| The
Future of the Coffee Industry
Background: a Future of Coffee Industry presentation
by Dr Patrick Dixon for the European Coffee
Federation posed huge questions about the future of coffee as a
consumer product in a world increasingly concerned about values,
ethics and image. (see slides)
Are you a journalist? Media hotline - TV / radio /press
This theme has since been taken up by influential leaders in the
coffee industry such as Walter Zwald, seeking to find a better way
to run the coffee industry for the good of all.
He has proposed a $1 per 50kg tarrif, which would raise $140m a
year yet only add $0.0034 per cup of coffee. $70m would go to improve
the public image of coffee and educate people about how to drink
it - much harder than you think to get a wonderful cup of coffee
tasting as it should. $70m would be used to fund community health
and development programmes in the poorest areas where coffee is
grown.
The following is adapted from story written in the Financial Times 27 January 2005 by Elizabeth Rigby:
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"Big coffee producers such as Nestle and Kraft have been pressed to introduce a voluntary levy on raw coffee beans as part of a wider move to promote sustainable development. The Worldwide Sustainable Coffee Fund, set up by leading members of the coffee industry, yesterday put forward at an International Coffee Organisation meeting in London a proposal to levy Dollars 1 on every 60kg bag of beans.
Walter Zwald, former president of the Swiss Coffee Trade Association, spearheading the proposal, said the move would raise Dollars 70m a year. "The money would be split between projects based in producing countries and the promotion of coffee consumption," he said. The ICO had agreed to explore the proposal and would meet the Coffee Fund team to present a more detailed plan.
The plan has informal backing from 70 per cent of coffee-producing countries. The Coffee Fund first discussed the scheme in 2001 but it was rejected by ICO at that time.
However, the continued fall in coffee prices has prompted a rethink. The ICO estimates that earnings of 50-plus producer countries in Africa, Asia and Latin America have dropped from Dollars 10bn a year to Dollars 5.5bn a year since 1998. The scheme will focus on the mainstream market rather than just the fair-trade segment of the industry, which makes up only 2 per cent of coffee production.
"This is all part of a conversation about sustainable coffee production and human justice," said Patrick Dixon, chairman of Global Change Limited and a speaker at the ICO conference. "We know these issues are complex but they have to be solved. The oil industry has accepted all kinds of initiatives and global regulation. Coffee is the poor cousin, there is much less money involved but the number of individuals involved is much greater."
The initiative is part of a wider thrust to promote sustainable coffee production. In September, coffee producers together with the world's largest coffee companies signed an agreement - the Common Code for the Coffee Community - to improve working conditions and environmental standards in the industry.
The code, adopted by Nestle, Sara Lee, Kraft Foods and Tchibo, was the most ambitious attempt to set standards in the industry. The code also applied to coffee producers in Brazil, Central America and Africa.
Separately, the ICO meeting also consulted members on moving the headquarters from London, where it has been for the past 40 years, to Madrid. The cost-saving move would be popular with Latin American coffee producing nations but less so with the UK coffee industry. A decision is expected tomorrow."
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PRESS RELEASE 26/9/01
CALL FOR ALL COFFEE TO BE “FAIR-TRADE COFFEE”
Chairman of Swiss Coffee Federation calls for global agreement
on new ethical coffee fund to benefit growers and says he is ashamed
by coffee industry exploitation of the poor
Major speech to members of the International Coffee Organisation,
London – proposing a “coffee tax” of 50 cents
per 50kg bag – money to be channelled back in community projects
run by charities / NGOs such as Oxfam
Speaking the International Coffee Organisation, Walter Zwald, Chairman
of the Swiss Coffee Federation said:
“Coffee has a bad image and it’s getting worse –
one reason why coffee drinking is stable or falling in Europe. I
am ashamed to be part of the coffee industry as it is today because
the way we run it is unjust and exploits the poor. We have made
more profits than we should.
“Coffee is the largest traded commodity in the world after
oil, a huge and wealthy global industry, yet the beans are grown
almost entirely by very poor people, who receive hardly anything
for their labours. Coffee bean prices have fallen dramatically over
the last two decades – even more so this year. Indeed prices
are now so low that the quality of coffee is suffering with poor
bush care and other problems.
“Fair-trade coffee has become popular, with chains like Starbucks
taking the moral high ground by adopting it. However very little
of the extra price of fair trade coffee actually gets back to the
grower, because it is all small-scale.
