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Read Article APRIL 2018 APRIL THE INTERNATIONAL & TRUSTED RESOURCE APRIL 2018 FOR THE TEA & COFFEE INDUSTRIES SINCE 1901 www.teaandcoffee.net TEA & COFFEE TRADE JOURNAL JOURNAL TRADE & COFFEE TEA Counter Culture Coffee Pursues Coffee Perfection Crafting Tea Lattes The Growing Need to Diversify Advantages of Offering Coffeehouse Wi-Fi Special Series: Sustainable Coffee Production Part II April 2018 CONTENTS CONTENTS April 2018 Vol. 190/No. 4 FEATURES 22 CONTACTS Editorial Director Sarah McRitchie [email protected] 22 Counter Culture Coffee: On a Relentless Pursuit of Coffee Perfection Editor Vanessa L Facenda By Anne-Marie Hardie [email protected] Specialties Editor Donald N Schoenholt 16 We Don’t Own Nature: Art Editor Sue Burke Coffee Producers and Diversification [email protected] By Anika Rice 16 Contributing Writers Ryan Detwiller 33 5 Tips for Coffeehouse Wi-Fi Anne-Marie Hardie Aubrye McDonagh Leigh By Ryan Detwiller Michael Maxey Yumi Nakatsugawa Rachel Northrop 35 The Powerful Role of Intangibles Carlos Ortiz Maxwell C Pollock in the Coffee Value Chain Anika Rice By Michael Maxey Alexis Rubinstein Joanna Paredes Wood Special Series: Sustainable Coffee Group Sales Manager 40 Mark Neilson Production Part II/Certification [email protected] By Rachel Northrop 47 Assistant Group Sales Manager Samantha Bull [email protected] Art of the Tea Latte 47 Sales Manager By Maxwell C Pollock Sophie Frondigoun [email protected] North American Sales Consultant 33 Scott Rogers Events Manager Megan Freeman [email protected] Assistant Events Manager Miranda McRitchie [email protected] Accounts Payable DEPARTMENTS Yee Yau (Miss) [email protected] 5 Editor’s Letter Publishing Director 6 New & Notable Neil McRitchie 35 [email protected] 10 Sustaining the Chain Taiwan Sales Agent Worldwide Services Co Ltd 15 Calendar of Events 40 11F-B No 540, Wen Hsin Road, 50 Section 1 Taichung 40848, Taiwan 51 Green Coffee Report Email: [email protected] Tel: +886 4 2325 1784 Fax: +886 4 2325 2967 52 Company News Web: acw.com.tw 56 People News Tea & Coffee Trade Journal Editorial & Sales Office: 58 Straight from the Cup: The Maltings, 57 Bath Street, Gravesend, Kent DA11 0DF, UK Carlos Ortiz, Global Manager for Volcafe’s Tel: +44 1474 532202 Sustainable Sourcing Strategy Designates a Designates a Fax: +44 1474 532203 tea story coffee story Web: www.teaandcoffee.net April 2018 www. teaandcoffee.net | TEA & COFFEE TRADE JOURNAL 3 COFFEE ECONOMICS The Powerful Role of Intangibles in the Coffee Value Chain recent study published by the World Below is a summary of the Economic Research Intellectual Property Organisation (WPO) draws the attention of the coffee industry Working Group Paper No 39 from the World Intel- Ato the relationship between intangibles, value chain lectual Property Organization (WPO), November governance and farmer economic sustainability. 2017, authored by Luis Fernando Samper, Daniele The paper estimates the annual global coffee trade Giovannucci and Luciana Marques Vieira. The is valued at USD $200 billion with most of the paper discusses coffee’s “third wave” or “experien- economic returns going to brands, retailers and tial” segment as a way of creating value for the supply chain operators. Most of the risk, however, small-scale producer and coffee exporting is borne by 25 million small-scale farm families communities by promoting intangible assets. producing on average less than five hectares of By Michael Maxey coffee in 50 countries around the world. The sustainability of the three billion cups of coffee (based on an average cup size of 100ml coffee’s “third wave” or “experiential” segment and a concentration of seven roasted grams per as a way of creating value for the small-scale serving using the 2016 International Coffee producer and coffee exporting communities by Organization world green coffee consumption promoting intangible assets. figures) consumed daily depends upon the ability The paper is divided into three segments: of these farmers to weather the fluctuations of (1) Description of coffee value chain with an commodity prices, global warming and declining explanation of how consumption and associated rural population. Luis Samper and his co-authors distribution channels at play create a structural of this study provide an argument for focusing on influence in coffee pricing and value chain The sustainabil- ity of the three billion cups of coffee consumed daily depends largely on small- scale farmers and their ability to weather climate change and mar- ket fuctuations. ∆ ∆ Photo courtesy of AnikaPhoto Rice April 2018 www. teaandcoffee.net | TEA & COFFEE TRADE JOURNAL 35 COFFEE ECONOMICS governance; (2) Discussion of the three coffee ICO in 2016 and the SCA in 2017 on coffee