GCR Jun 2012

May/June 2012

FORECOURT COFFEE

Thailand’s unlikely success story

SUSTAINABLE CONVENIENCE? Coffee capsules and the environment

THE SUPPLY GAP A look at countries set to increase production

A MATCH MADE IN DELHI

The Starbucks Tata deal

CONGO’S COFFEE REVIVAL From devastation to hope

THE CHAIN GAME

OLAM’S MANAGING DIRECTOR ON INCREASED CONTROL OVER THE MEANS OF PRODUCTION

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CONTENTS May/June 2012

COVER STORY CONTROLLING THE CHAIN

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Olam’s Coffee Trading division has grown to be one of the largest in the world, trading the equivalent of 1300 cups a second.

IN THIS ISSUE FEATURES 10 CONTROLLING THE CHAIN

Olam’s Managing Director Vivek Verma on the company’s move up and down the value chain.

14 BLACK GOLD

A look at the rise of the forecourt coffee sector in Southeast Asia.

20 POSITIVE PERCEPTIONS & PROFITS

Coffee shakes off its image as an unhealthy drink in Germany, with sales figures catapulting forward as a result.

24 FILLING THE SUPPLY GAP

A look at what countries will step forward to meet increasing demands for coffee.

RESEARCH & TECHNOLOGY 29 P LANNING FOR THE WORST The Colombian Coffee Growers Federation’s preventative steps to climate change.

38 A SUSTAINABLE CONVENIENCE?

20

Experts speak on the environmental impacts of single-serve systems.

MARKETING

44 LEAVING A LASTING IMPRESSION

24

48 C ONGO’S COFFEE REVIVAL

International interest in Congo is starting to spark new trade, and hope, in this war-torn nation.

38

REGULARS

PROFILE

4 EDITOR’S NOTE

34 A MATCH MADE IN DELHI

7

Starbucks & Tata leaders tell GCR of the deal that will see a chain of co-branded cafés open in India.

Olam Coffee Managing Director and Global Head

ORIGIN

58 W ORLD COFFEE RESEARCH The Global Coffee Quality Research Initiative launches its research agenda.

Vivek Verma

Experts on how a show exhibitor can stand-out from the crowd.

42 M OCOFFEE PROMOTIONAL FEATURE

This single-serve system out of Switzerland is emerging as one of the most sustainable on the market, as the brainchild of the original coffee capsule inventor.

“WHILE WE CONTINUOUSLY LOOK FOR OPPORTUNITIES TO GROW, WE’RE ALSO VERY CONSCIOUS THAT IT’S EASY TO BUY GROWTH IN THIS MARKET.”

NEWS DRIP BY DRIP

54 DIARY DASHBOARD 56 MARKETPLACE 58 LAST WORD

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EDITOR’S NOTE Global Coffee Review

PUBLISHER John Murphy john.murphy@primecreative.com.au EDITOR Christine Grimard christine.grimard@primecreative.com.au



JOURNALIST Sarah Baker sarah.baker@primecreative.com.au

WHY LESS IS MORE AND GREENER

It’s said that market forces will help divine the balance between supply and demand.

When demand kicks up, high prices encourage further production, just as low prices take care of oversupply.

Unfortunately in the coffee world, the gap between planting a coffee tree and selling a bean makes the balance more difficult to achieve. The challenges of climate change have added another layer to the mix. Organisations like the Colombian Coffee Federation are taking active steps to combat what they see as one of their biggest challenges in future years (see page 33).

Instability in the green coffee market is also challenging for roasters, who need to balance pricing strategies and futures contracts.

In the long term, current production and consumption trends are predicting a supply gap, which could lead to financial losses in the not too distant future (see page 24).

Instability in prices, however, is by far the most detrimental to farmers at the production level. Time and again, we are reminded of the devastation caused by the coffee price crisis a decade ago, when farmers could hardly feed their families. While a jump in prices last year should have been a welcome sign, Kenyan coffee thefts and subsequent death toll, are a reminder that instability is never welcome when resources are scarce.

It seems a strange twist of fate, then, that just as the world’s insatiable thirst for coffee is starting to get out of control, that technology would come around with the potential to

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G C R | MAY /J U N E

bring consumption back under control.

In looking at sustainability concerns surrounding coffee capsule use, the one ecological benefit that stood out was the ability to limit consumption, and virtually eliminate wastage. Advanced technologies use as little as 5.5 grams of coffee for a shot of espresso. As singleserve coffee systems are increasingly popular, some are predicting that it could actually decrease consumption figures over time.

While the additional waste produced by coffee capsules may be evident to the common observer, most experts seem to agree that the environmental impact of coffee farming is still the biggest ecological sinner (page 39). This will continue to be less evident to the common observer, with these impacts affecting origin countries the most.

While market forces may guide supply and demand, our inability to put a price on the environment means that only industrial action and consumer behaviour can now guide sustainability efforts.

Christine Grimard Editor

ART DIRECTOR Joel Parke DESIGN Blake Storey, Alice Ewen, Karen Sloane, Michelle Weston, Sarah Doyle BUSINESS DEVELOPMENT MANAGER Steve Roberts steve.roberts@primecreative.com.au GROUP SALES MANAGER Brad Buchanan brad.buchanan@primecreative.com.au PUBLICATION CO-ORDINATOR Hayley Blain hayley.blain@primecreative.com.au PHOTOGRAPHY Lionel Lai Patrick Varney CONTRIBUTORS Maja Wallengren Daniel Howden Dave Swinfen Eugene Gerden 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.globalcoffeereview.com SUBSCRIPTIONS +61 3 9690 8766 subscriptions@primecreative.com.au

Global Coffee Review 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.

COPYRIGHT

Global Coffee Review is owned by Prime Creative Media and published by John Murphy. All material in Global Coffee Review 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 Review are not necessarily the opinions of, or endorsed by the publisher unless otherwise stated.

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NEWS In Brief

NEWS DRIPBYDRIP 

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Petroleum companies in the Southeast Asian region are looking for additional revenue streams, as profits generated from retailing are marginal due to price tolerance limitations.

In 2011, Café Amazon, a coffee retail business owned and operated

by PTT Group, Thailand’s foremost petroleum company, generated a total sales revenue of 1.2 billion Baht (around US$40 million). In 2012, sales are forecast to grow at around 15 per cent.

India’s Tata Global Beverages Limited and Starbucks Coffee Company announced a joint venture between the iconic international coffee brand and the second largest branded tea company in the world.

The 50/50 joint venture, named Tata Starbucks Limited, will own and operate Starbucks cafés, which will be branded as Starbucks Coffee “A Tata Alliance.”

Company leaders tell GCR that the fit was as much about values as it was about both companies’ largescale commercial success. The two companies will collaborate to invest in coffee growing communities, with a specific focus on agronomy, responsible farming practices, and will also work to extend the Swastha Project’s Community Based Rehabilitation Program, which covers differently-abled children in Kodagu, Karnataka.

In a separate sourcing and roasting agreement between Starbucks Coffee Company and Tata Coffee Limited, Tata Coffee Limited will roast coffee to supply Tata Starbucks Limited.

EUROPE

From 2005 to 2010, coffee sales in Germany grew by an average of around 4.6 per cent a year – 10 times faster than beer and almost three times that of wine. This follows from a previous decline in sales. From 1998 to 2003, sales of coffee in Germany dropped from around US$5.5 billion $3.4 billion.

The turnaround has been attributed to a change in the perception of coffee as a “healthy drink”, thanks to efforts by the German Coffee Association and others.

Coffee capsule sales will likely well surpass 10 billion this year, and many sustainability experts are worried about their environmental impact.

While coffee capsules help reduce coffee wastage, they generate a large amount of discarded capsules. The aluminium in these capsules is theoretically recyclable, however, few believe that it’s a practical reality.

One Empa researcher found that despite this extra waste, up to 70 per cent of the environmental damage from coffee capsules is still done at origin, due to agricultural practices. Where environmental efforts are maximised at the farm level, these damages can be minimised to 1 per cent.

AMERICAS



ASIA PACIFIC

The most conservative projections are expecting coffee demand to expand by 13 to 15 million 60-kilogram bags in the next five years alone.

The International Coffee Organisation (ICO) has now decided to put more focus on what is believed to be a growing problem.

In its latest market report, the ICO’s Executive Director, Roberio Silva, said growing demand will more than likely lead to supply problems in the not-too-distant future.

Most of the world’s immediate demand in the next five years will be met by a combination of limited recovery in production numbers from Central America and Colombia, and the use of remaining stocks in importing countries – both of which are likely to become available in the 2014-15 crop cycle.

Colombia, the world’s second largest producer of Arabica coffee beans, is the coffee growing region most at risk of La Niña because of its varying climatic zones and close proximity to the equator. Colombian regions most at risk of La Niña are between 3 to 7 degrees north latitude, altitudes between 1200 metres and 1800 metres, and temperatures over 21.5 degrees Celsius.

In early 2012, the FNC, an organisation representing over 563,000 small coffee growers; and Cenicafé, the FNC’s National Coffee Research Centre, announced their plans to prepare for a worstcase scenario that could affect Colombian coffee farms over the next 20 to 30 years.

% 70% Up to 70 per cent of the environmental damage from coffee capsules is still done at origin due to agricultural practices.

See page 38.

MAY/JUNE 2012 | GCR

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NEWS In Brief

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AMERICAS

One year after the founding of the Global Coffee Quality Research Initiative (GCQRI), the organisation announced in March the launch of World Coffee Research (WCR).

Executive Director, Timothy Schilling, explains that while the GCQRI set the research agenda for the organisation – to support a global research and development initiative to increase the supply and quality of Arabica coffee – the WCR will be the space where research takes place.

The launch was largely possible thanks to the United States’ Green Mountain Coffee Roasters (GMCR), an anchor donor who submitted a significant amount of funding to help the initiative get off the ground.

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G C R | M AY /J U N E 2 012

Congo overcomes civil war to produce a thriving coffee sector in Kivus.

AFRICA

6000 Export volume in the Democractic Republic of Congo fell from around 119,320 tonnes of coffee in 1989 to 6000 tonnes in 2010 due to two periods of civil war. See page 48



Following up on exhibitions can be key to success. Over 70 per cent of exhibitors go to shows to collect leads and 80 per cent of leads are not followed up, according to Susan Friedmann, author of Riches in Niches: How to Make it Big in a Small Market.

Friedmann suggests sending a general email to future prospects to thank them for coming to the booth.

Use a lead-capture form and rank leads 1,2,3 or gold, silver, bronze and have a different strategy for each lead category. A hot prospect needs to be followed up immediately with a phone call. Second-tier are potential prospects that might be interested in six to 12 months and should be met face-to-face to further develop a relationship, and third-tier should be put on a mailing list.

Coffee production in the Congo has grown from just 8 tonnes in 2008 to 160 tonnes in 2011.

The country’s eastern highlands are well suited to growing Arabica coffee, while Robusta varieties grow well in the rest of the Congo basin. However, decades of civil war have left many of its larger estates empty, its mills and washing stations in ruins, its farmers scattered and routes to markets cut off. The result is production running at one twentieth of what it was in the 1970s.

The Congo’s Agriculture Ministry puts the cost of the recovery plan for the Congo’s coffee sector at US$100 million, with 50 per cent coming from the government, allocated in the 2012 budget.

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COVER STORY Olam

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CONTROLLING THE CHAIN

IN JUST A DECADE AND A HALF, OLAM’S COFFEE DIVISION HAS GROWN TO BE ONE OF THE LARGEST IN THE WORLD. WITH AN EXTENSIVE NETWORK AT ORIGIN, MANAGING DIRECTOR VIVEK VERMA TELLS GCR HOW THE COMPANY IS EXPANDING ITS UMBRELLA TO GAIN GREATER CONTROL OVER THE SUPPLY CHAIN.

O

ne thousand, three hundred cups of coffee a second. As consumption figures reach record highs, this amount of coffee is an astounding volume to take in. Even more impressive is that this isn’t the world consumption figure – it’s Olam’s coffee division’s trade figures.

Based in Singapore, Olam has grown at record levels since their start in coffee 15 years ago. In the last few years, those figures have skyrocketed, with an average year-on-year growth level of around 20 per cent. Today, the division is one of the largest coffee traders in the world. From Olam’s start in West Africa and India, the company that based its roots in Robusta trade moved into Arabica in South and Central America in the last five years.

Olam’s Managing Director and Global Head of its Coffee division, Vivek Verma tells GCR that in 2012 the company expects to trade over 9 million bags. With global production expected at around 137 million bags, that equates to a 6 per cent share of the global coffee market.

“We are always looking at creating value, and one of the pathways to creating value is to grow the business and to continue to grow the business over as long a period as possible– but only as long as the growth is profitable and generates a spread over cost of capital,” says Verma from the company’s headquarters in Singapore.

Verma says he expects the coffee business to continue to achieve a 20 per cent growth rate over the next few years. He’s cautious, however, when talking about these levels of growth.

“While we continuously look for opportunities to grow, we’re also very conscious that it’s easy to buy growth in this market, and that’s something we very clearly don’t want to do,” he says. “We focus on building up on our core competencies, on expanding our origination networks, on continuing to do the things that we are doing well.”

OLAMFACT Olam’s coffee division is expected to trade over 9 million 60-kilogram bags of coffee in 2012. With global production expected at 137 million bags, this equates to a 6 per cent global market share.

Verma points to the difference between this approach, and that of companies who grow very rapidly for a few years and are not able to sustain that momentum because either the strategy is not right or the systems are not in place.

“Many companies move in and when they increase too rapidly, they’re not able to sustain momentum, and grow profitably,” he says. “The only way to expand properly is to think about the long term.”

For Olam’s coffee division, the longterm has meant establishing a permanent presence in the producing countries they trade in. From its beginning when Olam started with cashews in Africa, Olam focused on developing systems and processes in sourcing from what Verma calls “difficult countries”.

“Once we put in place those systems, we realised we could replicate those systems across countries, across geographies as well as across products,” he says. “This is what led to Olam’s initial foray into coffee and is still a core competency for us.”

Most recently, Olam has opted to take a new direction in expanding the range of their operations beyond sourcing and processing, investing in different segments

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COVER STORY Olam

“WHEN WE TAKE IN ALL OF THESE THINGS COMBINED, WE KNOW THAT COFFEE CONSUMPTION WILL CONTINUE TO HAVE A GOOD FUTURE AHEAD. I THINK THERE’S A LOT MORE COFFEE THAT THE WORLD NEEDS TO GROW OVER THE NEXT DECADE.” Vivek Verma

Olam’s Managing Director, Global Head Coffee Division

of the supply chain.

The company has gone “upstream” by investing in plantations and also invested in “midstream processing” by starting up soluble coffee production in Vietnam.

The company’s “upstream” move has involved setting up plantations in Laos, and establishing plantations in Ethiopia and Tanzania, with plans on planting between 3000 and 4000 hectares per year over the next three to four years.

While Olam has no plans to replace the smallholder farm, Verma says they are looking at owning plantations in countries where they believe there is a cost-production advantage. The move, he says, should help them ensure a reasonable return even during down cycles in coffee prices.

He notes that wherever they are setting up plantations, they are looking to establish programs to help local farmers around that estate, in providing them with seedlings and training them in agronomic practices.

