Direct marketing of coffee fails to attract dealers

Direct marketing of coffee has failed to take off with less than five per cent of the crop sold using this method. The system, which was introduced in 2004 as part of efforts to liberalise the sector, has not attracted a significant number of  dealers. PHOTO | FILE  

In Summary

• The initiative by the  Ministry of Co-operative was intended to overcome challenges of low volumes and expensive marketing logistics, which had hindered exploitation of this window by coffee farmers.
• Experts partly attribute the failure of direct marketing to unpredictable production levels of coffee in Kenya, expensive market logistics and attendant risks of shipping.
• Most of the coffee, about 95 per cent, is sold through the Nairobi Coffee Exchange which some claim is under the grip of multinationals who dominated the coffee business and control prices through the value chain.

By MWANIKI WAHOME
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Direct marketing of coffee has failed to take off with less than five per cent of the crop sold using this method.

This comes as Kenya seeks to expand its market for local coffee through use of mark of origin and branding.

The system, which was introduced in 2004 as part of efforts to liberalise the sector, has not attracted a significant number of  dealers.

The government’s attempt to use the system to boost earnings of  small-scale farmers through the Kenya Coffee Co-operative Exporters has also failed. Most of the produce is now being sold through the Nairobi Coffee Exchange.

The initiative by the  Ministry of Co-operative was intended to overcome challenges of low volumes and expensive marketing logistics, which had hindered exploitation of this window by coffee farmers.

“The Nairobi Coffee Exchange remains the most trusted market price discovery method. We are seeking Sh25 million to upgrade the system, which has been used over many years,” said Nairobi Coffee Exchange chief executive, Mr Daniel Mbithi.

TRADITIONAL MARKETS

Experts partly attribute the failure of direct marketing to unpredictable production levels of coffee in Kenya, expensive market logistics and attendant risks of shipping.

The country is eyeing strategic markets in China, North and South Korea, Mongolia and Taiwan as well as the emerging markets in Malaysia, Indonesia, Philippines, Singapore, Thailand and Brunei to expand its global reach.

Other countries being targeted are United Arab Emirates, Jordan, Kuwait, Qatar, Saudi Arabia and Oman.

Kenya’s traditional markets include Germany that takes up 20 per cent of exported coffee, Belgium 18 per cent, America 14.6 per cent, Sweden 8.3 per cent, Finland 4.8 per cent and Norway 2.5 per cent among others that take about 1 per cent each.

“We want to expand the international market for our coffee to ensure farmers get the best return from their produce. Apart from increasing the local consumption we also want more international buyers and we are doing this by having a mark of origin and branding,” said the interim head of Agriculture, Fisheries and Food Authority, Mr Alfred Busolo when mark of origin was launched early in the year.

Most of the coffee, about 95 per cent, is sold through the Nairobi Coffee Exchange which some claim is under the grip of multinationals who dominated the coffee business and control prices through the value chain.

Only less than 5 per cent of the coffee is sold through direct marketing.

Coffee societies currently appoint millers and marketers who enter into contracts to take up the beans after wet processing, from which point these firms take control of the vast value chain.

Nairobi Coffee Exchange auction determines prices through competitive bidding on the floor but a section of players say some dealers collude to set prices.