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Some market diversification under way for Jamaican Blue Mountain coffee

05 July 2011

Jamaican Blue Mountain coffee has faced a difficult few years, as the recession in Japan saw importers shift from a system of advanced payments, which provided operating capital to the Jamaican industry, to ‘in-time’ inventory management system. With 90% of exports going to Japan, this left Jamaican Blue Mountain coffee producers not only bearing the costs of coffee storage, but also having to find working capital to sustain production.

The Jamaican government has secured loan financing for the sector while at the same time initiating a restructuring programme. This involves restructuring of the Coffee Industry Board ‘to provide quality control while exiting commercial aspects of coffee production’. The aim is to bring private-sector dynamism into the marketing of Blue Mountain coffee and to initiate a comprehensive cost-reduction programme.

By mid 2011 there were signs that the Blue Mountain coffee sector may now be turning a corner. Press reports indicate that after a trial promotional period, Starbucks is to expand its purchases of Jamaican Blue Mountain coffee, despite earlier press reports from September 2010 that the café chain would not be continuing after the trial period. Some 7.7 tonnes is now to be sold in 2011 at the ‘minimum price set by the regulator of some US$30 per kg’, with the supply contract being won by the privately owned Gold Cup Coffee Company. This follows USAID support for the development of a ‘marketing plan for the US market’ and the initiation of a marketing partnership to ‘focus on the luxury hotels and fine dining restaurants within the United States’. According to Norman Grant, Managing Director of the Mavis Bank Coffee Factory (which processes some 45% of total Blue Mountain exports), ‘the USA was being targeted for some 20 per cent of the export crop for the 2011-12 crop’.

April 2011 also saw the first shipment of 7.3 tonnes of Blue Mountain coffee to China. This forms part of a two-year deal to export 70–100 tonnes per annum to the Chinese market via two Chinese organisations, Hangzhou City Coffee and Western Cuisine Association, who will now act as Blue Mountain brand representatives in China.

In March 2011 there were also indications of increased interest from Europe in expanded purchases of Blue Mountain coffee, while interest in Japan was even reported to be recovering.

Despite the relatively small volumes involved compared to the global coffee trade, coffee remains Jamaica’s ‘second largest crop earner of foreign exchange’.

Editorial comment

Given the downturn in sales to the Japanese market and the prospect of the commercial value of the Blue Mountain Coffee brand being undermined, the opening up of new export opportunities is an urgent priority for Jamaican coffee exporters. Restructuring the Coffee Industry Board operations appears to be integral to bringing a new dynamic to the marketing of Jamaican Blue Mountain Coffee. While progress is clearly being made, there would appear to be considerable work ahead to reduce the level of dependence on the Japanese market, so as to better insulate the sector from the economic woes of an individual partner country.

The recent experience of the Blue Mountain coffee brand highlights the need for constant reinvestment in marketing efforts, in order to expand the range of markets served by quality-differentiated products. This reduces the vulnerability of exporters to commercial pressures from individual importers.

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