market segments or “waves” and the opportunity profitability point to the potential of unsustainable to increase intangible asset value of coffee as new production of high quality Arabica coffee under roles and marketing channels emerge; and (3) a commodity regime. This paper points to those Description of the current and potential role of studies and defines coffee market sector.) intellectual property tools for creating value for small-scale coffee producers and coffee exporting Intangible Assets in Coffee communities in the context of a global value chain. The market has evolved in three “waves” over the last 50 years: The Coffee Value Chain 1. Conventional or First Wave – Ten dominant According to the International Coffee Organization brands accounted for USD $26.7 billion dollars in (ICO), more than 52 percent of world coffee sales in retail outlets in 2015. Nescafé is the world production is consumed in the North America leader in soluble coffee with $12.6 billion in sales and Europe under trade patterns and a value chain in 2015. governance structure that characterizes coffee as a 2. Differentiated or Second Wave – This commodity. This trade regime is characterized by segment is closely associated with the evolution unequal value distribution with less than 10 percent of specialty coffee shops. Within this segment are of the global annual value of coffee being retained chain coffee shops and independent coffeehouses by farmers, exporters and government agencies in (73,000 brand shops versus 38,500 independent exporting countries (USD $19.2 billion retained shops). Two key intangibles in this segment are: in coffee countries versus USD $200 billion value (a) know-how and ability to learn and detect for the global coffee market [Based on estimates consumer trends, and (b) capacity to brand from global market intelligence firm, Euromonitor and communicate different ways to make their International 2017, ICO 2012, ICO 2014 and ICO brands attractive. Specialty coffee is growing as 2016. Approximately 74 percent of global coffee a percentage of total value of retail coffee sales production is exported creating an average annual in coffeehouses versus restaurants. The specialty export value of $20.2 billion based on prices and market is growing and the use of Voluntary volumes between 2010 and 2015]). Sustainability Standards (VSS) that focus on Illustrative of the disparity of share of value economic, social and environmental aspects of received by coffee farmers in relation to the overall coffee production has only provided a modest market, the National Coffee Association (NCA) of price premium. the United States estimated that US sales of coffee 3. Experiential Third Wave Segment – Based and ancillary goods generated over $28 billion in on growing desire of certain consumers to have tax revenues for federal and local governments in an in-depth knowledge of coffee with a focus the US during 2015. The NCA further reported on product-oriented experience rather than an that consumers in the US paid more in taxes for ambiance-oriented experience. Experiential coffee than 25 million coffee farmers worldwide coffeehouses provide a sense of the local by earned in 2015 (this includes taxes on ancillary focusing on single origin coffees of superior goods). The sustainability of this economic model qualities that are served with deep knowledge – is being questioned by the International Coffee specific farm origin, coffee variety, post harvesting Organization, Specialty Coffee Association (SCA) process, altitude at which the coffee was grown, etc ∆ and national coffee institutions. (Studies by the – providing the consumer with detailed knowledge April 2018 www. teaandcoffee.net | TEA & COFFEE TRADE JOURNAL 37 COFFEE ECONOMICS An Indicative Distribution of Value Creation and Distribution in Different Coffee Segments (2014) of the production process. carefully produced and origin identified coffee. Second Wave coffee shops focus more on Education and knowledge bring a craft orientation blends, ambiance, beverage preparation standards to this sector as beverage preparation and coffee and more generic information. Whereas, Third origin form part of an artisanal experience. Wave coffees are roasted according to their specific These three areas – transparency, quality and origins and their flavour profiles are described in knowledge – require significant changes of the detail. Third Wave coffee shops seek to establish role different value chain actors play. The focus direct trade relationships with specific farmers or on origin, knowledge and quality requires a more farm organizations through specialized exporters/ relational value chain focus. The tendency is for importers that can provide specific
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