On the “downside” of the stream, Olam has also invested in soluble coffee production. Verma says that this part of the business is only a small segment in the total scheme of things; however, it allows them to provide soluble coffee to the same roasters to whom they sell green.

While the core of Olam’s business will remain as managing the supply chain, Verma says that these investments, in many cases, have helped put the company in the shoes of the parties they work with.

For instance, running plantations has helped Olam in its growers programs, where they train farmers in best practises and help to improve their earnings and livelihoods. Providing soluble coffee to buyers, Verma says, has helped strengthen their relationships with their clients. These new developments follow what Verma perceives as the changing shape of the coffee trade market.

One trend he notes that has had a significant impact over the last few years has been the changing position of coffee as a commodity.

With commodities now considered a separate class of investment, he

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FARMERFACT Olam’s project in ­Cameroon helped participating ­farmers increase their yield by almost 50 per cent, and increase their income from US$200 per hectare in 2008 to $500 per hectare in 2010.

says that they are seeing increasing investment from non-commercial funds. The higher level of participation of funds in the market, he says, has resulted in higher volatility. Furthermore, he notes that commodities are becoming increasingly correlated, with prices moving in similar directions as they are susceptible to market pressures.

“The result of this is that commodities not only reflect the supply and demand of overall commodities, but the global economic sentiment as well,” he says.

On the other side of the equation, Verma is noticing segments of the coffee market moving away from this more traditional “commodities” role, in the form of specialty coffee. Following coffee shop culture, he says consumers are getting used to this higher quality coffee, and are demanding the same quality at home. This demand for quality, coupled with the search for convenience, is what is largely driving the single-serve market.

“We continue to see tremendous growth rates in this sector of the coffee economy. While the overall consumption growth rates continue to be around 2 per cent the specialty coffee sector has substantially higher growth rates,” he says.

Verma notes that this coffee shop culture is not limited to Western countries, but is becoming evident in emerging markets as well.

However, growth rates in these markets are driven primarily by the growth in soluble coffee.

As many of these regions are traditional tea drinking nations, these countries are naturally starting off at very low consumption rates.

Coffee consumption typically begins with soluble coffee and the high growth rates in these countries is resulting in global soluble coffee having far higher growth rates than the overall coffee consumption growth rates. Verma also points specifically to producing countries, such as Indonesia and Brazil, who are recording some of the highest growth rates of coffee consumption in the world.

“When we take in all of these things combined, we know that coffee consumption will continue to have a good future ahead,” says Verma. “I think there’s a lot more coffee that the world needs to grow over the next decade.”

In ensuring consistent coffee supply, Verma says that Olam has taken a strong focus in looking after the livelihoods of the farmers.

The company has launched an “Olam Livelihood Charter” that Verma says aims to bring prosperity to their farming and rural communities, build long-time relationships based on fairness and trust, and seek to transfer skills and knowledge through their partnerships. Under this charter, Olam has set up eight principles, and every project that gets approved under the livelihood charter has to meet those principles.

Two of the first six projects looked at coffee: one in Peru and one in Cameroon. The Cameroon project dealt specifically with yield, and just two years in, participating farmers have already seen an improvement in yield by almost 50 per cent, with the average farmer income increasing by US$200 per hectare in 2008 to $500 per hectare in 2010.

Overall the projects under the Olam Livelihood charter cover close to 65,000 farmers, and Verma expects that number will grow over the next few years. Closer relationships with their farmers are a natural extension of the core of Olam’s business, which focuses on its ability to control the entire supply chain.

“Being at origin is our core competency. When we talk of being at origin, we are not just talking about being in the port city. We are talking of extensive networks across the entire coffee growing areas in a country,” says Verma. “We are not just trading coffee. In most countries between 90 and 100 per cent of the coffee we source is bought by Olam buying offices across the country and processed in Olam factories. That allows us to meet the exact quality requirements and also meet our contractual obligations to a high degree of reliability.”

The next level of control over the supply chain that Olam is eyeing is the development of the Olam Sustainability Standard – an internal benchmark enabling the company to build end-to-end sustainable supply chains. By taking each step of the value chain from seed to shelf and embedding sustainability criteria into the business plans, processes and culture, Verma says they can ensure continuity and

quality of production for the long term.

“At its core this approach has the premise of unlocking mutual value – mutual value for Olam, global stakeholders and local partners,” says Verma. “Businesses in the 21st century need to deliver long-term, lasting value for their continuing shareholders, while at the same time be a positive force for sustainable change in the communities, contexts and countries where they operate.”

Verma says that a more sustainable industry will become increasingly important as coffee demand continues to increase. Over the next decade, Verma says production will likely have to increase by 10 million bags to keep up with growing demand.

“The industry is poised for growth and we have to grow this business in a sustainable manner,” he says. “Consumers are increasingly demanding that the entire supply chain be sustainable. This is essentially what we have been trying to do over the last 15 years, develop a sustainable supply chain.” GCR

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FEATURE Forecourt coffee

: BLACK GOLD RISE OF THE FORECOURT COFFEE SECTOR STORY BY DAVE SWINFEN

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AN UNLIKELY BRAND IS EMERGING IN THAILAND; A HALO HERO AND EXAMPLE OF WHAT CAN BE ACHIEVED WHEN CAREFULLY BRANDED COFFEE SHOPS ARE PLACED AT PROMINENT PETROL STATION FORECOURT LOCATIONS. A LOOK THE RISE OF THIS SECTOR SHOWS THAT BRANDING IS THE CRUCIAL INGREDIENT IN BLENDING THE PERFECT ROADSIDE COFFEE.

I

f rest stops with friends are the most memorable moments of road trips, then a hire car adventure across Thailand is a very welcome jaunt.

Seemingly, there’s a place to put fuel in the car and coffee in human companions every kilometre or so. For those more accustomed to the depressing prospect of a motorway stop in Europe, with its unending concrete, dreary corridors and overpriced snacks, then a quick break off the Thai highways is an unfamiliar pleasure. There’s usually a collection of outdoor picnic tables attended to by a “name that dish” maestro whose sole purpose in life is to serve up perfect Asian food for less than a dollar. And coffee. Not the instant coffee that might be expected of a roadside convenience store, but a fine selection of locally sourced gourmet beans, made by an on-site barista.

Welcome to Café Amazon, a brightly coloured and deeply refreshing coffee shop experience which is assiduous in its pursuit of excellence, and doing rather well as a result. Café Amazon is a coffee retail business owned and operated by PTT Group, Thailand’s foremost petroleum company. PTT’s Senior Executive Vice President of the Oil Business Group, Sarun Rungkasiri, speaks to GCR of the brand’s success, and also discusses the prospects this niche sector offers to independent coffee retailers.

PTT has developed a fresh brewed coffee business under the brand “Café Amazon” with an aim to deliver complete convenience to customers at PTT gas stations. The initiative fits into the company’s concept ‘Life Station’, under which motorists will find PTT a one-stop station providing more than just fuel. Travellers can drop by Café Amazon and enjoy full-flavoured, reasonably priced Thai-sourced coffee in a fresh and easy atmosphere, with all the conveniences that would be expected of a city centre chain outlet.

“It is PTT’s key policy to support the Café Amazon business and it’s an absolute requirement that all PTT gas stations have a Café Amazon,” says Rungkasiri. The marque has expanded rapidly, with 640 outlets nationwide, making it the uncontested leader in this segment in Thailand. In 2011, Café Amazon generated total sales revenue of 1.2 billion Thai Baht (around US$40 million).

This year, sales are forecast to grow at around 15 per cent. The expansion plan for Café Amazon will follow PTT’s plans to open new gas stations in foreign countries, with Indochina a focus area.

AMAZONFACT Although originally ­developed as nonprofit ­remit, in 2011, Café ­Amazon generated total sales revenue of around US$40 million). This year, sales are forecast to grow at around 15 per cent.

The brand has been a success largely because of its core mantra: Café Amazon venues are not surprisingly good for roadside coffee joints; they are surprisingly good for Asian coffee shops, period. The brand has attracted a loyal following of Thai youths who find a visit to Starbucks prohibitively expensive. Much attention has been paid to the detailing, so a visit is in no way an inferior experience to relaxing over an iced mocha in a leading chain outlet. There’s free Wi-Fi, floorto-ceiling widows, bright and stylish furniture and a broad offering of ways to enjoy tea, coffee and blended fruit juices.

“Café Amazon has an audit team working to unremittingly improve the standard of goods and services at the shop,” Rungkasiri explains.

“The team inspects the quality of beverages and services, including the standard of locally sourced raw materials, the preparation of equipment, baristas and their ability, beverage mixing procedures and shop administration and management. We’re quite unlike any other bolt-on petrol retail business in this respect. The auditors also provide advice to the shops on a monthly basis,” Rungkasiri says. Café Amazon recognises that operators and employees are vital couriers, passing directly the value of the coffee shop to customers, and so focuses on transferring knowledge in the fresh brewed coffee business and upgrading service skills of operators to an international standard.

While the roadside retail market may clearly represent an area of potential growth, a key question is one of profitability. In Thailand, these roadside locations outside of Bangkok offer good purchase cost value for developers, and that low initial cost base gives more headroom to deliver a quality outlet.

M AY /J U N E 2 0 1 2 | GCR

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

FEATURE Forecourt coffee

“THE TEAM INSPECTS THE QUALITY OF BEVERAGES AND SERVICES… WE’RE QUITE UNLIKE ANY OTHER BOLT-ON PETROL RETAIL BUSINESS IN THIS RESPECT.” Sarun Rungkasiri,

PTT’s Senior Executive Vice President of the Oil Business Group

Interestingly, Café Amazon was launched in 2002 almost with a non-profit remit; it was to exist only to complete the service offering at PTT’s gas stations. As Asia’s insatiable thirst for coffee becomes ever more emboldened, this small gap in the market is starting to be viewed as more of a potential growth area. Yet the gold-rush may be only just beginning.

For petroleum companies, profits generated from retailing are marginal due to price tolerance limitations. Oil companies across Asia are thus looking for opportunities to increase incomes and that is why it’s possible to see a rising quality of these forecourt locations. Fresh brewed coffee is a service that meets the demand of customers in gas stations, and so it is a viable approach with strong potential for more growth.

Now that the brand has become a success, it is tempting for PTT to push Café Amazon out into the cities, and it’s something they are starting to do. However, when asked about the landscape of competition, Rungkasiri gives a vivid explanation as to why the company has maintained its focus on being the coffee leader at forecourts: “In gas stations, our competitors include Caffe D’Oro and Inthanin. Outside the forecourt sector, then you’re basically up against Starbucks, True Coffee, Black Canyon and Coffee World.”

Rungkasiri says he still believes that it’s now time to extend the reach of Café Amazon beyond the forecourts and into Thailand’s largest metropolitan areas. He agrees that there are “thriving and unceasing” avenues for growth for companies that are able to develop customer loyalty through their branding, which is a key consideration to overcoming saturation in the non-forecourt market.

It’s a view echoed by leading food and beverage branding consultancy, Mystery Limited London. This agency is responsible for the branding of Caffé Italia and Caffé Ritazza in Western Europe, and is now receiving enquiries from firms in South-east Asia; small coffee retailers who are considering forecourt and roadside retail as a viable way to grow their own coffee chains

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PETROLFACT For petroleum companies, profits generated from ­retailing are marginal due to price tolerance ­limitations. Oil companies across Asia are thus looking for opportunities to increase incomes.

in Asia. Dan Einzig, the company’s Managing Director, chatted to GCR by telephone while in Rwanda on another coffee retail branding mission.

Reinforcing Rungkasiri’s sentiments, he says: “I see an increasing trend for branded coffee machines serving hot drinks to busy customers in service stations in our own portfolio of clients. I believe this will only increase over the next few years, and the quality keeps improving.

However, for roadside outlets with real people serving real coffee, the opportunity is there to maximise your key advantage by training, encouraging and empowering your team to engage with customers in a meaningful, human way that machines never can. In competitive environments where product offerings are broadly similar, it will be the brands that connect with customers emotively that will thrive.”

This is especially true in an industry like coffee retail, where the experience is as equally important as the product. The benefits that a strategically defined brand can bring are the same as when people fall in love with each other, Einzig explains. When customers connect emotively – because they share the same values and beliefs of a coffee brand – it leads to higher

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FEATURE Forecourt coffee

sales and better brand differentiation. It also leads to loyalty, advocacy and can even protect the retailer’s price in times when competitors rely on promotional discounts to drive sales. Just like with people, when the relationship is strong, they often decide to start a family. Once customers are emotively connected with a brand, it gives the retailer the ideal platform from which to expand their offering.

“This is why the forecourt sector is exciting, it’s largely untapped, and it’s something Café Amazon has done superbly,” says Einzig.

Aside from PTT, other petroleum companies in Southeast Asia have been slow to respond to the potential growth market that exists on their own doorstep, opting instead to rent out space to chain retailers. Petronas in Malaysia is a good example; here is an oil firm with one of the largest profiles in the region, yet a stop at a Petronas filling station, in either Malaysia or Thailand, will have one guessing as to which brand of coffee shop will be serving a particular station.

There is no comprehensive mandate for a similarly branded outlet at each forecourt. Here though, the growth prospects remain significant for a franchised, independent brand of coffee shops to step into the void and deliver a focused experience which is recognised as the roadside leader in the same way Café Amazon is in Thailand.

Einzig spoke of the need for this key principle to be a part of a coffee shop’s brand development from the outset: “Start by defining your brand; review the service your café offers, pinpoint the space in the market it occupies and research the emotive and rational needs and concerns of your customers. Café Amazon looked at what people expected of the lifestyle coffee shop

BRANDFACT Mystery Limited London’s Dan Einzig says that allegiance to a brand can be like falling in love: when the allegiance is strong, customers are less likely to leave the brand, even during harder times.

visit, took that concept and repackaged it, and dropped it neatly into these roadside locations.

It is exactly the right approach.”

Einzig explains that for small businesses, the best approach was not to try to mimic the look of chains or big brands. Instead, he suggests that independent cafés should try and carve out their own distinctive identity. There is a big consumer trend towards independent establishments, and several chains are trying to mimic an independent feel to capture some of that market.

Truly independent operators can leverage their status to attract customers who are looking for something more original and authentic which aligns with how they feel about themselves. The brand should always speak to customers with a consistent tone of voice. Einzig says it will help reinforce the business’s character and clarify its offering.

That expectation of an authentic experience has been a key driver behind the growth of PTT’s coffee business. Cafe Amazon continues to pursue its diversified growth plan, and with the underlying brand fundamentals already established, its future profitability looks to be well supported.

“Your brand character should promote your business, connect with your customer base and differentiate you in the market,” says Einzig.

“That is how you appeal on every level.” GCR

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FEATURE German market

POSITIVE PERCEPTIONS&PROFITS THE TURN OF THE MILLENNIUM SAW COFFEE SHAKE OFF ITS IMAGE AS AN UNHEALTHY DRINK IN GERMANY AND SALES FIGURES CATAPULT FORWARD AS A RESULT. EUGENE GERDEN WRITES HOW THE GROWING MARKET IS ALSO EXPERIENCING A SIGNIFICANT SHIFT, WITH A PREFERENCE FOR SPECIALTY DRINKS AND AT-HOME CONVENIENCE.

