaly, is that some people simply do not like the taste of coffee. Why do people order products that they inherently do not appreciate? It is purely because they want to fit into the tribe and that coffee, at present, is deemed to be a ‘cool’ drink, like the martini of old. When it comes to presenting coffee in creative forms, the world has gone berserk hot, cold, nitro, espresso, drip, instant, capsules, chemex, canned/ready-to-drink, a zillion types of milks, and syrups. And then there is ‘bullet proof coffee’, a very cool name perhaps, but adding butter in

Kamal Bengougam believes the natural form of coffee should be recognised, then appreciated.

your coffee makes you a deviant nonetheless. Are these trends a form of greater expression to enhance an already magnificent experience, or an act of camouflage to eradicate unwanted essences and disruptive aromas? What shall the future bring? More variety? Perhaps there will be a greater choices of milks. Fish milk must be good for you, sous vide brewing, even genetic enhancements. Why not cross a coffee bean with a vanilla bean, kryptonite spoons or plutonium cups? These are symptoms of the complex story we find ourselves living in. The argument for evolution is slowly undermining the natural rhythm of creation, increasing pace and noise, promoting a violent invasion of the senses at the expense of serendipity. Then there is the way they do it at origin. There’s a wood burning stove, a gentle flame, an old cast iron pan, a pestle and mortar, and a bit of clean water. Wait a while. Then savour the elixir with the whole of your being. Surround yourself with good friends, the beat of distant drums, and exotic scents driving joy through the microphone of your mind – a silent backing singer that is pure joy. At origin, two scrawny cows return to the business of random grazing. Their dusty copper coats are in harmony with the earth. Service is not required. They flick their tails in the air, trying to undermine a swarm of flies, identity, and adequacy restored. Life is good. Life is simple. Life is pure at ‘origin’. G C R

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ORIGIN Puerto Rico

In the eye of the storm ALMOST AS FAST AS HURRICANES IRMA AND MARIA SWEPT THROUGH PUERTO RICO’S COFFEE INDUSTRY IN 2017, A COALITION OF ORGANISATIONS IS WORKING TO GIVE THE COMMUNITY NEW LIFE.

or outsiders, “coffee” and “Puerto Rico” aren’t synonymous in the way that “coffee” and “Colombia” or “Ethiopia” are. In fact, it’s not widely known outside Puerto Rico that the island even produces coffee. Any coffee production associated with the United States is generally linked to the infamous Kona coffee of Hawaii. The reality is that the US also produces coffee in Puerto Rico, its southern-most territory at the top of the coffee belt in the Caribbean. In fact, it was the fourthlargest producer in the Americas and the sixth-largest exporter in the world at the end of the 19th century. Coffee was first introduced in 1736 when Puerto Rico was a Spanish colony. In the 19th century, coffee became the first agriculture product of Puerto Rico, hitting its peak as demand and prices of the commodity on the global market climbed. At the end of the century, however, coffee production started contracting as the US took over the island in 1898 and shifted its focus to sugar cane, and when a hurricane devastated coffee plantations in 1899. In more recent decades, production has continued declining as “Operation Bootstrap” aimed to industrialise the country in the 1950s, and as generations have abandoned the industry to move stateside. According to the US Department of Agriculture (USDA), Puerto Rico was home to 5678 coffee farmers in 2007 and 4478 in 2012. Organisations currently working in the industry estimate that there are anywhere between 2300 and 3000 today.

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In addition to declining production, Puerto Rico’s massive local consumption is the other factor contributing to its lack of reputation on a global scale. Unlike most other coffeeproducing countries, Puerto Rico consumes significantly more coffee than it produces. In fact, domestic production only satisfies about one-third of local consumption, the remainder imported largely from the Dominion Republic and Mexico. Some of the more popular local brands on the island are Yaucono, Café Crema and Café Rico, all owned today by local industry giant Puerto Rico Coffee Roasters. At one point in time, Puerto Rico had a direct line to the Vatican because it was the Pope’s preferred coffee, says Charlotte Gossett Navarro, Senior Director of Puerto Rico Operations at non-