“I am calling on the entire coffee industry to take a small
but significant step to help support some of the poorest people
in the world with a “coffee tax” of 50 cents per 50kg
bag. This will be returned to benefit the community of coffee farmers
by supporting education, health and other projects in partnership
with well-recognised NGOs and charities.
“I have had discussions with many of the main players –
whether producing nations, wholesalers or retailers and I have had
very positive responses. No one wants to be the only one but I believe
we could all act together.
• Walter Zwald is Chairman of the Swiss Coffee Federation,
Board Member of the European Coffee Federation and Member of the
International Coffee Organisation
• 4 companies buy 60% of all raw coffee beans
• Organisations already consulted: International Coffee Organisation
(ICO), Worldbank, Common Fund for Commodities, Association of Coffee
Producing Countries, Institute for Scientific Information on Coffee,
several NGO’s, several main coffee companies, European Coffee
Federation, National Coffee Association of America, Specialty Coffee
Association of Europe
Speech on 26 September 2001 in London 9.00am to 10.00am
International Coffee Organisation 2nd floor, Board room
22 Berners Street
London W1P 4DD
Interviews: Walter Zwald, Coffee Buying & Consulting
Spissenstrasse 76, CH-6045 Meggen
P.O.Box 442
phone 0041 41 379 61 21, fax 0041 41 379 61 20
e-mail: wzcbc@tic.ch
Here is the text of Victor Zwald's speech on the future
of the coffee industry at Cintercafe 2000 - raising the
issue of falling coffee commodity prices, falling incomes to the
poorest coffee workers, falling quality of coffee bushes (no incentive),
falling quality of coffee drunk, rising coffee prices in retail
stores, moral issues of injustice, image of coffee as a drink that
exploits people, rising of "fair trade coffee" use in
chains like Starbucks, falling coffee consumption among the young
in Europe - and finding a more sustainable future for the coffee
industry. See slides of orginal presentation on the Future
of Coffee by Dr Patrick Dixon
"Ladies and Gentlemen,
All of you have already listened to several interesting speakers
concerning either coffee producing and/or consuming countries. When
reading my heading – I wouldn’t blame you - if you came
to the idea that this speaker is either working for the Red Cross
or some “green” consumer organisation - not to say that
these organisations have a negative image.
What goes through your mind when you see this picture?
Picture of a woman with her child on her back picking coffee
For us here this is a normal picture. But what do you think is
going on in the consumer’s head!! I don’t think I have
to give any hints !!
But how do you think the consumer could understand our business
the right way ? It is our job to make much more educational work
and give the consumer transparency of our business. Yes, I already
know a few companies who do a great deal of work in this direction
and in addition also many companies do a lot of sustainability work
- either on the roaster - or on the trading side.
But that’s not enough at all. - Why ?
I’m not only saying it, I’m completely convinced.
Now you certainly have some questions.
How do you think we could change that ? To start with, I must tell
you that we have to do it together - only together will we be successful.
With today’s on-line Internet possibilities, we have a much
better chance than ever before. But let’s get back to this
later on.
With the low price period we are having now, we can’t
afford to wait for better times - until a natural disaster hits
our coffee market!
Even during a high price period, we think we are all experts: we
fix our price on the selling side on the top only and on the buying
side we fix the price at the lowest level.
Don’t you agree!!!
All of us know here that even seller and buyers have fixed the
price whatever level that will be that is not the farmers price.
This system we have to explain to the consumers and to the media.
In particular, in the last 10 years this unfixed business has overwhelmed
the entire selling and buying activity.
Why do we have to explain to our consumers how the coffee market
works and the important role of the trade and it’s necessity
?
e.g. Forward purchases of roasters where origin can not sell due
to internal restrictions and / or huge investments of trading companies
in exporting organisations at the origin.
Allow me to point out that in many coffee producing countries the
export activity wouldn’t function any more as they do today
without the trade!
This is also sustainability support. But this engagement of the
trading companies must be under the umbrella of economic efficiency,
as this sustainability support bears also enormous risks.
Economic efficiency is a good way of illustrating today’s
price situation with regards to the actual oversupply.
At the moment there is an intensive discussion going
on in the Ivory Coast about burning 250'000 tons of cocoa. Isn’t
this thought completely shocking - even hair-raising – with
the country now being at unrest and unable to pay back their enormous
debts?
Chart Cacoa
On this chart you can see the price development of cacoa of last
years. If the price decrease continuous like this there will be
not much left from this fruit.
But let’s come back to coffee. As we all know we have also
an verproduction - mainly in the Robusta field. As long as we see
production increase as these figures show.