A

midst the Europe Union’s swaggering fiscal woes, Germany’s massive economy has continued to reign relatively strong. Its highly skilled workforce has helped push along the country’s steady growth as a backbone supporting the regional currency.

Fuelling the country’s intelligent workers through their structured days has been a steady growth in coffee consumption. By 2010, per capita coffee consumption reached 150 litres per year, according to the German Coffee Association. At present, coffee remains one of the most imported foodstuffs in Germany, with sales surpassing bottled water and beer.

The German coffee market is set to continue to rise, and in this growth take on a changing shape.

Coffee drinkers are rapidly shifting their preferences away from instant coffee and towards fresher coffee brews.

Interestingly, this rise in the popularity of coffee in Germany is relatively recent. Up until 2003, sales figures showed five years of continuous decline.

According to Mintel, from 1998 to 2003, sales of coffee in Germany dropped from around US$5.5 billion to $3.4 billion. This was attributed to an unfavourable image of the drink among local consumers, as it was seen as unhealthy. In addition, the market was said to be lacking in original offerings.

The events of recent years, however, have helped promote a remarkable turnaround. The active expansion of global coffee chains in the country, Starbucks in particular, has helped increase the diversity of offerings available. This has been coupled with the efforts of local producers to change the image of coffee, through its promotion as a favourite beverage of young people. As a result, from 2005 to 2010 sales grew by an average of around 4.6 per cent a year – 10 times faster than beer and almost three times that of wine.

The German Coffee Association has played a significant role in the promotion of coffee in the country, skilfully taking advantage of the boom in healthy lifestyles. Coffee has come to be seen as a favourite drink among some German celebrities and athletes, contributing to its soaring popularity

among young people. The association enlisted the help of Gerald Asamoah, a cult German football player, who has served as the face of advertising campaigns to promote coffee consumption.

Currently, the coffee market in Germany is estimated to be worth around US$5.1 billion in sales terms, making it the biggest in the European Union. According to Boston Consulting Group data, the German coffee market is almost four times bigger than the UK’s and almost twice the size of France’s market.

Kraft Foods currently remains a leader, according to news reports, with 19 per cent of total retail sales. The success of the company is mainly based on the popularity of its flagship Jacobs, Onco and Cafe Hag brands. The Tchibo Group is the second major player with around a 15 per cent share. Local discounter Aldi Group has a similarly sized share at 15 per cent.

Melitta and Munich-based Dallmayr remain the third and the fourth largest coffee producers in Germany, with shares estimated at 5 and 7 per cent respectively. Nestle’s Nespresso and Dolce Gusto brands occupy

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FEATURE German market

Holger Preibisch, head of Germany Coffee Association

COFFEEFACT Germany saw 406,500 tonnes of roasted ground coffee sold in 2010, ­compared to 12,500 tonnes of instant and 53,300 tonnes of whole beans for espresso-based beverages.

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around 0.8 per cent and 1.7 per cent of the German coffee market respectively.

Holger Preibisch, Chief Executive of the German Coffee Association based in Hamburg, says that most recently the market is seeing a shift from traditional drip coffee made from pre-ground beans, to espresso-based specialty coffees.

“Despite the fact that 75 per cent of German consumers still prefer [drip] coffee, there is a clear shift to freshly ground coffee specialties with the ever growing sales of coffee capsules and pods,” he says. “In the latter case, since 2005 sales of capsules and pods have increased by 10 times and reached 35,100 tonnes in 2010.”

Overall, 406,500 tonnes of roasted coffee were sold in Germany in 2010, compared to 12,500 tons of instant. At the same time, espresso-based coffee in 2010 grew to 53,300 tonnes, which is almost 12 per cent higher than in 2009.

Preibisch says that fully automatic coffee machines have become an integral component of many German households and office. As such, the consumption of espresso coffee should continue to grow steadily. As for speciality drinks, cappuccino accounts for about 85 per cent of this category, while the share of Viennese Melange about 5 per cent. Sales of iced coffee are estimated at 6 per cent.

The share of instant coffee is currently estimated at around 3 per cent, meaning there is still seeing a segment of the market turning to instant coffee.

Germany is also seeing a very slow shift towards

sustainable certified coffee, currently estimated at just 3 per cent of the total market.

“Low market share of certified coffee means that these drinks still remain a niche product in the market and that the consumer is not ready yet to pay a premium for sustainability,” Preibisch says.

The German Coffee Association reports that one of the major trends which is currently observed in the German coffee market is the ongoing growth of out-of-home consumption. The amount of coffee which is consumed in restaurants and hotels (as well as while travelling, in public places or at work), is currently estimated at 25 per cent of the total market. This strong market share is being attributed to the growing number of specialised coffee shops, including both independents and chains.

The German Coffee Association reported that in 2011 more than 150 specialised coffee shops and bars opened in different cities throughout Germany. Since 2000 the country has seen around 1600 new coffee shops. Preibisch says that coffee houses have now become an integral part of most large German shopping malls.

American giant Starbucks has played a key role in the development of the German coffee market in recent years.

In addition to the opening of its shops, the Starbucks model is attributed for launching certain coffee trends in the German market, particularly boosting the image of espresso, cappuccino, latte macchiato and other coffee

drinks, which are currently in rising demand.

Preibisch says that in 2010 more espresso beans were sold in Germany than in the entire 1990s.

Since 2000, the single-serve segment has grown by an astounding 250 per cent. The biggest players in this segment include consumer goods group Sara Lee with its Senseo coffee brewing system, as well as domestic brands Dallmayr and Tchibo.

The Swiss food giant Nestlé is represented in this segment through its two well-known capsule systems. In addition to the successful luxury brand Nespresso, the company has high hopes for its Nescafe Dolce Gusto system.

According to analysts from the German Coffee Association, the segment of coffee capsules and pod machines is expected to become the main battleground in the country’s coffee market. The potential stems from a largely untapped market, as current only around 10 per cent of German coffee drinkers own single-serve systems.

“Convenience is becoming more and more important in the modern society,” Preibisch says. “These products should continue to be in demand in the future.”

According Euromonitor data, capsules at present account for 25 per cent of the German coffee market in terms of value. This is a six fold jump since 2005, and predictions say that those figures could jump to 30 per cent by 2015.

Many large companies are making public their plans for further investments in this area. Nestlé recently announced it plans to spend around US$292 million on a factory in Germany, which will specialise in the production of Nescafe Dolce Gusto pods. The plant is expected to be located in Schwerin, in the north of the country, and will have a production capacity of around 2 billion capsules a year.

According to Laurent Freixe, Head of Nestlé’s European business, the planned expansion “illustrates the company’s deep trust in the German market”. Currently Germany remains the world’s largest market for Nestle’s Dolce Gusto.

Despite this growth in popularity and sales figures, many local producers are experiencing pressure from increasing production costs and fierce competition. Discount retailers are using coffee as a cheap item to lure people into their shops.

Amid this retail pressure, producers are resorting to price wars and the occasional unfair competitive practices.

In 2009, the German Federal Cartel Office imposed fines that were estimated to reach US$229 million on three leading coffee roasters, also fining six individual managers. It was said that the cartel existed for nine years, from 2000 to 2009, where the group was coordinating price rises on beans, espresso, and filtered bags.

At the end of last year, eight companies were fined around US$45 million, having been accused of price fixing coffee in commercial service markets, including hotels and restaurants.

These discretions aside, analysts say that coffee sales are likely to continue to increase in Germany in the near future. The rise of espresso-based coffee is likely to negatively affect the positions of the current market leader Kraft, as this market takes on a new shape, putting aside drip and instant to welcome the espresso. GCR

“DESPITE THE FACT THAT 75 PER CENT OF GERMAN CONSUMERS STILL PREFER [DRIP] COFFEE, THERE IS A CLEAR SHIFT TO FRESHLY GROUND COFFEE SPECIALTIES WITH THE EVER GROWING SALES OF COFFEE CAPSULES AND PODS.” Holger Preibisch

Chief Executive German Coffee Association

Redesigned Tchibo coffee shop, as part of the company’s plant to break Starbucks’ monopoly

Laurent Freixe, (left) head of Nestle’s European business

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COFFEENOMICS Supply gap

FILLING THE SUPPLY

GAP

THE MOST CONSERVATIVE PROJECTIONS ARE EXPECTING DEMAND TO EXPAND BY 13 TO 15 MILLION 60-KILOGRAM BAGS IN THE NEXT FIVE YEARS ALONE. THE QUESTION NOW IS: WHERE IS ALL THAT COFFEE GOING TO COME FROM? STORY BY MAJA WALLENGREN

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hen producing countries plunged into crisis 10 years ago from an oversupply of coffee, much of the debate centred on the need to improve quality to boost consumption. It seems ironic, that a decade later this ‘quality campaign’ has spawned its own crisis on the other end of the equation – it would now seem that demand is far outpacing supply.

For importing countries, especially key markets of the United States and Europe, the growing gap between demand and supply is not only likely to impact the already volatile business of roasters and other industry stake holders, but could even lead to massive losses in jobs and revenues in the not too distant future. Any significant shortcuts in the quality of beans being drunk have always proven to lead to a drop in consumption that effects the entire coffee chain on the retail level. That is, unless swift action is taken to restore the balance.

Demand curves showing how this rapid growth will impact world supplies have been circulated at conferences for several years.

The International Coffee Organisation (ICO) has now decided to put more focus on what is believed to be a growing problem.

In its latest market report, the ICO’s Executive Director Roberio Silva said growing demand, whether at a conservative 1.5 per cent or keeping up with the 2.5 per cent growth seen in the last 10 years, will more than likely lead to supply problems in a not too distant future.

“Under all these scenarios, relatively strong consumption growth is envisaged, which could well outpace production growth,” said Silva.

Most of the world’s immediate demand in the next five years will be met by a combination of limited recovery in production numbers from Central America and Colombia, the use of remaining stocks in importing countries, the gradual arrival of new supply from countries currently renovating farms and expanding their cultivated areas, and supply that will start to become available in the 2014-15 crop cycle.

Currently, only five countries are known to be working to expand their production capacity: Brazil, Vietnam, Peru, Honduras and Tanzania. But, while it is certain that this new production won’t be sufficient to satisfy the world’s growing thirst for coffee, these efforts will ease some of the pressure on supply.

In northern Tanzania, stretched out along hundreds of kilometres of road, strange sights are meeting long-term visitors of the country’s heartland coffee region. This East African producer is currently replanting areas with coffee for the first time in over 50 years. Trees averaging 60 to 80 years of age are finally being replanted.

In Tanzania’s most famous coffee region of Kilimanjaro, vast areas of new coffee trees have been planted on formerly state-run farms, which in the last five to eight years have been taken over by private investors. This follows a number of changes in Tanzanian law which, for the first time since independence, has allowed for private investors to pump funds into an ailing industry.

“I started replanting the entire farm in 2004 just after we took

over at Machare,” says Bente Luther-Medoch, Manager at the Machare Estate.

“At the time it was completely run down and totally over-grown. Now we have finished replanting the last of the farm but 50 per cent of the total area is still young coffee that is not producing yet.” The farm should be in full production by the 2013-14 crop cycle.

The Tanzanian Coffee Board (TCB) is actively supporting the renovation effort, distributing millions of new seedlings to producers all over the country to increase productivity. Most are small producers with an average of one hectare of land per family.

“The goal is to see our total production reach 80,000 tonnes (1.3 million bags) by 2015 and then by 2020 to get as much as 130,000 tonnes (2.2 million bags). We do believe that is realistic,” says Adolph Kumburu, Director General at the TCB. “In the northern region, because of limitations of land available for expansion of cultivated areas, the increase in production will be limited to replanting. But with a full replanting that should take production to at least double [what it is] today, but not much more because of the contributions of big farms which are concentrated in the areas.”

In addition to replanting in the traditional northern coffee region, many new Arabica areas are also starting to emerge in other regions across the country, including Rukwa, Iringa and Morogoro in south-central Tanzania; the Mara, Manyara and Tanga regions in the northern area; Kigoma in the west; and Mbeya and Mbinga in the south.

While some traders believe that the TBC projection sounds overly optimistic, many say that the current renovation and several years of high prices have allowed for Tanzania to carry out work that will allow production to reach between 1.35 and 1.7 million bags.

The first signs of new production from the replanted farms have already started to show up in export statistics, with Tanzania producing its best harvest in over a decade in the 2008-09 cycle when total output reached 1.186 million bags.

SUPPLYFACT Conservative estimates say demand for coffee will increase by 13 to 15 million bags in the next five years. The countries most likely to increase production are Brazil, Vietnam, Peru, Honduras and Tanzania.

“UNDER ALL THESE SCENARIOS, RELATIVELY STRONG CONSUMPTION GROWTH IS ENVISAGED, WHICH COULD WELL OUTPACE PRODUCTION GROWTH.”

Roberio Silva

Executive Director International Coffee Organisation

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COFFEENOMICS Supply gap

“I USED TO GET UP TO 8 TONS (133 BAGS) PER HECTARE IN THE YEARS RIGHT AFTER PLANTING IN THE EARLY 1990S. TODAY I ONLY GET 4 TONS OR LESS.”

Diet Nguyen While coffee production in East Africa will continue to suffer from problems caused by changing weather patterns and insufficient water, these figures show that Tanzania’s crop is clearly growing.

From East Africa to Southeast Asia, it’s now been 20 to 30 years since Vietnam started the planting boom that would eventually make it the world’s second largest grower. However, average productivity, had, by 2008-09 started falling sharply. In the key coffee producing region of Buon Ma Thuot in the Vietnamese Central Highlands, little or no replanting had been done since that first boom. In areas where producers had pruned trees regularly, productivity was reported to be only half of the yields seen in the late 1980s and early 1990s.

“I used to get up to eight tonnes (133 bags) per hectare in the years right after planting in the early 1990s. Today I only get four tonnes or less,” Vietnamese producer Diet Nguyen said during a visit to the region in the 2009-10 crop cycle. “Even so, it’s not a bad production so I haven’t wanted to uproot the trees yet.”

By May 2011, when London Robusta prices reached almost US$2400 per tonne, the situation had changed. Traders and exporters began reporting that producers were replanting old trees. The surge in prices led to a renewed boom in coffee plantings.

Several local reports pointed to a total cultivated coffee area of between 600,000 and 650,000 hectares, which could yield between 22 – 24 million bags. This should come into full production by the 2014-15 cycle.

Most of the world’s new production will most likely come from Latin America, which is already home to two-thirds of total global ouput. Much of the talk in the market during the last year has focused on increased production from South America’s Peru and Central America’s Honduras, which have both benefitted from larger areas of agricultural land available for expansion, lower labour costs and higher average productivity, keeping production costs competitive.

In Honduras, a larger group of local investors with backgrounds in finance have used private funds to plant coffee, providing a significant cash injection into the coffee industry.

“Honduras is definitively increasing production, there has been a lot of money pouring into coffee from non-coffee people like doctors and lawyers who have been buying farms and putting their money into it,” says Jack Scoville, Vice President of Chicago-based brokers The Price Group.