“MANY TREES WERE GONE, AND THE TREES THAT REMAINED HAD NO LEAVES AND SOME HAD NO BARK. IT LOOKED LIKE A BOMB HAD EXPLODED.” Jaime Fortuño

Co-owner of Cafe Zumbador

Image: Johnny De Los Santos

profit the Hispanic Federation. “That story gets passed along through generations. I have no evidence for it, but it’s indicative of how strongly we feel about our coffee,” Gossett Navarro says. So for locals or Puerto Ricans abroad, “coffee” and “Puerto Rico” are most definitely synonymous. Gossett Navarro has fond childhood memories of travelling to Puerto Rico to visit family. “We’d come back [to the States] smelling like coffee because my mom insisted we fill our bags with Puerto Rican coffee to ensure we had enough to last until the next trip,” she tells Global Coffee Report. “Like many Puerto Ricans, my mom believed the best coffee came from Puerto Rico.” But without recent work by a vast coalition of donors, farmers, and other key stakeholders, the cherished industry could easily have been wiped out in 2017 after being hit with backto-back hurricanes. On 6 September 2017, category 5 Hurricane Irma travelled along Puerto Rico’s northern coast, devastating more than US$45 million in agriculture. Just two weeks later, category 5 Hurricane Maria made landfall, representing the strongest and costliest storm to hit Puerto

Rico since 1928, according to the USDA. It wiped out 80 per cent of the island’s crops, including coffee, causing a loss of US$780 million in agriculture yields, according to preliminary estimates. These losses were on top of an already flailing economy – just four months earlier, Puerto Rico filed bankruptcy after nearly 10 years of economic recession. Maria also destroyed key infrastructure, caused months of blackouts and claimed about 3000 lives as a result of delayed medical care. “The wet mill [looked] as if a giant had stepped on it,” explains Jaime Fortuño, who grows and exports coffee near the southeastern town of Yauco with his cousin. “Many trees were gone, and the trees that remained had no leaves and some had no bark. It looked like a bomb had exploded.” Fortuño’s great grandmother was the first coffee grower in his family. Although his father opted to follow a different career path, Fortuño returned from college to start a coffee export business – an ambitious venture considering the aforementioned lack of global awareness. Through 1998, his joint venture with two other families grew very successful, exporting their Puerto Rican coffee at high volumes and high prices. That year, however, Hurricane Georges hit, representing the largest and most costly hurricane to cross the island – until Maria. Fortuño and his partners lost nearly everything. So not unlike other fellow Puerto Ricans, he left the island for the mainland to support his family in a more secure industry.

Task Force member World Coffee Research estimates that about 20 million plants are needed for farm renovations after the damage of Hurricanes Irma and Maria.

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ORIGIN Puerto Rico

Today, Fortuño is back in the industry and plans to stay, despite Maria’s greater impact than Georges. He returned in 2014 to launch Café Zumbador with his cousin. They’ve endured the economic recession and the two 2017 hurricanes. This time around, Fortuño is in a better position to rebuild and doing so is more important to him than ever to support the industry and his family’s livelihood. “We have dried our tears and we are now focused,” he tells GCR . “To be able to tell my great grandmother Carmen that we did not abandon what we had is something that has driven us.” That strong connection between Puerto Rico and its coffee is the driving factor for many in the industry who stayed behind to rebuild. And it’s the only way towards recovery for the entire country, Gossett Navarro says. “Coffee is a critical piece of our culture and enterprise. So when we think about a full recovery of Puerto Rico, we can’t do it without the coffee sector.” Shortly after the hurricanes, word travelled to Starbucks headquarters where Director of Social Impact and Public Policy Kelly Goodejohn organised a trip to the island to take stock of the local industry. Over the following months, Starbucks and a group comprising local and foreign organisations formed what they would start calling the “Task Force” that would launch two massive initiatives to rebuild the industry. Because 80 per cent of the trees had been wiped out, the most significant and immediate need was seeds and replanting. Task Force member World Coffee Research (WCR) estimated