Chart “Vietnam”
W e must not ask ourselves why the market is at such a low level.
Therefore all of us should undertake every possible step and opportunity
to draw the attention to this development. This can be either done
by trade organizations, like export organisations - at government
level – world bank - or at diplomatic level.
As a German proverb says: “ Constant dripping hollows (out)
the stone“.
I know what you want to say. Every country can do what they like.
Yes, but this liberty ends where someone else starts to suffer.
So in this case, less would be more for everyone.
We have now touched a part of the production side.
But do not think we are better in marketing our product because
the consumption figures don’t show a brilliant picture. That
is expressed very diplomatically. The recent published figures for
the U.S. consumption over the past 40 years show the lowest coffee
consumption in the USA - despite the many new boutique roasters
starting their businesses.
The activity of these boutique/specialty roasters have certainly
addressed a new group of consumers. What does this mean to the so
called normal coffee drinker – I call them cardboard coffee
drinkers – who have consumed even less coffee than in the
past.
Without going into details the consumption picture in Europe is
not any better.
Why do you think it is so?
• Is it the quality?
• Is it our dull marketing strategy?
• Is it the price war particularly in the retail sector?
• Is it because we are just brewing our coffee, without any
story or identification to the product?
• Is it the image of coffee?
Each of these points are in some way responsible for the decline
in consumption figures in traditional coffee consuming countries.
I think we have to forget about serving coffee the way it is still
being done today in many German highway restaurants. With such products
we cannot promote consumption. We reduce it instead !
The reason is: The consumer has a lasting bad aftertaste from such
a cup of coffee! Also the acidity in a number of blends which you
come across around the world, is sometimes just shocking. (A lot
of experts – only think in terms of Arabicas in the blends
- and in addition - only highly grown Arabicas coffees, because
they are the best. I do not need to explain you more.
Why can you drink 4 to 5 Espressos a day in Italy without any problems.
That’s exactly the answer.
Now you would like to hear how “we” could improve this
situation.
1. First of all it is to start with an acceptable blend –
not too acid.
2. The hole chain from the roaster to the consumer has to be monitored
in all aspects much more than today. There I mean grinding, water
temperature, pressure and the most important point how we go to
serve the coffee.
I would like to show you that also with two examples.
Chart “Which cup is easier to sell”
Which cup of coffee is easier to sell?
This one picture of the bad cup
Or
This one picture of the better cup
Coffee is such an appreciated product in the marketing sector, as
we can make a lot of stories around our product coffee. We have
just to do it!
As mentioned earlier I am aware that good efforts are on the way
looking at different areas of the coffee market. Even today in the
new ICO agreement we have clauses like
sustainability and social clauses.
I should not say it, but I have to say it !!
Not much success can be achieved for example under the heading
of the Private Sector Consultative Board.
The task force “Good news on coffee” has only a budget
of $ 20’000.- to $ 30’000.- per year. But even though,
it is a start. Wherever you intend to reach a target, we need forerunners
– people who lead the way. Usually they have a hard time to
start up and they are laughed at.
More or less the same story applies to the PSCB task force;Sustainability;.
Most of the members of these “task forces” are only
working on a voluntary basis besides their normal jobs.
But we can only change something if we do it together. It is absolutely
necessary that we can fullfil todays consumer conditions and also
those of the future.
Let me quote Dr. P. Dixon – who was holding
an impressive speech during the last European
Coffee Conference in Bremen last June.
Chart proverbs by Dr. P. Dixon
“Either we take hold of the future or the future will take
hold of us”
or
“Eat or be eaten”
In order to monitor and support our business in a proper and real
professional way – as the commodity coffee is respected for
- we have to work in the direction of an export and import levy.
Allow me to make a calculation:
If we had 60 Mio bags of coffee on the export side and 60 Mio bags
on the import side– under the heading of the ICO members –
and we would add US$ 1.-- on each side per 50 kg – this would
amount to
US$ 144’000’000.--.
What does this mean to the consumer per cup.
Calculated at 7 grams per “real” cup of coffee –
that is - prepared with pistons - it would amount to US-Dollar 0,000329
per cup.
In other words – an extremely low amount – difficult
to pay in any currency!!
0.72 Lit calculation as per annexe 1
I think if we published these figures to the consumers, they would
accept both Dollars right away, here I mean
the US-Dollar 1.-- per 50 kg at the export side and
the US-Dollar 1.-- at the import side
for the commodity coffee.