“And you are seeing it starting to produce results as the yields are going up and export numbers are climbing.”

While exact figures are hard to come by in Honduras, local industry officials, traders and exporters estimate that the country has seen anywhere between 26,000 to 70,000 new hectares of coffee.

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Vietnamese producer

Scoville puts the figure at around 30,000 new hectares, but not much more than that.

He adds that it’s not clear if this figure includes the 15,000 hectares that have been replanted with much higher tree density thanks to funds provided by the official Honduran Coffee Institute (Ihcafe).

In 2009, Ihcafe started a 10-year program, replanting 5000 hectares a year. The goal is to replant a total of 50,000 hectares by 2020.

“So far we have managed to fully renovate 15,000 hectares. Traditionally they’ve had just 1500 trees per hectare, but now have between 5000 and 6000 trees. As a result the yields have gone up from five or seven bags per hectare to at least 20 bags,” Mario Ordonez, Technical Manager for Ihcafe, tells GCR . He says the program is so far on target.

With the new areas coming into production, total output from Honduras has been gradually increasing by 100,000 – 200,000 bags per year.

Eventually, production is expected to stabilise at around 5.5 – 6 million bags, from the current 4 – 4.5 million figure.

From a production of between 1.4 – 1.7 million bags in 1994, from a cultivated area of 200,000 hectares, more than 130,000 Peru coffee growers have today expanded output to some 340,000 hectares. They produced a

record crop of 5.367 million bags in the 2011-12 cycle, according to the Peruvian Coffee and Cocoa Chamber.

Some industry sources dispute that figure, saying the cycle was not higher than 4.8 million. Either figure, however, indicates a record crop.

“During the last 10 years the producing area has increased by some 50,000 hectares and the average production per hectare is now about 12 bags, compared to seven bags per hectare in 2000,” says Eduardo Montauban, General Manager of the Chamber.

Montauban says, however, that Peru’s potential for further expansions of the cultivated area is limited. Any further increase in production will require that areas with older trees be replanted with higher yielding varieties and more tree density. Peru is seen as having the potential to boost output to around 6 million bags in the next five years if Arabica prices stay above $2 per pound. It’s only at this price level that growers can generate enough income to invest in and renovate their farms.

From among all the world’s coffee producers, no other origin will continue to contribute as much as the number one grower Brazil. The country shows the most potential to increase their output in the next five to 10 years.

On a tour of Brazil’s Espirito Santo State, row after row of new coffee trees dominate the countryside, backing the local government’s projections for total production to increase by 5 million bags between 2011 and 2016, with at least 1 million new bags in the 2012-13 harvest in Brazil.

Barely half a metre high, these plants are already heavy with fruit. Local growers and industry officials here are optimistic that the record yields producers are seeing in Espirito Santo will continue to rise.

TCBFACT The Tanzania Coffee Board is setting a goal to increase the country’s total coffee production to 1.333 million bags by 2015 and then by 2020 to as much as 2.167 ­million bags.

“Look at these fields here, these farms all have average yields of between 80 and 100 bags per hectare,” says Evair Vieira de Melo, Director of the Espirito Santo Agriculture Ministry’s research institution Incaper.

While drought has cut the production forecast in Brazil’s top producing state of Minas Gerais, where Southern Minas coffee fields suffered especially, Espirito Santos, the country’s second largest producing state, is making up for some of those losses.

“Everything here depends on coffee. This city was built with coffee and it has continued to grow because of the income of coffee,” says local grower Paulo Oliari, who is taking advantage of the new technology and varieties provided by Incaper.

From a yield of just 10 bags per hectare, Oliari has increased his productivity to an average of 70 bags. He has become an example for other producers in the region to follow in terms of using the right plant variety, the right density and other planting methods.

“I got up to 20 bags [per hectare] and that wasn’t really that bad. But with the coffee crisis it wasn’t enough. Because of low prices some 10 years ago I started to apply all the new technology available and today I have an average of 70 bags per hectare a year between the two crops,” he says.

The local government has been much more actively involved in promoting projects that are helping producers become more efficient and increase their earnings, and in turn their circumstances.

“Brazil produces between 25 and 27 per cent of all its coffee here in Espirito Santo and we easily have at least 800,000 people who depend on coffee for their livelihood, so we have a lot of incentives for companies setting up industries in these areas that depend so heavily on coffee,” says Espirito Santo’s Agriculture Minister Enio Bergoli. He adds that the state aims to increase average yields to between 60 and 80 bags per hectare in the next 10 to 15 years.

While this is all good news to the industry, the promise of production in the state of Espirito Santo does not make up for all the shortfalls in supply expected to hit the market in coming years. Time will now tell what other countries will be stepping up to the plate. GCR

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RESEARCH Climate change

FOR PLANNING THE WORST

CLIMATE CHANGE PRESENTS A VERY REAL DANGER FOR THE FUTURE OF THE WORLD’S COFFEE ORIGINS. THE COLOMBIAN COFFEE GROWERS FEDERATION IS TAKING A PREVENTATIVE APPROACH BY TURNING TO CLIMATICALLY INTELLIGENT ACTIVITY. STORY BY SARAH BAKER

M AY /J U N E 2 0 1 2 | GCR

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RESEARCH Climate change

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hat state will the world’s coffee plantations be in 10, 20 or 50 years from now?

Drought stricken? Disease riddled? Or simply blossoming?

Luis Fernando Samper, Chief Communications and Marketing Officer at the Colombian Coffee Growers Federation (FNC), says there’s no point in waiting for the worst case scenario. It’s a matter of acting now or suffering the consequences.

“They (the farmers) are already experiencing problems in the field, and many of them had coffee leaf rust attacks that almost destroyed their livelihoods. We are all learning and investing for the future,” Samper says. “We have to prepare for the worst case scenario. That means we have to offer as much assistance to plantations as possible and it’s exactly what we’re doing.”

In early 2012, the FNC, an organisation representing over 563,000 small coffee growers; and Cenicafé, the FNC’s National Coffee Research Centre, announced their plans to prepare for a worst case scenario that could effect Colombian coffee farms over the next 20 to 30 years. According to Cenicafé, farmers risk seeing excessive levels of rainfall, reduced sunshine, low temperatures, high humidity and a high intensity and frequency of La Niña events.

La Niña is the extensive cooling of the central and eastern Pacific Ocean. It is the sister event to El Niño, the unusual warming of ocean temperatures in the Equatorial Pacific.

La Niña conditions in Colombia and much of Central America can increase the incidence and severity of diseases such as rust leaf.

Excess moisture in the soil can cause yellow colouring of leaves and roots, possibility killing the plants.

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RAINFACT In 2011, average rainfall in Colombia coffee ­growing regions was 35 per cent above historical averages, which contributed to a 44 per cent ­increase in leaf rust disease.

“Climate change is not just a single thing, it can be many things in different regions,” Samper says. “There is not just one single solution to all coffee growers. People assume [climate change] means warmer and drier weather conditions, but it’s not necessarily the case in the tropics.”

Colombia, the world’s second largest producer of Arabica coffee beans, is the coffee growing region most at risk of La Niña because of its varying climatic zones and close proximity to the equator. Colombian regions most at risk of La Niña are between 3 to 7 degrees north latitude, altitudes between 1200 metres and 1800 metres, temperatures over 21.5 degrees Celsius and areas that receive on average 2500 millimetres of annual rainfall.

Samper says Colombian coffee farmers are asking for help to adapt to the difficulties they are currently facing. In response, the FNC are working to turn Colombian coffee agriculture into a ‘climate smart activity’.

“Because of noticeable climate changes in Colombia, we (FNC) came up with the concept of more active climate solutions that would help farmers adapt to the changing conditions and conserve their plantations,” Samper says.

According to a report by Cenicafé in 2011, average rainfall in Colombian coffee growing regions was 35 per cent above the historical

average, which has contributed to a 44 per cent increase in rust disease.

The heavy rainfall has weakened the flowering of coffee plantations, eroded coffee soils and compromised roads. The production harvest declined by 20 per cent between March 2011 and February 2012 to 7.2 million 60-kilogram bags of green Arabica coffee compared to 9.3 million bags in the same period a year prior.

To help prepare coffee growers for climate change, the FNC has started planting resistant coffee varietals. The rust-resistant Castillo and its seven regional strains developed by Cenicafé are replacing Caturra and Colombia varietals. In 2011, 170,000 hectares of coffee trees were replanted with rust and pest-resistant trees, an action Samper describes as “no small feat”.

“That’s an all-time record for us that shows how dedicated we are to investing in our plantations,” he says. “Without support, [the farmers] would not have the capacity to renovate or plant new trees, that’s for sure.”

The Castillo tree also increases productivity by 17 per cent compared to Caturra and Colombia varieties. Up to 9500 Castillo trees can be planted per hectare in certain areas. Its large bean size, short stature and greater density will keep crops profitable and competitive.

“Focusing on regional solutions such as replanting resistant Arabica varieties has been a large and important project here in Colombia,” Samper says. “Plant arrangement is vitally important to maximising productivity, it’s all about control.”

Samper says coffee areas with plants over nine years of age must be renewed with resistant varieties and adequate crop density. According to a Cenicafé report, the portion of the 450,000 hectares renewed since 2008 will help increase production to expected levels nearing 14 million bags in 2014.

The preservation of coffee farms attacked by rust is an expensive venture. Samper says in 2011 the FNC supported farmers with about US$25 million of fertiliser and fungus control.“The biggest cost, which we are currently investing in, is renovating coffee trees with rust resistant varieties,” Samper says. He notes the FNC plans to continue the rapid rate of replanting for the next few years. The cost for an individual farmer to renovate a hectare is around US$3400. Last year the FNC helped finance US$400 million with the help of local banks and Colombia’s government.

Samper says these are significant amounts that people often overlook.

“The loss of productivity, however, far outweighs the cost of altering systems,” he says.

Preserving the health of plants from pests remains a cultivation challenge to many Colombian coffee farmers. As temperatures change, so too will the incidence of diseases such coffee leaf rust and coffee berry borer.

Replanting resistant varieties and rust control through fumigations is one way to eliminate rust. To tackle berry borer, the FNC suggests the process of ReRe, harvesting the coffee as soon as it’s ripe and not leaving overripe and dry beans on the tree or ground to prevent the spread of berry borer.

Samper notes that managing weeds without herbicides will allow for a sustainable soil resource and will soften the negative impact of large bouts of rain and soil erosion. According to Cenicafé, nearly half of Colombian coffee agriculture is under some degree of shade. This is a necessary procedure for the protection and conservation of humidity because of rain cycles followed by long dry spells. Samper says that high shade density

“(THE FARMERS) ARE ALREADY EXPERIENCING PROBLEMS IN THE FIELD, AND MANY OF THEM HAD COFFEE LEAF RUST ATTACKS THAT ALMOST DESTROYED THEIR LIVELIHOOD.” Luis Fernando Sampo

FNC Chief Communications & Marketing Officer

M AY /J U N E 2 0 1 2 | GCR

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RESEARCH Climate change

can prevent crops from achieving maximum productivity under these conditions. He says sufficient shade handling is the key to maximising productivity. Seventy shade trees per hectare and adequate handling through regulation and pruning can produce a productive crop. Samper adds that appropriate coffee nurturing with the use of fertiliser at the right time is also essential for productivity.

In an editorial released on the Café de Colombia website ahead of the 76th National Congress of Colombian Coffee Growers in 2011, Chief Executive, Luis Munoz Ortega, noted a loss of nearly 100 days worth of sunlight in a year, equivalent to 20 to 30 per cent less solar energy needed for photosynthesis.

In data provided to the National Congress, research showed the temperature on average dropped 0.8 degrees. “This might not be much in human temperature, but for a coffee tree, it’s huge,” Samper says. “The number of sun hours has dropped 15 per cent, trees have less solar energy and less yield as a result.”

To continue monitoring the changing climate patterns and coffee production on farms, the FNC’s Extension Service (ES) supports coffee producers with social, economic, technical and environmental programs. This service plays a large part in educating farmers and giving early warning signs about changing climate changes in different regions. The ES carries out follow-ups for at least 2500 plantation plots in Colombia and educates producers about the effects of rust and berry borer. Samper says early warning about the impact of climate change is the most powerful action they can take, allowing the FNC to design controls for the correct handling of plagues and diseases and provide recommendations to producers.

“We are educating growers and making available digital devices so that we can deliver information,” Samper says. He notes the biggest challenge in implementing climate solutions is accessing up-to-date data relevant to different regions, processing it and making it available to growers in a usable form according to their circumstances. “These are challenges as well as opportunities to collaborate with new partners in a very significant endeavour,” Samper says.

Scientific research focused on climate change remains one of the most powerful methods of controlling patterns that could affect the productivity of Colombian coffee farmers.

To assist with monitoring, the FNC has provided farmers with 4000 tablet PCs to record local climate information, input costs and other variables that would help measure their effectiveness, productivity and sustainability indications such as rainfall patterns and harvest days. Samper says while the solutions will take time, many producers have shown their enthusiasm by taking computer classes so they are equipped to use the technology provided.

“Connecting with farmers is vital to the success of the solutions and establishing relationships will help us support them in the long run,” Samper says.

In addition to the web connected PC tablets, sixty computer centres have been set up in Colombian towns, providing internet and assisting farmers to use these new technological methods. A number of Cenicafé’s meteorological stations are spread across

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G C R | M AY /J U N E 2 012

TREEFACT The FNC has started ­planting with rust-resistant Castillo and its seven ­regional strains. In 2011, 170,000 hectares of coffee trees were replanted with rust and pest-resistant trees.

Colombian coffee growing regions to focus on the dynamics of weather factors. “We are investing an additional US$3.4 million dollars in having additional meteorological stations and connecting them in line so that information can be processed faster,” Samper says.

While Samper notes the new climate initiatives will provide some reassurance for farmers, he says the solutions won’t fix the problems of all Colombian coffee growing communities yet alone coffee origins the worldover. However, he’s confident the group is making a good start.

“We believe we will have better informed and productive coffee growers whose plantations will be using up-to-date data so that adequate and on-time measures can be taken on fertility, inputs, plagues and diseases,” he says. “We do have the ability to improve the standard of living and improve the lives of farmers and their families. At the end of the day we need to do whatever we can to assist our coffee growers.”

Regardless of timeline, Samper says the important thing is that they’ve already started planning ahead for a variable climate in the future.

“We are making changes to ensure we sustain the future of professional coffee growers,” Samper says. “One of the most important things is that we have the infrastructure to make things work and that we can advise coffee growers what they can and should be doing. At the end of the day, it’s a puzzle that has to be solved.” GCR

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PROFILE Starbucks & Tata

A MATCH MADE

IN DELHI

AS STARBUCKS PREPARES TO OPEN ITS FIRST RETAIL LOCATION TO SHARE A NAMEPLATE, COMPANY LEADERS TELL GCR THAT THE TEAMING UP WAS AN ALIGNMENT OF VALUES AS MUCH AS IT WAS A STRATEGIC FIT.

I

t could be said that Tata is as ubiquitous to India as Starbucks is to coffee.