Images: Johnny De Los Santos

Starbucks, along with local and foreign organisations have formed a “Task Force” to help rebuild the industry in the hurricane aftermath.

that about 20 million plants would be needed for farm renovations and that they could probably get there in three years. The Starbucks Foundation, with a supplementary grant from the Fonalledas Foundation, put up the funds for the first initiative that focused on WCR’s work with the coffee seeds and plants. Because previously existing nurseries and seed lots had also been destroyed in the storm, they looked to imports. There also wasn’t enough genetically pure raw material left to propagate Puerto Rico’s two main rust-resistant varieties of high-quality Arabica, Limani and Fronton, on a mass scale. Those two varieties are unique to Puerto Rico, however, so the Task Force identified the Marsellesa variety as the most similar, while also being high quality, resistant to coffee leaf rust, and climate tolerant. Starbucks also volunteered to send over two million seeds, but because Puerto Rico is a US territory, there are strict, albeit necessary, regulations in place regarding

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importing foreign plant material in order to prevent introducing new pests or diseases. The Puerto Rican Department of Agriculture, which is also a Task Force member, selected four farms to quarantine and house the seeds while they germinated, with the costs incurred by those farmers, explains WCR’s local project manager Viviana Medina. The seedlings are expected to be ready for distribution mid-year. “This is an opportunity to reset the seeds in particular to make sure the farmers are starting with a successful foundation of highquality seeds,” Gossett Navarro points out. “But there is a fear in Puerto Rico of losing our local varieties, so we want to ensure that doesn’t happen. The seeds, the variety, the flavour – all of that is important to maintain, while supporting quality coffee production.” The other initiative underway involves significant work that will happen after seedlings are distributed, so TechnoServe joined as a Task Force member to implement the technical training portion. “There’s a big-picture component to our work,” explains TechnoServe’s Puerto Rico Coffee Manager Hector Saez-Nunez. “We train farmers on best practices so they can then apply those in the field and we train them on business skills so they can also manage their books better.” The Hispanic Federation, Nespresso, The Rockefeller Foundation, and the Colibri Foundation are largely funding this portion of work. Aside from its mission of supporting Latino families and institutions throughout the United States, the Hispanic Federation joined the efforts and Task Force when Founding President Luis Miranda, father of Broadway star and producer Lin-Manuel Miranda, learned of the blow the industry took from Maria. Among other local organisations invested in rebuilding the industry, Puerto Rico Coffee Roasters and the University of Puerto Rico are also key members of the Task Force and supporters of the initiatives. With three major coffee companies on board, Medina sees that alone as an achievement in the enormous task at hand. “We had competitors and different members of the industry all sitting at the same table for the first time,” she tells GCR .

“That is one of the most significant parts of this whole story – getting these people at one table where they’re all putting aside their differences in the name of the industry and this revitalisation effort, trying to come up with a solution for the benefit of the Puerto Rican coffee industry.” On a greater scale, many of these individuals see the aftermath of Maria as a clean slate to rebuild a more efficient, updated industry that puts a higher focus on quality to help farmers bring in higher earnings. Because Puerto Rico is subject to US labour regulations and standards, higher costs of production are reflected in the coffee’s generally higher prices, regardless of quality. Although the Task Force’s primary goal is focused on building a sustainable industry that can supports farmers’ livelihoods and local consumption, a by-product of the clean slate and these initiatives could by stronger positioning in export and specialty markets. “The focus over recent years has been more local because it’s easier, but that’s not a big enough market to sustain the industry without an export component,” emphasises

Starbucks is sending more than two million Marsellesa variety seeds, which the Task Force identified as the most similar to local varieties.

Fortuño, whose business has long been export focused. “The only way Puerto Rican coffee production is going to be viable [in the future] is to focus on export to high-quality markets, which will bring the prices that allow us to do this work and remain [in] these mountains.” What’s more, greater participation in export and specialty markets will be big steps toward getting Puerto Rico’s coffee onto the world stage. While the 9000-square-kilometre archipelago may never achieve Colombia or Ethiopia notoriety, Starbucks’ Goodejohn sees a future where “Puerto Rico” and “coffee” are, indeed, synonymous: “If Puerto Rico farmers get new trees and learn better farming methods, their quality will go through the roof. The whole world will want to buy their coffee.” G C R The Puerto Rican coffee industry is rebuilding after hurricanes wiped out 80 per cent of the island’s crops, causing a loss of US$780 million in agriculture yields.

