The Role of the Private Sector in Delivering STI to Rural Africathe Case of Specialty Coffee World B

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The Role of the Private Sector in Delivering STI
to Rural Africathe Case of Specialty
CoffeeWorld Bank, 14 February 2007
Thomas L Dixon Country Director TechnoServe
Tanzania www.technoserve.org
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START WITH THE MARKET COFFEE CONSUMPTION
GROWING 1.6 p.a., BUT FARMERS FACING PRICE
VOLATILITY DUE TO UNEVEN PRODUCTION
Green coffee millions of 60 kg bags
Production
Consumption
Source ICO World Bank 150 Years of Coffee,
Marcellino Martins and E. Johnston
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PRODUCTION SURPLUSES PUSHED PRICES DOWN,
JEOPARDIZING THE FUTURE OF FARMERS AND CAUSING
THEM TO THINK ABOUT CHANGE.
Real price of green coffee ICO indicator price,
U.S. per lb., constant 2002 dollars
Real price index created by combining 1900-91
average U.S. import prices from 150 Years of
Coffee and 1992-2002 ICO indicator prices all
prices in 2002 dollars adjusted using World Bank
Global Manufactured Unit Value index Source
ICO World Bank 150 Years of Coffee, Marcellino
Martins and E. Johnston
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AN ATTRACTIVE NICHE MARKET SEGMENT IS HIGH-END
SPECIALTY COFFEE
Specialty coffee consumption
World coffee consumption
100 6 million bags
100 108 million bags
Other certified
3
4
Fair Trade certified
Gourmet/ High Quality
93
Commercial Grade
1 bag 60 kgs Source ICO Daniele Giovannucci
Team estimate
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ROASTERS SEEK CONSISTENT SUPPLIES OF QUALITY
SPECIALTY COFFEE TO MEET THE GROWING DEMAND
Demand may grow by 2.6 million bags by 2007
However this demand growth will require
consistent supplies of quality specialty coffee
Specialty consumption (million of 60 kg bags)

• 2.6 million bags would bring 100 million in
  additional revenue annually to coffee producers
  assuming an average premium of 30 cents/lb

8.6
6
3.7
2.3
2007E
2002
1997
1992
Growth estimates for the specialty market
range from 5 to 10 annually Source SCAA Team
estimate
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Nearly all smallholder coffee was processed at
home, causing quality variations and limited
ability to negotiate good prices
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The KILICAFE Strategy
Central Pulpery coffee fetches prices two times
higher than home-processed coffee
Home processed v. Central Pulpery (CPU) value
Smallholder farmer groups selling via direct
export received US1.65/kg parchment for their
central pulpery coffee
US /kg parchment (2004/05)
1.65
0.10
Average farm-gate price in Tanzania
0.08
1.47
Access to central pulperies results in price
premiums of over 70
0.85
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Introduction.
KILICAFE was founded with assistance of
Technoserve in 2001 A Farmer Association that
provides services to Farmer Groups, assisting
them to market their coffee to the national
coffee auction and directly to overseas buyers

• VALUE CREATION
• Farmer Association
• Proper corporate governance
• Professional management
• Scale (national level)
• Infrastructure
• Market knowledge
• Farmer Business groups
• 93 smallholder farmer groups
• Scale (village level)
• Centralized collection and processing
• 8,000 smallholder farmers
• Farming
• Ownership of above structures

STRUCTURE
Farmer group
Farmer group
Farmer group
Smallholder farmers
Smallholder farmers
Smallholder farmers
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TECHNOSERVES INTERVENTION HAS CREATED
APPROXIMATELY 1MN IN ANNUAL INCREMENTAL REVENUES
AKSCG Parchment Sales 2004 U.S. /kilo
Incremental revenues due to TechnoServe
intervention
1 million
Average regional price
2004 sales Millions of kilos
Farmgate Source TechnoServe analysis
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DIRECT EXPORT SALES GAINED IN SHARE AT KILICAFE
SINCE LEGALIZATION IN 2003, HELPED BY CPU ROLLOUT

• Fast growth trend in production quality and
  volumes
• More members assisted to install new cpus
  annually
• Fair Trade certified as producer.
• Kilicafe has Own company standards to ensure
  Best Practices.

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New Approaches to Coffee Sustainability
KILICAFE is working with key partners to launch
more central pulperies and develop new approaches
to coffee sustainability

• New initiatives include
• Central Pulpery Development Department
• KILICAFE Company Standards
• Farmer education using radio media
• Price risk management tools

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KILICAFE is a success story, bringing technology,
innovation, and market links to enable remote
smallholders to prosper
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QUOTES FROM LOCAL STAKEHOLDERS
I used to think I was unlucky in coffee, but now
I realize there is no such thing as to be lucky
or unlucky in business. Rather it is a matter of
producing what customers need, high quality
products.
The Tanzanian coffee industry is on a slow but
sure road to recovery, as it takes time to fully
convert farmers from old habits and practices.
We thank TechnoServe for the critical role they
have played in this achievement. TechnoServe has
the solution for Tanzanias coffee crisis
David Mwakapola, KILICAFE coffee farmer
The Honorable Basil Mramba, Minister of Finance
Tanzania
My income has quadrupled since joining KILICAFE,
which has allowed me to renovate my house and
connect to electricity and fresh water
Emmeline Swai, KILICAFE coffee farmer
Tanzania Kilimanjaro is the fruit of our ongoing
partnership with TechnoServe and thousands of
small-holder growers. This special offering
represents the best in Tanzania coffee, as well
as hope for a brighter future for these farmers
and their families.
The pulperies have added huge value. The
improved quality has given Starbucks the
confidence to buy forward versus spot. Weve
increased our sales twofold in the past two years
Doug Welsh, Peets Vice President of Coffee
Chris Jordan, Starbucks Director of Quality
Source TechnoServe interviews (2004-05)