Is the coffee sector ready for the top ten global trends? Part II

Following my previous post about the coffee sector and the top ten global trends published by The Economist, November 26, I will describe three more global trends and my opinion about how coffee has adapted them or how will it prepare for the future.

5.The new space race:  Pushing the frontiers of technology once again”As a result of the space race, there is a “significant impact on how we live and work, from advanced materials to global telecommunications”.  One perfect example is the Internet and how e-commerce has driven the future trends. As estimated in the Nielsen’s 2011 study, from the seven billion population 78% own TV (1.4 billion households); 28% have Internet (0.5 billion) and three in five are connected with social media. Every three of four women state that “computers and mobiles have improved their lives”.  Usage of mobiles is also increasing. In the same year, “40% of Western Europeans had smart phones, 38% in USA and 20% in Asia” states the report. We have seen recently the role that social media played in overthrows of dictatorial governments in Middle-East, so it is a trend that will take more and more leadership also in how coffee is traded. One set of example is PT’s Coffee Mobile Site, in Kansas which allows placing orders directly from browser-enabled smartphone. According to the Korea Online Shopping Association (KOLSA) published by The Asian in July 2012,”transactions amounted to 14 billion won from 7.18 million users. Last year, the “market” grew to 200 billion won with 22.8 million people using the devices”. Customers are already taking advantage of smartphones and so will coffee drinkers.

A woman uses her smartphone to examine coffee products at a virtual “smart” store operated by Home plus at Seolleung Subway Station in southern Seoul. The next-generation branch, which has the photos of the products but not the real items, allows customers to use cameras and bar code-reading applications on their handsets to browse and purchase goods, which are delivered to their homes. (Photo : The Korea Times/Lee Ho-jae)

6. “Geopolitical wars: The fight to control the future”.

During my consultancy with El Injerto and Santa Felisa on-line coffee auctions, I was able to confirm that new and emerging markets are opening small segments where unique and distinctive coffee lots are being sold directly.  They have never visited origin before. But their habit of buying through the internet allows them to break distance barriers and start direct relationships with growers in the other side of the world. According to Nielsen Company who made a marketing research The Global Consumer, the number one driver of brand loyalty is quality as stated by 95% of women (who are driving changes towards consumption) in the countries surveyed. In the coffee sector, this is no different. First is quality that basically is driven by the cup profile, second is price and then certifications.

It is common to hear discussions about how these markets are influencing changes on the focus of producing countries to selling their supply to nontraditional markets (understanding traditional also as big buyers such as United States, Germany and Japan).  My opinion is that as coffee farmers learn about these emerging markets, they will also understand that they can segment their production by dividing them accordingly to varieties, quality cup profiles and characteristics. Normally, unique and rare varieties of coffee do not deliver big volume yields, making these supply scarce and therefore of a higher price. They are also very distinctive in the cup and thus attract buyers who utilize this as a marketing benefit. Because of the strength of their economy, these countries can pay premium prices for small quantities.  Niche markets in emerging economies are driving the future trade while traditional markets areas still recovering slowly from economic crisis. With Starbucks ambitious goal of expansion in China (1,500 stores by 2015) and smaller companies introducing quality coffee to the tea traditional consumer, imports will increase allowing more choices for the Asian market.

Dynamic markets

7. “Resource wars escalating: From a world of abundance to shortage”. Just a few weeks ago, The Impact of Climate Change on Indigenous Arabica Coffee (Coffea Arabica): Predicting Future Trends and Identifying Priorities was released causing a lot of misinterpretations by social media users towards the whole Arabica production.  The research states that “models [of bio-climatic modeling] show a profoundly negative influence on indigenous Arabica. In a locality analysis the most favorable outcome is a c. 65% reduction in the number of pre-existing bio-climatically suitable localities, and at worst an almost 100% reduction, by 2080”. Note that in the study it was modeled “the present and future predicted distribution of indigenous Arabica and identify priorities in order to facilitate appropriate decision making for conservation, monitoring and future research”.

Nevertheless, it is also true that the Arabica specie is affected by more than 40 different diseases. Reduction of production due to the coffee rust present in Central and South America was in some cases estimated 20% to 40% for 2012-2013 crop. The disease is commonly increased mainly by unpredictable and unstable rainfall patterns combined with long dry seasons where the fungus apparently stops but continues the infection in the next rain cycle. As a mechanism of control, the plant drops all of its leaves and thus, loses its potential fruit.  Studies have been conducted towards more resistant varieties that could eventually be planted instead those more affected, but their cup profile has been questioned by connoisseurs.

In the article Creating a viable future for Robusta, Ted Lingle, internationally and longtime recognized coffee professional, explains how the principles of Standards-Education-Ethics applied for the Arabica success can be also applied for Robusta. A basic program started in 2009 doing regional workshops with USAID funds through LEAD program supported by COMPETE, Uganda Coffee Authority and lead by the Coffee Quality Institute aiming to create standards accepted by the industry. Protocols for grading, roasting and cupping were done and four main lessons learned: Fine Robusta coffees can be differentiated by their country of origin; they can have appealing cup characteristics (scores above 80+ points on a 100 point scale); they have a complexity in their taste profiles that far surpasses Arabica (due to“Bitter/Sweet” and “Salt/Acid” attributes); and they are more difficult to roast properly due to the need to develop a wider color spread between the whole bean and ground color measurements.  Following steps will be to educate growers on technical issues, identifying value added Robusta coffees, developing programs to award excellence and to providing marketing access through internet trading, according to the professional.

A strategy to face coffee shortage in the future? It may be. But it is pretty much clear that new varieties, whether they are better quality or more resistant, will be featured. The marketing strategy towards developing products for existing and new consumers located in traditional and new geographical areas has started and its success will strike on whether the cup profile is accepted by leading buyers and coffee drinkers. More choices for the consumers, more challenges for producers and buyers to differentiate their products among all others. Quality, scarcity and how well it tastes will for sure drive the market on this.


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