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DIARY Dashboard COFFEE COFFEE AROUND AROUND THE THE GLOBE GLOBE

GLOBAL COFFEE EVENTS

THAIFEX – WORLD OF FOOD ASIA

BANGKOK, THAILAND

28 MAY - 1 JUNE Thaifex is 11 trade shows in one, showcasing a unified food and beverage industry through a diversity of products. Its coffee-related division, Thaifex Coffee & Tea, underscores the robust business opportunities in this segment, showcasing product from beans to equipment, and leaves to cup. This segment covers beans, pods/ capsules, instant hot beverages, syrups, coffee machines, grinders, and roasters, as well as tea and cocoa. www.thaifexworldoffoodasia.com/en

TEA & COFFEE WORLD CONFERENCE 2019

HONG KONG, CHINA

23 - 25 SEPTEMBER

The Tea & Coffee World Conference assembles delegates and suppliers from the entire industry. Coffee roasters, packers, and retailers can interact with suppliers of equipment and raw materials, importers, exporters and service providers, maximising the channels of communication between key decision makers. The three-day event will feature high-profile key note speakers and technical experts, educational workshops, and a table top exhibition. www.tcworldcup.com

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WORLD OF COFFEE BERLIN, GERMANY

6 – 8 JUNE World of Coffee features more than 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

HOST MILANO

MILAN, ITALY 18 – 22 OCTOBER Host Milano is a world-leading trade fair dedicated to the world of catering and hospitality. Attendees will find a complete offering from international hospitality and hotel industries, including the latest trends in terms of equipment and products, a busy schedule of events, and a suite of coffee and product competitions and awards. www.host.fieramilano.it

WORLD COFFEE PRODUCERS FORUM

SÃO PAULO, BRAZIL

SPECIALITY & FINE FOOD ASIA

SUNTEC, SINGAPORE

10 – 11 JULY 17 – 19 JULY The 2019 Edition of the World Coffee Producer’s Forum 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. The purpose of this second collaborative event is so that more than 25 million families who grow beans and create the drink that satisfies the most diverse tastes around the world can keep growing and scaling quality produce. www.worldcoffeeproducersforum.com

WORLD TEA & COFFEE EXPO

MUMBAI, INDIA 21 – 23 NOVEMBER At the Bombay Exhibition Centre, the seventh edition of the World Tea & Coffee Expo will provide networking opportunity for serious industry players to meet and undertake business, as well as understand and determine future trends. The trade show is accompanied by a two-day high-level conference, and workshops on the last day. www.worldteacoffeeexpo.com

Speciality & Fine Food Asia provides a dedicated platform for gourmet food producers and purveyors to meet with key buyers and decision makers from the retail, wholesale, foodservice, and hospitality sectors in South-East Asia. The second edition held in July will welcome 160 local and international exhibiting companies and more than 3300 visitors across South-East Asia, cementing its position as a leading showcase of specialty and premium food in South-East Asia. www.speciality-asia.com

MELBOURNE INTERNATIONAL COFFEE EXPO 2020

MELBOURNE, AUSTRALIA

4 – 7 MAY, 2020 Now in its ninth year, the Melbourne International Coffee Expo (MICE) is known throughout the Asia Pacific as the largest and most exciting dedicated coffee event. Each year, café owners, roasters, baristas, equipment manufacturers, service providers, and more gather at this trade-oriented event to network and do business. MICE2020 will take place at the Melbourne Convention and Exhibition Centre. It will host the 2020 World Barista Championship and World Brewers Cup. www.internationalcoffeeexpo.com