In almost any Indian city, one would struggle to escape the Tata Motors logos driving past Tata Indicom telecommunications posters, decorating the way to Tata Steel and Tata Chemical factories. In the 2010-11 financial year, Tata Group’s total revenue from its Indian operations amounted to around US$35 billion. The Tata Group comprises over 100 operating companies, with coffee and tea covered by Tata Global Beverages and Tata Coffee Limited.

It’s the kind of magnitude that Starbucks can relate to. The American giants reported their 2011 net revenues as reaching a record US$11.7 billion, thanks to over 17,000 stores it operates worldwide, branded coffee it sells on grocery shelves, and the Starbucks K-Cups it produces for the Keurig single-serve system.

The official announcement in January that Starbucks and Tata Global Beverages were pooling US$80 million for a 50/50 joint venture seemed a natural match of two companies of such large proportions.

But as John Culver, President China and Asia Pacific, tells GCR, in looking for a partner, it was more than size that mattered. Starbucks has been eyeing Indian operations since 2006, taking its time to look for the right partner. Apart from the common thread of large-scale commercial success, it was a matching of values that both sides attribute to sealing the deal.

“We firmly believe that Tata and Starbucks share many of the same values for conducting business in a way that is responsible and earns the trust and respect of our customers,” says Culver. “Tata is a known leader with a proven track record in delivering quality and value to customers.”

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G C R | M AY /J U N E 2 0 1 2

This reference to values is one echoed by Vinaya Chinnappa, Head of Green Coffee for Tata Coffee. In a separate sourcing and roasting agreement between Starbucks Coffee Company and Tata Coffee, complimenting the joint retail venture, Chinnappa will be working to source green coffee for Starbucks ‘A Tata Alliance’ to roast and sell.

Chinnappa says that the Tata Group has found in Starbucks a partner who is focused on quality and has long been promoting one of the company’s main core values: improving the lives of the people they work with.

For Tata, this experience dates back to the company’s earliest inception, when corporate social responsibility practices were written into the group’s code of conduct.

“In any of the Tata businesses, you have to live CSR,” Hameed Huq, Managing Director of Tata Coffee told GCR in an interview in early

John Culver, President, Starbucks China and Asia Pacific and R K Krishnakumar, Vice Chairman, Tata Global Beverages.

“WITH STARBUCKS, WE FOUND SOMEONE WHO IS DEDICATED TO HIGH QUALITY COFFEE AND ALSO SHARES THE SAME VALUES AS US. IT REALLY WORKS OUT FOR BOTH SIDES.” Vinaya Chinnappa,

Head of Green Coffee, Tata Coffee

2011. “We believe that things such as welfare and social issues should always be measurable for a business.”

Starbucks’ Culver echoes these sentiments, and says that the decision to team up with Tata largely came from the group’s reputation as a known leader in delivering both quality and value to customers in a responsible fashion.

Taking this commitment forward, Culver says the two companies will collaborate to invest in coffee growing communities, with a specific focus on agronomy, responsible farming practices, and will also work to extend the Swastha Project’s Community Based Rehabilitation Program, which covers differently-abled children in Kodagu, Karnataka.

The arrangement with Tata Coffee is an outcome of Starbucks continued investment in the production side of coffee. Interestingly, these investments are being made in emerging economies where Starbucks sees the most potential for expansion. In February, Starbucks announced a jointventure with Ai Ni Group, one of the most established coffee operators in China’s coffee-growing Yunnan province. Culver says the moves to invest in coffee growing in India and China

TAXFACT To promote Indian-grown coffee, the government has imposed a 108 per cent duty on imported coffee, not really making it ­economically viable to source coffee elsewhere.

M AY /J U N E 2 0 1 2 | GCR

35

PROFILE Starbucks & Tata

will help ensure a long-term supply of premium quality coffee.

“Our vision is to develop a comprehensive ‘seed to cup’ value chain, where we will leverage our coffee leadership and share our coffee knowledge to help elevate all facets of the coffee industry in China and India, help local farmers promote responsible coffeegrowing practices and develop localised high-quality coffee,” Culver says.

Sourcing from within a country also comes with some strong commercial incentives. In a move to promote consumption of coffee grown on Indian soil, there is a 108 per cent duty on imported coffee, not really making it economically viable to source coffee elsewhere.

For Tata Coffee, securing Starbucks retail locations as a selling point, however, lined up well with the company’s focus on the quality of their coffee.

“When Starbucks was looking to enter the Indian market, they naturally needed a partner,” Chinnappa says. “It is a win-win situation because as a group we want to focus on the premium segment. With Starbucks, we found someone who is dedicated to high quality coffee and also shares the same values as us. It really works out for both sides.”

India is currently known largely as a Robusta producer, accounting for around two thirds of their crop. With Starbucks focusing on quality Arabica

36

G C R | M AY /J U N E 2 0 1 2

ORIGINFACT Starbucks is increasingly investing directly in coffee sourcing, to develop a comprehensive “seed to cup” value chain, according to John Culver, President Starbucks China and Asia Pacific.

coffee, Chinnappa says the deal will help lift the reputation of Indian coffee internationally.

“Starbucks is globally recognised as a purveyor of premium coffee,” Chinnappa says. “The very fact that they are using Indian Arabicas should bring a lot of interest towards coffees from India.”

The first co-branded stores are set to open by the end of 2012, beginning with Dehli and Mumbai. With the partnership under their belts, the question now may not be if Indians take to Starbucks, but if they take to the coffee drinking culture at all. As a primarily tea-drinking nation, per capita coffee consumption in India sits at an average of under a kilogram a year.

Domestic brand Café CoffeeDay has had some success, currently operating a network of 1270 cafés in 185 cities around India. Similar to the Tata Group, Café CoffeeDay has its roots in green bean trade, as an offshoot of the Amalgamated Bean Coffee Trading Company.

Culver says that he’s confident there is plenty of room for India’s coffee consumption to grow and welcome a variety of coffee houses.

“There’s a steady shift in consumer preferences in India – coffee has changed from being a traditional beverage, consumed mainly in South India, to a mainstream beverage with a national presence,” he says. “The Indian market is growing multifold and the marketplace has room for many coffeehouses that meet different customers’ needs.” GCR

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INPUT COSTS

B Community

Not every brand, however, finds its way onto the human body, so what is it about the likes of La Marzocco that foster such strong examples of brand loyalty? Academic literature demonstrates the role of the tattoo as a signifier of social membership and suggests contemporary tattoos act as symbolic markers of sub-cultural membership.

Terry Ziniewicz of Espresso Parts is one example of how tattoos can represent modern signifiers of social membership. In discussing the La Marzocco logo tattooed on his calf, Ziniewicz speaks of this idea of community that first attracted him to the coffee industry.

“La Marzocco is family to me and my tattoo connects me to the coffee community at large,” he says, noting how his introduction to La Marzocco coincided with his introduction into this community. In the early 1990s Ziniewicz met CEO of La Marzocco International, Kent Bakke, to discuss using his machines in his burgeoning coffee chain. “We spent three days playing around with coffee and when it was all said and done I bought a whole bunch of machines from him and we have been great friends ever since.”

Lizz Hudson of Seattle’s iconic Stumptown Coffee has the La Marzocco logo tattooed across her chest. For her, it is also this notion of familial ties that she finds appealing about the brand. “La Marzocco is family,” she says. “They look out for one another. They listen to, and involve, their customers and other coffee professionals in the design of their products.”

HistoRy Historical brands tend to denote quality, tradition, craftsmanship and reliability. The sense of history is embodied in La Marzocco’s logo, taking its iconography from the classic Marzocco statue, a seated lion sculpted by Donatello. Synonymous with victory and triumph, it is the emblem of the La Marzocco’s founding city of Florence.

Hudson credits the beauty of this image for some of her motivation in acquiring a La Marzocco tattoo. Even before the offer of a free machine, Hudson notes that she’s wanted to get the tattoo for a while because she “loves the company that designed it” and brand aside “the design of the logo really is beautiful.”

Espresso machine technician, Peter Droste, who has an image of the logo tattooed down his bicep, was similarly attracted to the aesthetic beauty of the logo, as well as its historical roots. He says he wanted his La Marzocco tattoo shortly after seeing Donatello’s sculpture in a Florentine museum.

“I’m really proud of it, it’s a bad-ass lion holding a shield,” he laughs. But, his motivations weren’t entirely aesthetic. “If it wasn’t for La Marzocco I certainly wouldn’t have picked the symbol. It’s the fact that I’ve worked at their factory in Florence and the fact that I work with their machines every single day.”

The tattoo comes in handy, as Droste notes that occasionally when repairing or servicing

G C R | j u ly / a u g u s t 2 011

NOLO GY

TA, YOUR ARABI CA & ROBUS II NEW FRIEN D BRASS

28

of The discovery indigenous Australia’s firstis an s coffee specie for important step coffee the future of production.

aren’t just Coffee prices nd. supply and dema about marketinghow rising prices at ALalook Marzocco necessities of oil and otherincreased . are leading to costs of coffee production

rand loyalty and identification manifests itself in many ways, from what we choose to consume, to the logos displayed on the front of t-shirts. Recently, company logos have found their way onto the human body in the form of tattoos, as perhaps the ultimate sign of brand identification.

La Marzocco has been manufacturing artisan espresso machines in its hometown of Florence, Italy, since 1927. Today, on the other side of the globe, American baristas and coffee industry workers are tattooing the iconic brand on their bodies.

Anthropologists note that historically tattoos signified membership in a clan or community. The images used within these communities belonged to a shared mythology of cultural iconography.

The human desire for community and belonging is just as strong today as it was back then, but the cultural landscape has changed. The village is now global; cultural iconography is no longer dominated by religious symbols, but images of pop culture, Hollywood stars, advertising, and of course, brand names. It is little wonder then, that modern forms of tattooing incorporate iconic brand images.

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espresso machines he’s questioned by his clients on his knowledge of La Marzocco. “Now I just pull up my sleeve and [the tattoo] displays an interesting bit of a credibility.”

Connection with place was a similar motivation for Espresso Parts’ Ziniewicz. He notes that it was a family trip to the La Marzocco factory in Florence that cemented his idea to get his tattoo. What struck Ziniewicz was that La Marzocco Hon. President Piero Bambi, whose father and uncle established the company, took time out of his day to meet with them on their visit.

“That sense of family really showed itself and the tattoo idea came in through this dedication to family,” he says.

Much like a historical tattoo’s traditional role in demarcating community, it seems this sense of the La Marzocco family is a common thread among those sporting this brand. La Marzocco’s Marketing Director, Chris Salierno, says he’s proud of the company’s family traditions.

“We’re a small company, but we don’t want to grow so much that we lose connection with our customer,” he says. “We’re small enough that when people come to Florence our doors are always open to our customers.

I think that makes us unique.”

Salierno explains that knowing your product and being able to have a dialogue with your customers across all facets of the industry is paramount. He says the company invests quite a bit internally in technical training for all employees.

Salierno further attributes La Marzocco’s success, in part, to the culture within the company that encompasses a genuine passion for what they do.

“We pride ourselves on our ability to communicate with our customers. There are a lot of companies out there whose employees don’t even know how to use the espresso machines they manufacture,” Salierno says.

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july/august 2011 | GCR

n 1801 botanist, Robert Brown, joined Commander Matthew Flinders on the HMS Investigator for the first circumnavigation of Australia. On 2 November, 1802 the Investigator weighed anchor at Goods Island (Palilug Island) in the Torres Strait, allowing Brown to collect a rather insignificant and unknown plant belonging to the coffee family (Rubiaceae).

This same plant was collected again in 1821 by botanist and explorer, Allan Cunningham, from Sunday Island. It was not seen again on Australian soil for 150 years until 1971 on the island of Dauan in the Torres Strait.

Three years later, rainforest botanists, Len Webb and Geoff Tracey, found the same plant growing on a remote headland on the east coast of the Cape York Peninsula, near the mouth of the Pascoe River. In the meantime, this unknown plant was finally named as a new species, Paracoffea brassii, which later changed to Psilanthus brassii.

Nearly four decades later, this plant would find itself the subject of discussion among the coffee industry at large, after taxonomic research undertaken earlier this year – led by Dr Aaron Davis at the Royal Botanic Gardens, Kew, in the United Kingdom - confirmed a close relationship between the coffee genus, Coffea and the genus Psilanthus. As it turns out, what Brown had discovered 209 years ago, was Australia’s first and only known indigenous coffee species.

Scientists can now confirm that Psilanthus, which includes 20 or so species, is now accepted as part of the natural variation of coffee. Subsequently, to reflect the latest findings, this wild Australian coffee has been reclassified as Coffea brassii. Genetic analysis of C. brassii shows that it is closely related to the Asian coffee species, which in turn, are related to the all-important cultivated species, Robusta (C. canephora) and Arabica (C. arabica).

Records show that Coffea brassii was collected in 1933 in the Central Province of Papua New Guinea. However, it is possible that the plant was collected earlier and that specimens have languished in piles of unidentified specimens in herbaria.

According to Professor Darren Crayn, Director of the Cairns-based Australian Tropical Herbarium at James Cook University and who is heading the Australian side of the research on C. brassii, the genetics of the Coffea genus and Psilanthus are very similar and the one thing they both have in common is that they possess coffee beans.

Since the discovery, Crayn has spent four days on the Cape York Peninsula collecting fresh samples of the native species for further testing. Between 50 and 100 plants were found in a localised area. “The plants themselves don’t look anything like commercial coffee plants,” Crayn says. “They were found to be much smaller and they don’t produce as much fruit. We now know what the species is related to, but we don’t know what the beans contain or how the plant behaves ecologically or in cultivation.”

It is thought the plant could be known to Indigenous tribes that inhabit the Cape York region, as Indigenous people elsewhere in the world use a number of wild coffee species as a stimulant. Quite a few wild coffees are cultivated on a small scale and consumed locally, such as the Kafé kely species from Madagascar.

Translated as “small coffee,” this plant contains tiny beans that are more or less caffeine free. Davis says this coffee is collected from the wild and consumed directly by the collectors or sometimes sold in local markets and roasted by the Indigenous community who seem to favour Kafé kely over Robusta.

Roasters eager to sip this new bean, however, should hold off on warming their machines just yet. Scientists are yet to determine if the latest find even contains caffeine, but the new discovery is an exciting feat for the coffee industry and scientists alike. The scientific community has historically found that wild

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37

FEATURE Coffee Capsules

A SUSTAINABLE

C O NVE N I E N C E

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G C R | M AY /J U N E 2 012

AS THE NUMBER OF COFFEE CAPSULES ON THE PLANET SKYROCKETS, ADVOCATES ARE GROWING INCREASINGLY CONCERNED OF THE ENVIRONMENTAL IMPACTS FROM SINGLE-SERVE SYSTEMS. EXPERTS SPEAK ABOUT WHAT IT WILL TAKE TO MAKE THESE SYSTEMS SUSTAINABLE.

A

midst much talk of an increasing level of demand for coffee, one report in March stood out as a rare occurrence of an industry leader predicting a drop.

In a New York interview, Chief Executive Officer, Andrea Illy, told Bloomberg that demand for coffee could potentially decline by 1 per cent in the long term. With the International Coffee Organisation among others predicting an increasing demand for coffee, it was unusual for someone to speak of a potential drop in consumption.