This could be done with the slogan: “Drink
coffee for a better world”
I can let you know that a few big roasters would support this idea
and we would reach two points:
- a real official sustainability for coffee
- and an answer to “the increasing number of questions by
end consumers” We would be the first commodity who would create
a sustainability fund.
Let’s assume we would get the
US Dollars 144’000’000.-- .
50 % is export levy – 50 % is import levy.
With that amount of money a group of top professionals in all coffee
fields – here I mean roasting – trading and origin knowledge
– and an experience with the different long term supply agreements
- could really change the situation. My idea is that the amount
of the export levy has to go back/invested into origin and the import
levy has to be invested in projects on the consuming side.
Where now should the money be spent under the umbrella of economic
efficiency?
Let’s first look at the consuming countries –which is
probably easier.
Chart “The consuming side”
• Coffee campaigns
• Coffee Education – Consumer evenings – coffee
clubs
• Coffee Promotion
• Mould prevention – moisture management
• Establishing professional links between the already existing
coffee organisations like
- European Coffee Federation – CECA/EUCA/ECF
- (support to all different task forces under this heading)
- Association of the Coffee Producing Countries ACPC
- Consumer Organisations
- European Union regarding food regulations (prevention work)
- Private- or industry coffee promoting organisations like “Viva
Café Forever”.
Before I finish, let me briefly mention the origin side and then
I let you go for lunch and you can discuss my extraordinary ideas
!
On the origin side – after all it is an other 77’000’000--
US. Dollars.
Chart “The origine side”
• Infrastructure support in the shipment ports.
• Giving financial support to road construction for better
inland transport.
• Mould prevention – Moisture management – I
don’t like to go into details here, but this item, Ladies
and Gentleman, is actually one of the most important subject we
have to handle. Believe me, it is so. Here we have to do prevention
and our job before the bomb blows off!
• Growing and picking instruction in absolutely underdeveloped
producing countries
• To promote international cooperation in all coffee matters
Ladies and gentlemen,
Some of you might think the guy in front of you is a dreamer -
BUT I AM NOT. I have been working now for nearly 30 years in the
coffee business – in the trading sector – in central
buying office activity, on the roasting side and active in different
official functions for many years.
Some of you might think the idea is good and could be considered.
What I would appreciate is that both parties could give me a feedback
- whether positive or negative.
I am pleased to answer you any question you might have.
Thank you for your attention!
Meggen, November 2000 Walter Zwald, Coffee Buying & Consulting,
CH-6045 Meggen, Switzerland, e-mail: wzcbc@tic.ch
Profile of Walter Zwald
Walter Zwald started his career with a commercial apprenticeship
in an international coffee, cocoa and sugar trading company from
1965 - 1968.
For 4 years after the apprenticeship different education steps in
the banking sector - such as stock exchange assistend trader - currency
trading - documents handling - bond trading - options trading -
have been attend.
From 1972 - 1979 he moved on to becoming an international trader
in green coffee. In 1979 he became member of the board of the Kraft
Jacobs Suchard Central green coffee buying office in Switzerland
(Taloca). Among other responsibilities he was responsible for establishing
relationships with different government-orientated selling organisations
in the origin countries and concluding long-term supply agreements.
In 1987 he became general manager for an international trading
company for coffee, sugar and cocoa (Fritz Kopp AG, Lucerne). From
1991 he worked as general manager of a medium sized roasting company
in the roast and ground business (Rost AG, Sursee).
Since 1996 Mr. Zwald has been and is still doing different consulting
jobs in New Zealand and Australia.
Since 1989 Mr. Zwald is president of the Swiss Coffee Trade Association.
Also since 1989 he is member of the “Contract Commission”
of the European Coffee Federation for the European Contracts for
Coffee - green coffee trade rules.Since 1998 he is a member of the
new existing Liaison Group between coffee producers and consumers.In
June 2000 he has been elected as member of the board of CECA -Committee
of European Coffee Associations.In August 2000 he has been elected
as member of the Private Sector Consultive Board of the International
Coffee Organisation (ICO).In September 2000 he has been invited
to be observer of the Council of the International Coffee Organisation
(ICO).
Walter Zwald
Coffee Buying & Consulting
P.O. Box 442
Spissenstrasse 76
CH-6045 Meggen
Switzerland
Phone: ++41 41 379 61 21
Facsimile: ++41 41 379 61 20
Can coffee be
addictive - what are the health risks of heavy coffee drinking?
Presentation on the Future of
Coffee by Dr Patrick Dixon
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