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PRODUCTS Marketplace

OIL-FREE DEGASSING VALVE Plitek is excited to announce the launch of its oil-free one-way degassing valves. This product will help coffee roasters protect and preserve the quality of their roast, allowing them to serve the best quality coffee to their customers. The oil-free feature helps save time, decrease scrap, and reduce clean-up efforts by eliminating the need to oil valves. The features presented by the new valve permits greater application throughput efficiency. With its environmental footprint in mind, the product uses less material compared to a button valve. The oil-free one-way degassing valve is flexible and conforms to a package’s contours. Its clear design seamlessly integrates with packaging graphics. The new technology also has outstanding opening and closing pressure allowing for the best preservation of roasted coffee. For more information, visit www.plitek.com

STELLA EPIC The Stella Epic is ready to win the barista community over with an all new and unique way to profile the perfect espresso shot through an intuitive Expert Mode programming function. Featuring Unic’s Thermalink network technology, the Stella Epic offers exceptional workflow performance for high volume cafés by using an intelligent power management system, resulting in one of the most thermally stable and precise brew groups ever made. Another industry breakthrough is Unic’s Easylock system that facilitates locking the portafilter to the group with minimal effort. The hydraulically sealed portafilter minimises barista wrist fatigue, allows for greater consistency between shots, and extends the life of group gaskets. With flat customisable panels, master handwelded construction, and an assertive design profile inspired by the late 50’s iconic manual piston Stella espresso machine, the Stella Epic is the new head-turning flagship machine from the French manufacturer Unic. The Stella Epic will be visible at World of Coffee 2019 Berlin – Stand B28. For more information, visit www.unic-sa.com

KASON AIR CLASSIFIER MILL Kason has introduced a new Air Classifier Mill with higher capacity than any model previously offered by the company. The CAM 1300 combines impact grinding and air classification in one machine to produce fine grinds with narrow particle size distribution in the range of D97 = 10µm, at rates to 15 tonnes per hour for large-scale processes. Intended for bulk foods, pharmaceuticals, mineral applications, and more, the mill allows control of the airflow rate and grinding temperature to condition heat-sensitive materials. These materials enter the milling chamber where a spinning rotor impacts the particles against grinding segments inside of the chamber wall by centrifugal force. A rising column of air lifts the particles into the rotating classifier wheel, separating on-size material and directing it to the process air stream for collection or further processing. For more information, visit www.kasoneurope.com 56

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LWM 100 GRINDER The LWM 100 Grinder by Neuhaus Neotec is ideal for product optimisation. Neuhaus Neotec presents the new laboratory grinder LWM 100, now with additional features. The grinder follows the successful model of the previous generation but has a completely new programmable logic control with a revised user interface based on the new totally integrated automation portal. In addition, the new cleaning system and bearing temperature monitoring ensure additional process reliability. The grinding unit with its quick-change roller system has been specially developed for flexible and reproducible product development and smaller production units. The LWM can be used both in batch operation and integrated into continuous production processes. It is the optimum machine in the field of low-dust-grinding with a narrow particle size distribution. For more information visit www.neuhaus-neotec.com

IN-SITU GRINDER BY MPE MPE’s revolutionary, ultra-compact In Situ Model 600.IS roller style coffee grinder is designed to operate on top of capsule, pod, and any other types of packaging machines. Until now, only large industrial roller mills could reach particle size distributions and coffee densities to meet the highest quality capsule experience consumer demand. This means more coffee batching, grinder cleaning, conveying, storage, and possibly totes. If a capsule or pod manufacturer wanted a grinder installed above their packaging machine, they were forced to be satisfied with a convenient, but inferior, disc style grinder. Now, the same leading edge roller grinding technology and patented densifier systems available with MPE’s larger grinders are available with a water-cooled environment. The In Situ can be mounted directly on top of a packaging machine. No more hassles, just fresh ground coffee delivered direct to the filler, perfectly densified to espresso or lungo-style capsule or K-cup pod. For more information, contact scott@mpechicago.com or visit www.mpechicago.com