The decline Illy was referring to was due to the use of single-serve systems, such as pods or coffee capsules. As coffee drinkers can make just one cup at a time, there is no longer the need to pour that extra coffee down the drain.

As such, Illy was saying that less coffee wastage could lead to lower coffee consumption figures.

The theory doesn’t only stand out as a rare factor that could reduce coffee consumption.

It’s also one of the only environmental benefits that advocates mention in discussing the sustainability of single-serve systems. As used coffee capsules pile up in landfills and powered capsule machines increase electricity bills, the sustainability of single-serve systems is becoming a hotly debated topic.

Darby Hoover, a Senior Resource Specialist with the Natural Resources Defense Council (NRDC) out of the United States, acknowledges that limiting food wastage is perhaps one of the only advantages that coffee capsules offer from an ecological perspective.

“From one environmental standpoint, that is the standpoint of wasting food, that is one issue that is somewhat addressed by these single-serve containers,” Hoover tells GCR. “But that has to be balanced against these coffee capsules that are most often made from non-renewable, fossil-fuel derived material…

You have a delivery method that helps reduce food waste but on the other hand you have more packaging waste. I don’t know if the trade off is really worth it.”

Hoover’s comments echo larger concerns about the extra waste produced from these systems. In some cases, aluminium discs are still being used in every capsule. Aluminium takes a large amount of energy to extract; however it is also a highly recyclable material. Unfortunately, in often ends up in landfills.

Some reports say there is a higher concentration of aluminium in landfills than there is in bauxite, the ore aluminium is sourced from. There is even a term for ‘landfill mining’, when people or companies hunt for aluminium in landfills. The aluminium from coffee capsules is harder to recycle than other products, for instance soda cans, because these filters need to be separated.

“Typically [coffee capsules] are made of plastic, paper, and are sealed with foil,” Hoover says. “While they may be theoretically recyclable, things that are theoretically recyclable aren’t necessarily logistically recyclable or economically recyclable.”

Darby says she believes it’s up to the companies that produce capsules to come up with a solution, and consider the waste produced from their product right from the pilot phases.

“We need to start thinking about disposal when we start the design of a product,” she says. “When a manufacturer is responsible for disposal, they are more incentivised to look at if they can design a product better so it can be disassembled for recycling. Once we involve the producers in that way, we’re going to see some real change.”

These are sentiments shared by Fairfood International.

Spokesperson Abigail Joffre says that while the group doesn’t consider themselves to be experts on packaging, they are concerned of the waste streams being produced by the growing

WASTEFACT NRDC’s Darby Hoover says that while single serve systems have helped reduce wastage, they are most often made from non-renewable, fossil-fuel derived material that can end up in landfills.

M AY /J U N E 2012 | GCR

39

FEATURE Coffee Capsules

“THE WORST CASE SCENARIO WOULD BE THAT A COMPANY PRODUCES A PRODUCT WITH BYPRODUCTS WHICH END UP IN A LANDFILL, WHERE IT CANNOT BE REUSED OR RECYCLED.” Abigail Joffre

Fairfood International. Spokesperson

single-serve trend.

“Coffee capsules, in general, are a response to a fashion; not based on a greater need or on sustainable growth,” Joffre says. “The capsules are high-end and high-price; therefore, if the coffee within the capsules and the packaging itself is not sustainable, then there is a definite mismatch between image and the inherent quality and sustainability of the product.”

In looking at the waste stream produced by any product, Joffre says that Fairfood International asks companies in the food and beverage industry not to waste resources during production, and to inform their stakeholders on the sustainability of their products. This includes the way they can properly dispose and recycle their products in order to reduce waste impact.

“Ideally, packaging should be reusable, therein creating a zero waste cycle,” she says, adding that if it’s not reusable, it should then at least be recyclable to ensure it’s properly entering the waste/recycle stream. “The worst case scenario would be that a company produces a product with byproducts which end up in a landfill, where it cannot be reused or recycled.”

It can be assumed that all those capsules that aren’t being recycled are currently ending up in landfills. With over 10 billion coffee capsules sold last year, any significant percentage of that figure in a landfill would be alarming.

In addition to concerns over the waste produced by single-serve machines, fears over the energy usage of coffee capsule machines have caught the eye of the Topten group, a

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PHYSICSFACT Many coffee machine systems have moved over from a boiler system to thermo-block or flow-type heaters hot, where only 10 to 20 millilitres of water need to be heated, instead of up to half a litre.

consumer organisation that encourages energy efficient products.

The organisation’s Barbara Josephy explains that of all the criteria Topten looks at to limit energy consumption, the autopower-down function, where a machine shuts down after a period of non-use, is one of the most essential characteristics manufacturers of single-serve machines have brought on board to limit energy consumption.

“Three to five years ago, we weren’t seeing any machines with auto-power-down,” Josephy says. “This was really impacting our measurements of energy usage, as we were seeing machines that were either permanently on, or were staying on for four to five hours before powering down.”

Of these systems, many were operating on a boiler system. The boiler system uses the most energy, as the machine works by keeping hundreds of millilitres of water ready to brew at 80 degrees Celsius or more.

“You can imagine how much energy it would take to keep that much water at 80 degrees Celsius,” Josephy explains.

Major steps forward have reduced the energy usage of some machines to a fraction of what they were five years ago. The autopower-down function on some machines is usually under half an hour, and in some cases the machine shuts down immediately after use.

Many systems have also moved from a boiler system to thermo-block or flow-type heaters. In these systems, instead of using a boiler to keep several hundred millilitres of water hot, only 10 to 20 millilitres of water needs to be heated.

“It’s simple physics. The less water you need to heat the less energy you use,” says Josephy.

Empa eco-balance researcher Roland Hischer sought to examine the overall sustainability coffee capsules from an

COMPARISON OF HEATING UNITS IN COFFEE MACHINES BOILER

THERMO-BLOCK

FLOW-TYPE HEATER

METAL

400g

650g

120g

WATER

200g

10g

10g

THERMAL CAPACITY (23OC > 90OC)

22Wh

12Wh

3Wh

Source: Super Efficient Coffee Machines – Best Available Technology (BAT) and Market Transformation, 2011, Barbara Josephy, et al.

ecological perspective. Hischer prepared a simplified life cycle analysis using different coffee capsules. He weighed the capsules and identified the main components of the contents, and then took values from literature of average material usage and consumption during the manufacturing of the capsule.

“The point of the interview was to look at plastic versus aluminium,” Hischer says. “But if you’re only looking at the materials, you’re not taking into account the most important element of the capsule: and that’s the coffee.”

In the theoretical life cycle analysis, Hischer found that while the type and amount of packaging material used naturally led to more waste, the agricultural practices at origin are the biggest sinner. His preliminary findings show these practices can account for as much as 70 per cent of the environmental damage caused by a cup of coffee. In the best cases, where environmentally sustainable practices are maximised at the farm level, the value can drop to 1 per cent. This best case scenario puts the rest of the burden to limit environmental

damage back on the coffee capsule and machine producers. As coffee capsules become an everyday component of many people’s lives, the NRDC’s Hoover is confident there’s time for manufacturers to take the initiative now to confront this burden.

“People are starting to change their habits,” she says. “I do think, when you point out the environmental consequences associated with a behaviour, a number of customers are going to shift behaviour based on that, especially if they’re given alternatives.” G C R

MARKET TRANSFORMATION OF COFFEE MACHINES AUTO-POWER-DOWN

Before 2005: no 2007: first models

All new coffee machines

DELAY TIME AUTO-POWERDOWN (FACTORY SETTING)

> 3 hours

< 1 min (some) 10-60 min (many) > 2 hours (some)

STANDBY CONSUMPTION

2007: ca. 3W

0.5-0.9 W (typically) Zero standby (more and more)

INSULATION HOT PARTS

Before 2005: > 30 W ready mode

10W (efficient models)

FLOW-TYPE HEATERS

2008: first models

ENERGY SAVING MODE

2009: first models

Source: Super Efficient Coffee Machines – Best Available Technology (BAT) and Market Transformation, 2011, Barbara Josephy, et al.

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MOCOFFEE : AN ECO FOLLOWING GROWING CONCERNS ON THE SUSTAINABILITY OF COFFEE CAPSULES, MOCOFFEE IS QUICKLY EMERGING AS A LEADER IN SUSTAINABLE SOLUTIONS. CEO PASCAL SCHLITTLER TELLS GCR OF THE COMPANY’S STEPS TOWARDS COUPLING SUSTAINABILITY WITH CONVENIENCE AND QUALITY.

F

or Mocoffee, the sustainability of their coffee capsules is much more than just an afterthought.

Mocoffee is the brainchild of Eric Favre, the original inventor of the Nespresso system. After pioneering Nespresso’s coffee capsule and acting as the company’s first General Director, Favre left Nespresso to start his own company, partially over concerns of the sustainability of the system.

Favre’s efforts have resulted in Mocoffee, a single-serve coffee capsule system that has taken sustainability concerns into account through every step of the process. Mocoffee CEO Pascal Schlittler, is now helping spread the word of the company’s efforts.

“We’re trying to keep a focus on all the environmental aspects,” says Schlittler.

He points to three main factors that consumers should be aware of in considering the sustainability of their single-serve systems: the materials of the capsule, the sustainability of the coffee, and the energy usage of the machine.

In addressing these key elements, Schlittler is proud to explain how Mocoffee has looked after these points, to develop one of the most

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sustainable systems on the market.

The first key element to consider in the sustainability of a system is the material the capsule uses. Mocoffee coffee capsules are made entirely of polypropylene, a material commonly used in food packaging and recognised as highly sanitary and protective.

This is an important point of difference, as many systems still use aluminium or plastic filters (or both). These filters are damaging to the environment if left in landfills, and need to be separated before recycling, something Schlittler says doesn’t usually take place.

“Coffee capsules are a convenience, but let’s admit it, recycling a capsule is a hassle,” he says. “Even when you can find places to recycle capsules, at the end of the day, many people are just going to throw them away.”

Because the Mocoffee capsules contain only polypropylene and coffee, they can be burned with arbitrary household waste and are dispersed in steam and carbon dioxide.

In using a single material for the capsule, Schlittler says that the company is also in a good position to move towards a biodegradable system. Schlittler says that biodegradable capsules will be the most sustainable in the long term.

Another advantage of the Mocoffee system is that the capsules are all hermetically-sealed. The method essentially sews the cover of the capsule to the body, ensuring an impressive shelf-life of over 50 months. A longer shelf life helps limit the potential of stocks going to waste.

“With the additional advantage of keeping stocks for some time, companies won’t have to throw them away,” Schlittler says.

A further element to consider in the sustainability of a capsule system is the weight of the capsule. Choosing a capsule that weighs two grams heavier than necessary, in a household that makes two coffees a day, can lead to almost an extra one and half kilograms of waste a year. Multiplied by hundreds of thousands of users, this could lead to tonnes of additional waste.

Mocoffee capsules are one of the lightest capsules in existence

USAGEFACT This year we’ll see 14 to 15 billion coffee capsules sold.

In 10 years, that number could jump to 150 billion – a good reason to consider sustainability.

PROMOTIONAL FEATURE//////////

LOGICAL SOLUTION not using aluminium or plastic filters. The capsules carry up to 18 per cent more coffee than comparable brands without the additional weight. The Mocoffee system can do this because of its superior extraction technology that produces a high quality coffee with a good mouthfeel. Inferior systems need to use more coffee and/or more packaging to get a reasonable extraction. As the Mocoffee systems uses less packaging, there is less waste that ends up in a landfill.

Mocoffee also limits the size of their capsules by using a low percentage of packaging material per capsule. The packaging makes up just 12 per cent of the total weight of the capsule (with coffee making up the remainder). Most products are made of over 15 per cent capsule material, while others contain capsule material of 25 per cent or more.

Efforts to limit the amount of material used are reinforced with work to ensure the outside packaging, that is the boxes or bags in which the capsules are placed, are just as economical. The Mocoffee system stacks the capsules in reverse, to ensure the maximum number fit into the smallest carton possible.

“These little things can make such a big difference when you think of the number of capsules that are being sold,” Schlittler says.

The next major consideration in the sustainability of coffee capsules is the agricultural practices of harvesting the coffee. As this must happen at the farm level, Mocoffee can only turn to the roasters it works with to choose a sustainability certification system to regulate practices at the farm level.

“When they procure coffee, whether they choose Rainforest Alliance, Fair Trade, Utz or others, we think that roasters need to look at certifications as this is being requested by customers,” says Schlittler.

In choosing a coffee capsule system, customers need to consider another factor similar to any other household appliance – energy consumption. In most parts of Europe, energy consumption is now regulated by the European

Union community, requiring appliances to have a low-power stand-by function. The Mocoffee system has exceeded these requirements, and is recommended by the Topten consumer group.

Schlittler points to one last environmental consideration that many consumers may be tempted to overlook in choosing a coffee capsule system. With so many machines available on the market, he warns of the temptation to purchase the most inexpensive machine. While consumers may think they’re being economical, they are running the risk of contributing to the unsustainability of the system.

Cheaper machines have a higher chance of breaking down, and at such a low price point, often it’s not worth getting them fixed. As such, these lower-priced machines are more likely to end up in a landfill. When cheaper machines don’t produce the quality a consumer expects, they are also less likely to be used and more likely to get thrown out. What the consumer has saved in the price point, could end up costing the planet more in the long run.

“Our machines are not cheap, but as with anything if you want quality you need to pay the price,” Schlittler says. “The cost issue could end up forcing the industry to go in the wrong direction.”

Mocoffee takes full responsibility for the repairs of their systems. Broken machines can be exchanged for a functioning system. Mocoffee refurbishes machines to limit wastage wherever possible. “We need to ensure we’re not throwing away tonnes of machines,” he says.

Every one of these details, Schlittler explains, will make a difference in the long run. As coffee capsule use is expected to continue to rise and spread around the world, these small considerations at the manufacturing level need to be taken into consideration to promote the popularity of sustainability efforts.

“This year, we’ll see 14 to 15 billion coffee capsules sold, while in 10 years that number could jump to 150 billion,” Schlittler says. “That’s a really good reason to think about the impact of the capsules you’re buying.” GCR Mocoffee is currently seeking roasters to work with around the world who share their sustainability and quality ethos. www.mocoffee.com

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MARKETING Exhibiting

LEAVING A LASTING

IMPRESSION GCR TALKS TO THE EXPERTS ON HOW A SHOW EXHIBITOR CAN STAND-OUT FROM A CROWD. STORY BY SARAH BAKER

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T

he doors open and a flood of visitors consisting of industry leaders and potential clients roll in. They pass stall-by-stall, scouting business leads and the latest innovative products and services. The question is: what will leave a lasting imprint in their minds?

Year by year, more companies within the coffee industry are taking advantage of show opportunities as the number of expositions continue to grow.

Dr Danielle Chmielewski-Raimondo from the Department of Management and Marketing at The University of Melbourne, notes the growing importance of expositions within the coffee industry.

“Coffee is a prestigious market very much about quality,” she says.

“With expositions, there’s legitimacy. If you want to be considered a serious competitor in a serious industry, and in order to get a reputation, you have to be part of these expositions.”

