Monday, June 27, 2005

thinking about origin

"'why aren't we doing the roasting and packaging?' asked cyprian ipomai, a regional manager for coffee board of kenya, which oversees the country's coffee production and marketing."

at first this sounds like a great question. however, we do have a valid business reason why origin isn't the best place for roasting and packaging -- good coffee must be presented fresh to the consumer.

roasting, packaging, and transporting from kenya and many other origins -- places not known for great infrastructure or twice daily deliveries from fed ex -- would result in coffee that's even staler than what most consumers are already faced with.

this lowers the quality of the product and reduces consumer acceptance, ultimately harming coffee consumption; so ironically, this tactic would backfire on kenyan farmers. however, it would make a ton mo' money for people on the coffee board, which is notoriously and openly corrupt. . .

"these days, most african coffee farmers teeter on the edge of poverty, even as western coffee processors and specialty outlets like starbucks rake in about 90 percent of the $70 billion-a-year industry, according to some industry analysts."

part of this is true: and not just african coffee farmers suffer. however, the statement is wrong about where the money lands, i do believe.

most retailers make only about US$0.25 on that US$3.75 latte, according to old figures the scaa once published. i personally think after talking quickly to a couple of retailers that a more reasonable figure is nowadays US$0.15 or so.

this is still a large sum compared to the farmer, who receives just US$0.01 of that drink cost, true.

our friends the artisan roasters (brownies) generally seem to book a profit of about US$0.09 outta that latte (this obviously varies by region). so where does all the cash in the coffee industry lodge?

you don't have to hang in the coffee industry for more than a moment before you realize who owns the polo ponies and porsches: the greenies (importers/brokers).

"karanja [the farmer] bristles at the fact that most americans every year spend more money on their daily cups of coffee than he makes in a year. he longs for the day when he himself can negotiate a fair price for his beans with buyers in new york and california. at the moment, kenyan coffee growers are prohibited by kenyan law from selling their coffee individually."

bingo. and i'm here to say that all of us coffee-lovin' consumers agree with karanja -- he should be able to sell freely in an open way on a fair, transparent, level, electronic market. most brownies would jump with joy at the chance to do business with him that way.

but notice what prevents that: kenyan law. the same law that is made and overseen by above corrupt national coffee board!

but we have to be realistic as well. the greenies make a lot of money because they accept a lot of risk. and in market economies, risk is rewarded.

let's face it: it's hard to get coffee from the higher slopes of the misty mountains where roads are nonexistent, past the government officials and soldiers who want their cut right there, to get it loaded on a ship in a timely manner (more bribes), and then get it delivered to new york and parceled out across the country in time for the contract.

this requires resources that the farmer and the roaster can't pony up. it's not unheard of -- but i still wouldn't call it common either -- for greenies to build a gravel road to a coffee-growing community just to be able to get the coffee out, you know?

this means that in some areas the greenies have basically been providing the services normally expected of a local government. so there's no doubt the greenies provide an important role.

also, since most coffee is still shipped by container -- that's 37,500 pounds -- it would be very hard for a group of small farmers and roasters in an electronic auction to manage the shipping in a time- and cost-efficient manner. how are many small buyers going to put disparate lots together in a sensible way?

the coffee famers certainly can't do it, meaning the greenie does and will in the future. this is why some people, like jim kosalos, say the final barrier to a real coffee market reform is the container shipping system. . .but this doesn't mean i think the greenies are off the hook, either.

these are the on-the-ground facts that i think articles, like the piece i'm quoting today, need to deal with more, imvho. a total "blame the west" isn't completely appropriate. . .altho' there's no doubt that everyone needs to see where they could do more to improve this situation!

everyone in the specialty coffee family, to my mind, needs to work together to understand how we can manage this situation to the benefit of all, as one former scaa prez so famously states. (for us coffee lovers, this often means we just have to learn what the current situation is -- not that it's easy to educate yourself in the complexities of coffee, i admit.)

um, and that includes the coffee boards and coffee-producing countries, who need to face and deal with their own internal corruption straight on. otherwise why would kenyan coffee famers be begging human rights officials for protection from their own government's agents?

in short we need a new coffee conference, a new and permanent discussion group of farmers, greenies, brownies, retailers, market-makers, gov't officials, and consumers. a group completely devoted to market reform.

does anyone have any ideas how we can start it? smaller groups of various players seem to have formed, but it needs to gel, you know. . .

posted by fortune | 8:09 AM | top | link to this | email this: | links to this post | | 0 comments

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