Tanzania Coffee Board looking for market diversification
02 December 2012
In the face of falling global coffee prices, which are reflected in the prices obtained at the Moshi weekly coffee auctions, it is reported in the press that the Tanzania Coffee Board plans to both promote local coffee consumption and target ‘strategic markets’, with the aim of better insulating Tanzanian coffee producers from the price volatility in global coffee markets. With a bumper crop in Brazil, strong production in Colombia and reduced Eurozone and US demand in the face of economic problems, the director general of the Tanzania Coffee Board has warned that current trends could result in a 10% decline in coffee revenues. This is despite his acknowledgement that ‘good quality coffees were still fetching higher prices’
This view of the sector followed observations in the ‘Tanzania coffee industry development strategy 2011/2021’, published in May 2012, that ‘there has been little increase in demand from traditional markets (Europe, US, Japan)’ and that consideration should therefore be given to the promotion of Tanzanian coffee in new markets. The strategy document also acknowledged the growth of speciality coffee consumption (an estimated 10% of the market), and identified this as a potential growth area for Tanzanian coffee exports. This was seen as important since speciality coffee markets for the highest quality coffees ‘are less prone to price volatility’. The strategy document also sees sustainability certification as another major trend to which the Tanzanian coffee sector needs to respond.
Within the framework of the strategy, the Tanzanian Coffee Board aims to double production to 100,000 tonnes by 2021. Four areas for strategic interventions have been identified:
- measures aimed at improving coffee productivity and production levels;
- measures aimed at improving the efficiency of the value chain (reducing transaction costs, reducing the length and complexity of the supply chain, promoting transparency in pricing and other aspects of market information, improving sector governance, and strengthening cooperatives);
- measures to support improvements in coffee quality;
- measures to support the development of new market opportunities including: a focus on emerging new markets (China, India, Eastern Europe, Pacific, Asia and even Brazil); the production of more consumer-ready products such as roasted beans, roast and ground coffees and instant coffee for national and regional markets; the development of strategic partnerships in established markets to capitalise on new consumer trends (e.g. towards sustainably certified coffees and speciality coffees).
Editorial comment
The fact that good quality coffees are less subject to price volatility and fetch higher prices is an important window of opportunity that needs particular emphasis in Tanzania’s new coffee strategy. Emphasising quality rather than volume is likely to yield higher net gains for producers, since, proportionally, export costs will be lower.
This has implications for the type of non-traditional markets to be targeted, since market positioning in new markets can prove easier than repositioning exports on traditional markets.
On traditional markets, far more detailed market research is required to understand precisely how to reposition Tanzanian coffee exports and the implications this carries for product development and investment in value-added processing.
The strategic activities will need to be implemented in close association with stakeholder bodies, such as the Eastern Africa Fine Coffee Association. Potentially this could draw on the methodology and approach of successful regional market repositioning strategies for other products in other ACP regions. A case in point is the ‘Authentic Caribbean’ marketing strategy developed by the West Indies Rum and Spirits Producers’ Association as part of a broader region-wide Caribbean rum sector development programme. Significantly, this programme was designed and implemented by the regional producers’ association (in close consultation with national producers), with the support of national governments and EU financing.
In the coffee sector, beyond support to resource mobilisation, government support could be advantageously targeted at strengthening the policy and regulatory framework to provide a better environment for investment in both quality coffee production and in whatever forms of value-addition are required by evolving market demand.