Chmielewski-Raimondo says a company’s presence at an exposition can provide publicity and create brand awareness. “You almost can’t put a dollar value on it,” she says. “Having people talk about your brand and take an interest in your company at an expo is far more credible compared to [other forms of publicity].”

Expositions have long been used by businesses as a marketing strategy, and they continue to evolve with time. “People prefer to spend a bit more money on something that is far superior than settling with the status quo,” Chmielewski-Raimondo says. “Expositions are still very relevant to coffee because there are a lot more specialty brands and small niches under a larger umbrella of coffee.”

Founder of Marketing Scoop, Michael Fleischner, says that to ensure an exposition is worthwhile and profitable, three crucial planning phases must be considered: before, during and afterwards.

Choosing the right event for a business is one of the first steps in pre-show planning. Fleischner says some business will tour the tradeshow circuit and attend multiple events throughout the year, but there is no real advantage in consistently making an appearance at each event. “Attending two to three significant shows per year is far more productive than attending 35 with marginal results,” he says.

Companies have different reasons for attending expositions, such as selling, promoting, conducting market research and advertising.

Fleischner says for some businesses, attending expositions is important from a branding perspective and a company’s industry standing. However, if an exposition hasn’t been productive in the past, consider attending with a smaller presence, by simply walking the show floor or choosing which exposition you take part in more wisely. “Due to the expense of exhibiting at shows, people have become more conscious of what they are spending and look for greater value from the shows they attend,” Fleichener says.

As part of pre-show planning, Fleischner says exhibitors should always have a long-term goal in mind before investing, and should strategically consider their point of difference compared to other vendors offering similar products or service.

Exhibition prices can cost upwards to $25,000 and more.

Therefore, planning and prior research is critical. “Exhibitors must consider the cost in relation to the price point of their offerings,”

“EXPOSITIONS ARE STILL VERY RELEVANT TO COFFEE BECAUSE THERE ARE A LOT MORE SPECIALTY BRANDS AND SMALL NICHES UNDER A LARGER UMBRELLA OF COFFEE.” Dr Danielle Chmielewski-Raimondo

Management and Marketing at The Univeristy of Melbourne

Dr Danielle ChmielewskiRaimondo

EXPOTIP Three planning phases must be considered before ­committing to an ­exposition: before, during and after. Expositions are not about a­ ttracting ­quantity, but about ­attracting quality.

Fleischener says. “If the average customer is worth $20, then investing $25,000 in a show may not be a good investment. However, if you’re selling higher priced products, the buyers you meet can help you achieve a positive return on your investment much more quickly.”

Fleischener adds that reaching out to customers before, during, and after the show is essential to ensure your investment is a worth-while venture.

Expositions can be cost-effective if managed properly. However, Fleischener says the reality of making them profitable is that marketers and sales representatives must be ‘all in’ or ‘all out’. “You certainly must consider all of the expenses associated with participating in an expo,” Fleischener says. This includes travel costs, accommodation and hospitality expenses. “If you don’t make a full investment in terms of booth resources, people and premarketing activities, then you’re better off not attending,” he says.

Fleischner says the only thing detrimental

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MARKETING Exhibiting

TEN COMMON MISTAKES EXHIBITORS MAKES PRE-SHOW 1. Failing to set exhibiting goals.

2. Forgetting to read the exhibitor manual.

3. Leaving graphics to the last minute.

4. Neglecting booth staff preparation.

AT-SHOW 5. Ignoring visitors’ needs.

6. Handing out literature and premiums.

7. Being unfamiliar with demonstrations.

8. Overcrowding the booth with company representatives.

POST-SHOW 9. Ignoring lead follow-up.

10. Overlooking show evaluation.

to a company’s success is inadequate planning. “People notice vendors who have something unique as well as those who are not adequately prepared. If you’re throwing things together at the last minute, you should consider passing on the show and focusing on one that you can adequately plan for.”

Susan Friedmann, Author of Riches in Niches: How to Make it Big in a Small Market has worked as a tradeshow coach for 25 years.

“In a niche market like coffee, a tradeshow is an extraordinarily powerful marketing tool that any company can use,” she says.

In order to achieve a successful outcome from expositions, Friedmann says research is the first step to success. “You have to know what you’re doing and do the proper planning and promotion,” she says. “You can’t just buy space and turn up and expect miracles to happen.”

Friedmann suggests asking two simple questions: how much money do I have to invest and what do I want to get out of exhibiting?

“You have to start with the end in mind,” she says. “You’ve got to know what you want. Your goals will form the foundation from which to build. If you don’t know what you’re doing, you’re going to crash and burn very quickly and you’re not going to get the return you wanted.”

Thought must then be given to fundamentals like design and booth appearance and choosing what products and services to highlight. “A big mistake people make is thinking they have to take and display everything in the booth. If people don’t see it, they don’t know you have it,” Friedmann says. Sometimes, visuals like flyers can be just as effective, narrowing the product focus just to one.

Knowing how to handle leads after an exposition is also critical and could be the key factor to turning a prospective client

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EXPOFACT Over 70 per cent of ­exhibitors go to shows to collect leads and 80 per cent of leads are not followed up.

into a customer. Friedmann says over 70 per cent of exhibitors go to shows to collect leads and 80 per cent of leads are not followed up, the main reason being there hasn’t been any planning beforehand. “People put all their energy into the show but then go back to the office, get back to management activities and forget about the hot leads they collected. They end up getting colder and more mediocre by the second,” Friedmann says. “Unless a plan is in place, leads will go to waste.”

Choosing the right people to attend is important to maximising potential in the showphase. “You can make or break relationships on the show floor just based on your behaviour and your communication skills,” Friedmann says. “A lot of exhibitors don’t take this seriously enough, but the show phase is when your business is on display in a very public arena.”

Friedmann says exhibitors must have adequate training, be aware of their role and what the company wants to achieve.

“At the end of the day, your people are your ambassadors,” she says.

Exhibitors should not be eating, drinking, lazing around, writing emails, reading their own literature, answering their personal mobile and looking bored out of their minds. “Do you want to do business with people like this? It’s

a big turnoff and it’s often what happens,” Friedmann says.

She notes from experience that many companies attempt to cut costs by selecting people to man the company stand who may be in the right location, but are not capable of a sales pitch. In the long run, this solution is of no benefit if people aren’t right for the job. Friedmann says exhibitors have to enjoy engaging in conversation and interacting with other people. “It’s about asking questions of the attendee to establish if the customer is a

“YOU CAN MAKE OR BREAK RELATIONSHIPS ON THE SHOW FLOOR JUST BASED ON YOUR BEHAVIOUR AND YOUR COMMUNICATION SKILLS.”

Susan Friedmann

potential prospect or simply wants a free gift,” she says. “Prepared questions will establish how you can serve your customer better. Remember, the booth will never sell however pretty it is. You don’t buy from a booth, you buy from a person.”

The job of an exhibitor is to direct the right people to the booth and make an impression by featuring something unique that no other booth has. Friedmann suggests using giveaways as a thank you token to prospective clients and provide educational material related to company products. She recommends strongly against hanging out standard pens, USBs, stress balls and highlighters. “The key to standing above the competition is to be different and challenge the norms,” Friedmann says. “Find a point of difference that will attract attendee curiosity and experiment with different approaches that will generate attention.”

Her inside tip: exhibitors looking to hand out a company bag of goodies should supply the biggest bag possible because it will become a walking billboard. And avoid the standard three-inch company catalogue – it’ll go straight in the bin. “Don’t do [something] just because everyone else is doing it,” she says. “After all, it’s not about attracting quantity, it’s about attracting quality.”

Once the exposition is over and the doors are shut for another year, the post-show phase begins and every effort should be made to help turn leads into clients. First and foremost, Friedmann suggests sending a general email to future prospects to thank them for coming to the booth. Use a lead-capture form and rank leads 1,2,3 or gold, silver, bronze and have a different strategy for each lead category. A hot prospect needs to be followed up immediately with a phone call. Second-tier are potential prospects that might be interested in six to 12 months and should be met face-to-face to further develop a relationship, and third-tier should be put on a mailing list.

Marketing Scoop’s Fleischner says that while expositions may not bring immediate income, an “advance” from a company’s exposition involvement can be expected at the show. “An advance might be setting up a follow-up appointment, a face-to-face meeting or an online presentation,” he says. “Regardless of whether the next step is defined, the goal is to get something tangible from your prospect. Once the immediate advance is defined, expect prospects to be integrated into a standard sales cycle.”

Expositions are a huge commitment to any business, and regardless of size, should be treated strategically. When it comes to the crunch, to be successful, The University of Melbourne’s ChmielewskiRaimondo says it all comes down to effort. “Expositions are a lot of work and a huge investment from a financial perspective, but you really do have to be in it to win it.” GCR

Best-selling author, speaker & tradeshow coach

Tradeshow coach Susan Friedmann

EXHIBITING DO AND DON’TS. DO • prepare for a successful show • dress according to company dresscode • wear your name tag on upper right side • wear comfortable shoes • know the booth layout • know the products being displayed • qualify the prospect with powerful questions • determine prospect needs through questioning • know your competition • walk around the show and familiarize with what’s new in the industry • keep booth clean and neat • be enthusiastic • be confident • be nice to lookers

DON’T • sit, read, smoke, eat, chew gum or drink in the booth • ignore prospects by forming a chatting with colleagues • use a mobile phone while visitors are around • close off conversation by crossing your arms • use inappropriate/negative body language • say ‘Can I help you’ • lean on booth furniture • complain • talk negatively about the competition • let the booth get untidy • get into over fence conversations with neighbouring exhibits • be unprofessional

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ORIGIN The Congo

CONGO’S COFFEE

REVIVAL

FROM A TIME WHEN COFFEE FARMERS WERE RISKING THEIR LIVES TO SELL THEIR COFFEE, INTERNATIONAL INTEREST IN THE CONGO IS STARTING TO SPARK NEW TRADE, AND HOPE, IN THIS WAR TORN NATION. STORY BY DANIEL HOWDEN

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C

rossing the border into Eastern Congo nearly five years ago Richard Hide was about to discover what he now thinks of as the “most compelling, most appalling and most beautiful” of places.

The Kivus, the two provinces that surround the lake of the same name, with their extraordinary topography of volcanoes, rainforests and lush, fertile slopes and valleys, had for years been home to a theatre of human misery.

The backwash from the 1994 genocide in Rwanda had flooded into its enormous neighbour, the Democratic Republic of the Congo (DRC), tearing its complex ethnic fabric to pieces and unleashing what has come to be known as ‘Africa’s World War’.

The lava plains and forests around the city of Goma on the northern shore of Lake Kivu were filled with one million refugees from that conflict, and most newcomers were aid workers flown in to staff the sprawling camps. But Hide had come in search of something else.

A coffee expert with the UK-based Twin Trading, he had come to find something that had all-but disappeared since the 1980s – the excellent Arabica beans of the Kivus. The Eastern highlands of sub-Saharan Africa’s largest country provide the ideal environment for growing high-grade coffee and once produced beans that were known from the cafés of Liege in Belgium to the roasters in the United States. While much of the Congo Basin is better suited to Robusta, the potential growing area for Arabica is far larger than Rwanda and Burundi combined.

“I knew Kivu coffee from when I was a trader in the city in the 1980s. Although very unreliable in quality, I could see it had great potential. Then for the next 20 years Kivu coffee just disappeared from the market. It was like the farms had dropped off the edge of the known world. I was keen to see what had become of them and what might be done,” Hide says.

So he set off on a journey to see if it was possible to wake one of the sleeping giants of the coffee industry from a nightmarish two decades.

“What I found was a sense of desolation and destruction,” he says. “There was a huge refugee problem in Goma, the population was scattered and the infrastructure destroyed.”

Nothing captured the awfulness of what had happened to the region’s smallholders and growers like the fate of the coffee widows. With desperate shortages of everything from food to soap and salt, many of the women who did not lose husbands to the war lost them instead in doomed efforts to smuggle out Congolese coffee into Rwanda across the waters of Lake Kivu.

Thousands of these smugglers, working at night often sailing handmade rafts, drowned.

The rewards on offer for the extraordinary risks they took underline the conditions in which people were then living as they bartered Arabica cherries for anything they could get in the comparatively stable Rwanda. Men were dying to bring back a few kilos of salt or a corrugated iron sheet.

Amid the wreckage, the British coffee expert, who has worked on fairtrade schemes and farmers’ collectives for 20 years in Latin America and Africa, found the cooperative at Sopacdimidway along the lake’s shore between its two biggest settlements, Goma and Bukavu. He was led there by Joachim Munganga a Congolese farmer who had worked there since 2002 – a year before the second Congo war officially ended – together with his uncle. The team worked to rehabilitate a run-down estate with one of the few brick-built coffee washing stations left standing

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ORIGIN The Congo

in the region, on the Bulenga peninsula close to Minova.

“It was hard, but fortunately our coffee washing station is on a peninsula on Lake Kivu which was never occupied by militias so we could keep it going,” he says. “Many of our farmers were badly affected though and many even had to abandon their farms for some time.”

Muganga says that those who stayed, “had no choice but to sell our coffee to smugglers or smuggle it ourselves across Lake Kivu into Rwanda. It was very dangerous and many farmers lost their lives.”

Official estimates put the death toll from smuggling operations as high as 1000 per year and it was clear to Muganga that something had to change.

“Nine years ago, a group of us came together to look for a way forward. We decided that producing and marketing the finest coffee was the answer, and so we started,” he says. “We experimented, and produced just a few tonnes at first. We finally found a buyer in 2008, who was amazed by the quality of our coffee. Since then, the momentum has been building.”

From a few hundred farmers, Sopacdi has grown to a cooperative of more than 3600 growers.

With the help of Twin Trading and the UK’s Department for International Development, the cooperative was able to get its coffee onto the shelves of the major UK supermarket Sainsbury’s last year in the form of a limited edition fairtrade blend. Talks are underway with the UK retailer to have a Congo-branded

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“THERE’S A LOT OF INTEREST IN WHAT’S GOING ON IN CONGO AND WITH THE RIGHT POLITICAL ENVIRONMENT IT COULD TAKE OFF IN THE SAME WAY AS HAPPENED IN RWANDA.” Bernard Sitati

Africa Fine Coffee Association Chairman in Kenya

gourmet coffee on sale within the next year. Similar ventures are underway with buyers from Japan, US, Belgium, Netherlands and Canada, according to representatives of Twin Trading.

Production has grown from just eight tonnes in 2008 to 160 tonnes in 2011.

While the numbers remain tiny, a similar trend across the region would have a dramatic impact on earnings and livelihoods. The income from Sopacdi’s sales has enabled the construction of the first modern washing station in the DRC in nearly 40 years. And this year the collective is due to reach another

milestone when its coffee gets the official Organic certification.

“Working in an area like the Congo, it’s very important to create an example that works,” says Hide. “What we have is a great story but it wouldn’t work if it was just a great story, it’s also great coffee.”

The green shoots at Sopacdi on the shores of the lake are mirrored elsewhere in the Kivus where a long dormant sector is showing signs of coming back to life. But the patient has been in near terminal decline for so long that most experts expect the recovery to be long and painful. With its swathes of tropical forest in the equatorial zone in Africa, the Democratic Republic of the Congo should be one of the continent’s larger producers.