INDUSTRY 4.0 BRAMBATI SOLUTION To satisfy increasing requests of integration between different production areas, Brambati offers a fully integrated system for coffee management, from the green coffee warehouse to the single-packed bag of coffee. With this solution, customers can plan their production directly from their business accounting systems, receiving back the data related to the production done with a very accurate traceability of each single lot of green coffee and finished product. Over the traditional automation layer, Brambati has developed an interface capable to receive production orders, green coffee current stock, and other data from the upper levels, such as ERP, SAP, and MES, and dispensing this data to the different plant areas and machines, including roasters and grinders. In this way, the data entering request to the operator and mistakes are reduced to a minimum. For more information, visit www.brambati.it

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LAST WORD Space Roasters

OUT OF THIS WORLD SPACE ROASTERS HAS DESIGNED A SHUTTLE CAPABLE OF ROASTING COFFEE IN ZERO GRAVITY THAT AIMS TO TAKE OFF BY 2020. IN 2015, LAVAZZA AND THE ITALIAN SPACE AGENCY SUCCESSFULLY brewed the first espresso coffee in space. Now, California-based start-up Space Roasters wants to take it to the next level: producing the first batch of coffee roasted in space. The company’s space roasting capsule (SRC) is the brainchild of International Space University (ISU) graduates Anders Cavallini and Hatem Alkhafaji. The Space Roasters Chief Technical and Executive Officers, respectively, were inspired to develop the concept during an ISU class where the instructor presented a graph depicting the fall of interest in space among Americans from the 1960s to the present day. “That was a saddening and shocking revelation for them. They both wanted to create something that would engage people and give them a relatable way to be inspired by space science,” Space Roasters Chief Communications Officer Kelli Sullivan says. “Both being coffee lovers, they realised that coffee roasting – a seemingly ordinary earth-based activity that’s been done for centuries – and rocket science – a concept that seems very out of reach – would make a good partnership.” To develop the SRC, Alkhafaji combined his architectural engineering, robotic design, and space architecture knowledge with Cavallini’s background in mechanical engineering and space manufacturing, as well as experience as a roaster and barista. A nominal design of the capsule envisages it at 500 kilograms and 10 cubic metres, with four pressurised chambers where beans are roasted in a gravity-free setting. “The one thing we can’t avoid while roasting here on Earth is gravity. In the normal roasting process, beans tumble around, break apart, and make contact with a hot surface, all due to gravity,” Sullivan says. “If gravity is removed, the beans would essentially float around in a heated oven, giving it evenly distributed heat, therefore, not needing to be roasted over and over, possibly burning the beans.” In space, heat will be generated through a combination of solar energy, onboard energy storage devices, and heat from re-entry. Trade-off analysis and experimentation will determine the ideal combination. Space Roasters aims to make its first sub-orbital launch in late 2019 or early 2020. The company is in contact with a number of launch providers to make this a possibility. “This test will give us enough data to better understand the effect of roasting in zero gravity,” Sullivan says. “Once we confirm our [launch provider], we’re hoping to do it relatively frequently to yield as many coffee beans as possible.” Space Roasters is also in contact with growers and traders to determine

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A nominal design of Space Roasters’ SRC.

which beans will be used in the initial launch. “We are doing our research to make sure the coffee we use is fair-trade coffee and helps the local communities,” Sullivan says. “Our team is also in talks with coffee industry experts, who are willing to share their roasting and sourcing expertise.” Though the price of the space-roasted coffee from the initial launch won’t be sustainable for everyone, Sullivan says it won’t stay that way. “The first batch will definitely be more exclusive. After all, this is the first time in history coffee has been roasted in outer space. However, as time goes on, Space Roasters coffee will become affordable for everyone,” Sullivan says. “We want people to feel like space is something not so out of reach. Even if they can’t afford the initial price per cup, we encourage people to show their support by following our journey on social media.” Through its orbital mission, Space Roasters’ goal is to make space an accessible concept to the everyday person, and not just the playground of billionaires and large governments. “Ultimately, space roasting will allow people to experience a product that we know and love, and has been around for centuries, in a new and innovative way,” Sullivan says. “If we can enhance a product here on Earth using space science, it could influence more than the coffee industry and inspire people elsewhere to think outside the box. Who knows what will be next?” G C R