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Tanzania to increase its focus on single-origin coffee

10 June 2011

Tanzania, which mainly produces arabica coffee, is looking to further develop its marketing of single-origin coffee, to capitalise on the growing coffee culture in ‘big emerging markets such as China and Russia’. The resulting auction prices have reached a 15-year high. The state-run Tanzanian Coffee Board is encouraging producers to expand production both by replacing old varieties of coffee plants with new disease-resistant varieties, which offer higher yield, and by bringing a further 50,000 acres into production (raising the area under coffee from 250,000 to 300,000 hectares). While drought is affecting coffee production in some parts of Tanzania, the director general of the Tanzania Coffee Board, Adolph Kumburu, said that the country ‘could meet this season’s target of 55,000 metric tonnes’.

It is unclear to what extent the high prices enjoyed at the Moshi auction can be attributed to the marketing of single-origin coffee, as in April coffee prices on the global market exceeded $3/lb for the first time since 1977. This comes after a squeeze on coffee supplies and a fourth year in which demand has exceeded supply. According to market analysts expanding demand for arabica coffee beans ‘in line with a taste for upmarket coffee’ is expected to ensure that demand remains undeterred by rising coffee prices. Coffee prices for arabica coffee had however fallen back 6.8% from the April highs by mid May.

Tanzania, which mainly produces arabica coffee, is looking to further develop its marketing of single-origin coffee, to capitalise on the growing coffee culture in ‘big emerging markets such as China and Russia’. The resulting auction prices have reached a 15-year high. The state-run Tanzanian Coffee Board is encouraging producers to expand production both by replacing old varieties of coffee plants with new disease-resistant varieties, which offer higher yield, and by bringing a further 50,000 acres into production (raising the area under coffee from 250,000 to 300,000 hectares). While drought is affecting coffee production in some parts of Tanzania, the director general of the Tanzania Coffee Board, Adolph Kumburu, said that the country ‘could meet this season’s target of 55,000 metric tonnes’.

It is unclear to what extent the high prices enjoyed at the Moshi auction can be attributed to the marketing of single-origin coffee, as in April coffee prices on the global market exceeded $3/lb for the first time since 1977. This comes after a squeeze on coffee supplies and a fourth year in which demand has exceeded supply. According to market analysts expanding demand for arabica coffee beans ‘in line with a taste for upmarket coffee’ is expected to ensure that demand remains undeterred by rising coffee prices. Coffee prices for arabica coffee had however fallen back 6.8% from the April highs by mid May.

‘Coffee other mild arabica’ prices and ‘coffee robusta’ prices Oct 2010 – April 2011

(New York cash price, ex-dock New York, US cents per pound).

  Arabica Robusta
October 2010 215.84 90.57
November 2010 227.97 97.96
December 2010 237.33 98.35
January 2011 262.94 106.03
February 2011 288.08 114.62
March 2011 294.48 122.46
April 2011 302.70 121.29

Source: IMF, cited on Indexmundi.com

Arabica:   http://www.indexmundi.com/commodities/?commodity=other-mild-arabicas-coffee
Robusta:  http://www.indexmundi.com/commodities/?commodity=robusta-coffee

Editorial comment

In order to secure price premiums for single-origin coffees, it is not enough simply to place single-origin coffees on the market. Strategies need to be designed and implemented to develop brand identity and then brand loyalty, so that end-consumers and wholesale buyers are increasingly willing to pay a price premium. This requires investments to be made, the costs of which may be considerable and the benefits of which can only be effectively recouped if the volumes marketed are expanded. Investments in improved sorting and packaging of quality-differentiated single-origin coffees thus need to be complemented by investments both in marketing and production expansion. Different strategies have been adopted by African countries (Ethiopia and Kenya) and other global coffee suppliers (e.g. Colombia), with the specific strategy adopted being linked to the scale of production and the specificities of the product being marketed.

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