The eastern highlands are well suited to growing Arabica coffee, while Robusta varieties grow well in the rest of the Congo Basin. But decades of civil war have left many of its larger estates empty, its mills and washing stations in ruins, its farmers scattered and the routes to markets cut off. The result is production running at one twentieth of what it was in the 1970s.

According to historical data, DRC’s export volume fell from around 119,320 tonnes of coffee in 1989 to just 6000 tonnes in 2010 due to two extended periods of civil war.

That picture is changing for the better according to officials from the DRC’s national coffee bureau, known by its French acronym ONC, who estimate that at least half a million people are already being supported by the coffee industry despite its parless state in the wake of the civil war. The ONC claims to have delivered over half a million seedlings to eight districts.

“The cost of the recovery plan for Congo’s coffee sector is of the order of $100 million. About 50 per cent is coming from the government, allocated in the 2012 budget,” says Thomas Kembola, President of the National Committee for Monitoring of the Coffee Sector at the Agriculture Ministry.

The uptick in the industry’s fortunes has been noted at the African Fine Coffees Association (AFCA) which has chapters in Kenya, Burundi, Ethiopia, Malawi, Rwanda, South Africa, Tanzania, Uganda, Zambia and Zimbabwe and recently added the DRC. The government has also unveiled a strategic plan to return to pre-war levels of production by 2015 with 120,000 tonnes.

“If sanity can be restored on a political level, the Congo will be a force to be reckoned with in the regional coffee industry,” says Bernard Sitati, AFCA’s chairman in Kenya. He says that the DRC could surpass Kenya in volume and eventually match production in Uganda given the assistance of other members’

COSTFACT Congo’s Agriculture ­Ministry puts the cost of the ­recovery plan for Congo’s coffee sector at US$100 million, with 50 per cent coming from the ­government, ­allocated in the 2012 budge

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ORIGIN The Congo

experience in growing their domestic production.

“There’s a lot of interest in what’s going on in the Congo and with the right political environment it could take off in the same way as happened in Rwanda,” he says.

There have already been tantalising flashes of the quality that can be achieved by growers in the eastern highlands.

“It’s about the quality of the soil, the altitude and the variety of coffee that’s grown,” says Ewan Reid, Technical Director and Coffee buyer at UKbased Matthew Algie, the first buyer of its kind to invest in coffee from eastern Congo. He says the higher yielding bourbon variety lends itself particularly well to the conditions in the Kivus and is already producing “stunning” results.

Matthew Algie, which supplies the UK’s leading fairtrade retailer Sainsbury’s as well as a Marks and Spencers café, a host of independent coffee chains and Britain’s Houses of Parliament, is offering both single origin Congolese coffee as well as including it in its high grade espresso blend along with an Ethiopian and Sumatran roasts.

“It’s a classic bourbon with subtle dark fruit a hint of citrus but also melon with really interesting secondary fruit flavours,” enthuses Reid. “It’s tasting absolutely stunning and as good as anything we’ve sold from Rwanda.”

The initial response to the micro lots from eastern Congo has persuaded the British buyer that the market is ready to support a full-scale revival of the coffee sector in a similar fashion to the recovery in its tiny central African neighbour Rwanda.

For many of its supporters in the industry, including Twin’s Hide, the Congo recovery remains fragile but potentially offers a more reliable route out of poverty than the vast mineral wealth which has often blighted the central African country: “In Eastern Congo in the 1970s, children were taught that there were four kinds of gold: yellow gold (the metal); brown gold (the oil); white gold (cotton); and green gold (coffee),” says Hide.

“Unlike mineral wealth, green gold can stay in the hands of the people and the people are motivated.

They remember the days when coffee provided a good livelihood.

In Mutumbala they told us: ‘If coffee fetches a good price again, even those who have died will come back to life and start growing it’.” GCR

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DIARY Dashboard COFFEE AROUND THE GLOBE

WORLD COFFEE EVENTS

CAFFÈ CULTURE

COTECA TEA COFFEE COCOA

16 – 17 MAY

HAMBURG, GERMANY

LO N D O N O LYM PIA Taking place over two days at the London Olympia, Caffè Culture welcomes 5000 senior decision-makers to meet and do business with more than 200 suppliers. The event offers the opportunity to source new products, network, and keep up-to-date with the latest in industry trends. The event is a highly targeted trade exhibition that caters for the UK’s café and coffee bar market. As an information-led show, Caffè Culture not only offers exhibitors a platform to network and generate new business, but to gain valuable insight into a continually evolving market. www.caffecultureshow.com

SCAE WORLD OF COFFE E

V I E N N A, A U STR I A 13 – 15 JUNE This premium showcase for coffee industry professionals and suppliers will welcome representatives from over 50 countries, with an estimated more than 10,000 visitors. The event is not just for coffee specialists; exhibitors also include a wide range of food-to-go solutions, premium equipment and services companies. New for 2012 will be the introduction of the ‘Product of the Show Awards’ initiative. Also new to the event is the ‘The Business of Coffee’ Conference, a half-day forum for key decision makers and influencers from the coffee community.

Set alongside the major trade fair exhibition, extending to 7000 square metres, is the world’s pre-eminent international coffee competition, the World Barista Championship. Also taking place will be the World Brewers Cup, the World Cup Tasters Championship and the World Cezve/Ibrik Championship. www.scae-events.com 54

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GLOBAL INDUSTRY EXPO

20 – 22 SEPTEMBER The Tea Coffee Cocoa Global Industry Expo (COTECA) is a unique trade show set to become the major meeting point for the industry in Europe.

An ideal platform to cultivate existing business contacts and make new ones, backed by a high-calibre conference which analyses the future of the market and discusses current trends in all issues related to coffee.

Coteca-hamburg.com

CHINA XIAMEN INTERNATIONAL COFFEE FAIR XIAMEN, FUJIAN CHINA

19 – 22 OCTOBER The last China Xiamen International Coffee Fair welcomed 273 exhibiting companies in total, including 96 overseas companies from Taiwan, Singapore, Indonesia, Malaysia, Poland, US, Mexico, and Portugal. This year, the fair will be held alongside the Third China Xiamen International Tea Fair with a total exhibition area of 22,000 square metres accommodating 1000 standard booths. www.coffeefair.cn/En/

TRIESTESPRESSO EXPO

TRIESTE, ITALY 25 – 27 OCTOBER

TriestEspresso Expo will enter its sixth year, bringing together the world of coffee under one roof: importers, roasters, producers of espresso equipment, roasting and processing machines, packaging, coffee cups and accessories, connected services, merchandising and trade press. This biennial event will see some important changes, moving from Fiera Trieste to Aries, an ad-hoc agency of the Trieste Chamber of Commerce. The successful approach adopted in previous years will be maintained, and special attention will be paid to international trade visitors who represented 39 per cent of the last edition attendees. A total of 230 exhibitors from 22 countries signed agreements in 2008 worth millions of euros, establishing new sales channels. www.triestespresso.it

CAFÉ & BAKERY SHOW KINTEX, GYEONNGGI-DO, KOREA

CONVENTION CENTER 1 – 4 NOVEMBER

KEEP A LOOK-OUT World Coffee Outlook 18 – 20 June 2012 Geneva, Switzerland www.worldcoffeeoutlook.com The Canadian Coffee & Tea Show 9 – 10 September Toronto, Canada Coffeeteashow.ca 3rd Moscow International Coffee Forum 17 September Moscow, Russia www.coffeetea.ru 7 Espaco Café Brazil 4 – 6 October 2012 Sao Paulo, Brazil www.espacocafebrasil.com.br ExpoCafe 18 – 20 October 2012 Lima, Peru www.expocafeperu.com The 24th International Conference on Coffee Science 11–16 November Ramada Plaza Herradura Golf Resort and Conference Centre www.asic2012costarica.org

Show organiser Mirae Fair welcomes exhibitors from the coffee, tea, bakery, baking machine, equipment, dessert, and beverage industry categories over four days at the Kintex, Gyeonnggi-do, Korea convention center. For the first time, the country will welcome the World Latte Art Championships and World Coffee in Good Spirits Championships to the event. www.cafeshow.co.kr

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PRODUCTS Marketplace

ANCAP Ancap is one of Italy’s most prestigious cup manufacturers. Founded in 1964 by Joseph Boschini, Ancap has a long and proud tradition. After 50 years experience, Ancap has affirmed its position in the market by supplying some of the world’s best roasters with their range of cups that are 100 per cent made in Italy. Using quality porcelain to maintain temperature, the Ancap cup’s thickness and hard porcelain top glaze ensures cup durability and preserves coffee aroma and flavour. Ancap products are available in a variety of sizes and styles, including classical, personalised and modern art trends that are vibrant and colourful. Ancap is distributed in Australia by Casa Espresso. For more information email info@casaespresso.com.au or phone (03) 9530 8992.

MONOARABICA Illy’s MonoArabica is the first single origin coffee line to be released from the Italy-based coffee roaster. The MonoArabica features the highest quality examples of Arabica coffee from Brazil, Guatemala and Ethiopia. Each of the three coffees offer different taste experiences as a result of their unique topographies and climates.

The beans are responsibly cultivated and sourced from farms under the direct trade method, pioneered by illy nearly 25 years ago. Each MonoArabica single origin coffee presents beautiful, rich, and nuanced tasting notes that sing of its region’s distinct flavor and culture. Each MonoArabica variety is available at select finer retailers.

For more information visit http://shop.illy.com

MENUMATE Menumate is one of Australasia’s largest Point of Sale companies for the hospitality industry. Menumate has been delivering their Point of Sale system to restaurants and cafés for over 20 years and operates in branches throughout Australia, New Zealand and Southeast Asia. The Point of Sale software and systems aims to improve business operations, including order-taking, delivery of meals and easy payment of customer bills. The system can increase businesss turnover by creating more efficient table turn, accurate billing and a focused loyalty system. It can also reduce wage costs by minimising stock variances and reducing administration costs. To find out more, contact Menumate at 1300 886 942 or sales@menumate.com

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OPEM CR-2P OPEM S.p.A presents the new filling plant for coffee capsules mod. The CR-2P is a two-lane capsule filler that comes with an integrated vertical packaging machine mod, Bi-colibri. The CR-2P produces up to 140 capsules per minute, in pillow or gusseted bags. The auger dosing units are equipped with automatic feed-back adjustment connected to the integrated check-weigher. A gas flush enclosure placed on the entire distance between the dosing group and capsule packaging group ensures a residual oxygen level less than 1 per cent. In addition to the standard version for compatible capsules of brands no more protected by patent, CR-2P can be designed and manufactured for capsules with complex configurations. For more information visit www.opem.it

UNIC’S VIPER SYSTEM To celebrate the first anniversary of the Stella di Caffè coffee machine, Unic is proud to introduce the Viper system, or Variable Infusion Pressure and Extraction Regulation. Unic has changed the way baristas and coffee professionals think about espresso machine technology. Power systems are the product of Unic’s core development philosophy of meeting professional’s expectations, and now the French coffee machine manufacturer has developed the Viper System – a versatile and dependable system on the Stella di Caffè. The Viper system uses modern technology and allows for user and programmed pressure adjustments to be made throughout the infusion process. It is completely computer controlled and pressure levels can be monitored using the intuitive touch screen interface.

Discover the Viper System at the SCAE World of Coffee Vienna from June 13 – 15, 2012, stand E19.

MAHLKOENIG GUATEMALA LAB GRINDER Mahlkoenig announced early this year that they will provide the Guatemala Lab Grinder to eight Latin American and two African countries for the Cup of Excellence competitions. The precision grinder was designed for use in laboratories, for tastings and in roasteries, with the ability to grind even the smallest amount of roasted coffee without residue. Cross contamination when grinding different coffees is reduced thanks to a special spout with a knock off device that facilitates the removal of leftover coffee powder before the next grinding operation.

For more information about the grinder visit www.mahlkoenig.de

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LASTWORD WCR

WORLD COFFEE RESEARCH ONE YEAR AFTER THE FOUNDING of the Global Coffee Quality Research Initiative (GCQRI), the organisation announced in March the launch of World Coffee Research (WCR).

Executive Director Timothy Schilling explains that while the GCQRI set the research agenda for the organisation – to support a global research and development initiative to increase the supply and quality of Arabica coffee – the WCR will be the space where the research will take place.

“With the GCQRI, this was an initiative in the coffee industry where several key players were getting together with researchers and academics to put together programs on the supply and quality issues that we, the global coffee community, face and are in jeopardy for,” he tells GCR. “After one year of working to get the funding, and wire the network together, we’re ready to turn it on. This is what we call World Coffee Research.”

He also admits, that dropping the acronym down to something a little more tangible has its perks: “C-G-Q-R-I isn’t exactly something that rolls off your tongue,” he laughs.

The slightly catchier WCR is being set up as a 501 (c)(5) non-profit.

Far from being a charity, however, the group is targeting businesses to take advantage of the initiative and use the WCR as their own research and development department.

“We didn’t think it was going to be this challenging to get this far – the idea makes so much sense,” says Schilling, explaining why they are taking this approach to get businesses on board with the initiative. He says that many coffee companies don’t really think about the agronomic conditions that coffee is grown in. With most companies sourcing their beans from traders, the separation between roasters and the source of their coffee can make some reluctant to come forward and take part in these research activities at the farmer level.

As such, part of the strategy is to get these larger roasting companies to consider the project as their own internal R&D department to help ensure a stable supply, and “pay their dues to the common”, as Schilling says. In addressing yield issues, Schilling says the group is fully aware how careful they need to be in treating quality issues. “We need to, at the worst, leave it neutral – not harm quality,” he says. “But what we really want to do is increase these agronomic traits while increasing quality.”

Because they’ll need to measure quality in everything they do, one of WCR’s first projects will be looking at a scientific way to discern quality.

While cupping is a good way to grow and trade coffee, in terms of scientific work, Schilling says, “it leaves a lot to be desired.” As such, the group is seeking to find more scientific indicators of quality.

Another major project will be multi-location variety trials. Working across 20 origin countries, the WCR will send out identical packages containing what they consider as the top varieties in the world. This way, the varietals can be grown across almost every coffee growing region.

The benefits, Schilling explains, will be two-fold in that not only will scientists observe the traits of the highest quality varietals, but the

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GROWFACT One of World Coffee Research’s first projects will be to send packages of the same varietals around the world, so scientists can see how the varietals grow across different ­coffee regions.

project will help bring together a global network of coffee researchers.

“Not only does it show a country that there is a better varietal out there that they can start to use to replace their old varietal, but also it cements the WCR into a scientific network,” says Schilling.

“It brings all the scientists together, looking at the same genetic material in their own environments. That alone is a lot of what science is about, that’s how you create the synergies and interactions and collaborations need to move things towards our goal of more higher quality coffee while increasing producer revenues.

Schilling points to Green Mountain Coffee Roasters (GMCR) as an anchor donor who submitted a significant amount of funding to help the initiative get off the ground. Following GMCR’s donation, a list of other companies have followed suit to help the organisation raise their target goal of US$1.2 million.

“That fear has been taken out of the equation and now we’re ready to sail,” he says. GCR`

The new dimension of espresso quality

www.nuovasimonelli.com