the coffee sector presentation - kenya

8/9/2019 The Coffee Sector Presentation - Kenya

1/28

1


2/28

2

1.0 INTRODUCTION Coffee introduced in Kenya 1893

Initially grown by European settlers

Indigenous Africa involvement after reforms

Major coffee expansion around independence period

1952 = 3,000 acres 11,864 farmers

Currently 170,000ha 700,000 growers

Smallholder 2/3 total area

Estates 1/3 total area


3/28

3

2.0 Climate, Soils and Production2.1 Climate and Soils Kenya has a favorable climate

Temperature extremes of less 19OC

Well distributed rainfall of over 1000mm

Presence of volcanic soils on high lands.

- attributed to uniqueness of Kenya Coffee.

Coffee grown on the highlands 1400 2000 meters abovesea level

Unique Taste and Aroma is attributed to the volcanic soil(acidic) altitude and climatic conditions.


4/28

4

2.2 Production and Production Trends

Kenya produces high valued mild arabicas Varieties:-

SL 28, SL 34 Medium to high altitudes K7 Lower altitudes Ruiru 11 For all altitudes

Annual coffee production fluctuation a consequence of :- Price weather

Long terms trends influenced by profitability

Production at independence - 43778Mt (1963 Increased to 128,926mt in 1987/88 Today it stands at 48,431Mt (2003/04), an all time low


5/28

5

Decline consequence of global coffee prices crisis Mild recovery likely in near future due to slight improvement

in coffee prices.

Future production (2005/06) pegged at 60,000Mt or onemillion bags.

CONTD.


6/28

6

3.0 Production Trend of Green BeansCoffee(1997/98 2003/04)

Production trend of Green beans coffee(1997/98 - 200

53.4

68.1

100.7

51.7 51.855.4

48.4

0

20

40

60

80

10 0

12 0

1997/98 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/20

Year

Production(MT)(000)


7/28

7

3.1 National yields (Kg/ha) TrendsNational yields(Kg/ha) Tren

32 9

40 0

59 2

30 4 30 532 6

0

10 0

20 0

30 0

40 0

50 0

60 0

70 0

1 997 /98 1 99 8/99 19 99/20 00 2 000 /20 01 20 01/20 02 200 2/2 003

Year

Yields(Kg/ha)


8/28

8

4.0 Exports Value (million USD) Trends:1997/98 2003/04Exports value(million USD) Trends

211

157 161

79 77

50

89

0

50

100

150

200

250

1997/98 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004

Year

ValueUS

In 1997/98 average producer price was USD 3.97 per kg clean coffeeIn 2003/04 the average producer price dropped to USD 0.54/kgccCurrently due to price recovery averages were USD 2.35/kg in mid

January 2005.


9/28

9

Farming CommunityLarge and small scale farming systems

Over 700,000 smallholders grow coffee under 569 co-operativessocieties.

Plantation sector comprises of 3,270 estates ranging from 2ha to

over 20ha

Coffee farming supports over five million Kenyans both directlyand indirectly as a result of forward and backward linkages.

Currently 170,000 hectares estimated to be under coffee with two-

thirds under the co-operative sector.


10/28

10

Distribution of Production Per SectorDistribution of production per sec

21.3

28.7

38.5

26.923 21.4

18.5

32.1

39.4

62.2

24.828.8

3429.9

0

10

20

30

40

50

60

70

1997/98 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004

Year

MTCC

('000')

Estates Co-operatives


11/28

11

Contd.Comparison of yields/ha for Estates versus co-operatives

537

683

917

641

547510

438

262

308

486

194225 266 234

0

100

200300

400

500

600

700

800

900

1000

1997/98 1998/99 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004

Year

Yields/Ha(Kg

EstatesCo-operatives

Estates sector better managed than the cooperative sector

- Estates yields always much higher.


12/28

12

Coffee Farming Value Chain AnalysisValue addition activities Appropriate land preparation

Fertilizer application

Pests and diseases control

Irrigation

Primary processing

Secondary processing

Facilities maintenance


13/28

13

Smaller holder Farms:-Value Chain AnalysisIllustration

Yield of 400kg/ha of clean coffee (equivalent of 2870 kg/ha cherry) at

a cost of $531.31/ha ($ 0.181kg of cherry).

spraying

33%

Land preparation

8%

Fertilizer

application

13%

Harvesting

19%

Plant

maintenance

27%

Kenya coffee production is labour intensive.


14/28

14

Large Estate Farms: Value Chainanalysis

Land preparation

7%

Fertilizer

12%

Harvesting

20%

Administration

14%

Maintenance

repairs

7%

Plant maintenance

21%

spraying

19%

Plant maintenance constitutes the single largest value added activity

for large plantations

- Pruning alone takes 54.9%


15/28

15

Coffee Processing(i)Primary processing Over 95% of Kenya coffee is wet processed.

The wet method involves the following stages

Sorting/selection

Pulping

Grading

Soaking Final wash

Skin drying

Final drying

Conditioning


16/28

16

Contd. Value chain analysis for primary processing (cooperative): -

Processing

67%

Transport

15%

Packaging

5%

Maintenance

13%


17/28

17

Value chain analysis for primary

processing(estates)

Processing

72%

Transport

10%

Packaging

4%

Maintenance

14%

-Estates spend 2.5 times more on every activity when compared with

the cooperative sector,hence the higher capacity


18/28

18

Secondary Processing (Milling) Installed milling capacity 210,000mt against national

production 48,000mt clean coffee

Coffee milled and graded into seven grades (AA, AB, PB,E, C, T, TT)

Milling and grading costs average US$ 63/mt

Overall export averages us$85.00/mt

Capacity utilization 22%


19/28

19

Capacity utilization A total of 2680 pulping stations exist in the country

Co-operatives own 1000 units

Each unit capacity averaged at 140 mt/year but

annual throughput is estimated at 29mt/factory Therefore capacity utilization is at 21%

Estates capacity utilization 44%


20/28

20

Tertiary Processing and Marketing Largest proportion of value accrues to roasters

Efforts to add value being done by way of:- Roasting domestically for local consumption Roasting for export

Export green beans for roasting at consumptionpoint.

There are 18 licensed roasters in Kenya today

Problem of gaining shelf space in supermarkets anissue

Stiff competition likely from established brands


21/28

21

Kenya Coffee Exports Destinations Kenya coffee classified with Colombian milds

Is facing stiff competition from similar coffees of otherorigins

Destinations

Germany

Belgium/Lux

Austria

Switzerland

Nordic Canada

U.S.A

Japan


22/28

22

Fig a: Kenya Exports by cou

German

35%

Swede

8%

Belgium/Lu7%

Netherland

7%

UK

7%

Finlan

4%

Saudi Arabi

4%

US A

7%

Franc

2%

Italy

2%

Other

17%

Kenya Exports by country


23/28


24/28

24

Roasting Green Beans at the place ofconsumption

Fig C: Specialty Coffee Value chai

Retailer

33%

Roaster

54%

Importer

2%

Growers

7%

Exporter

1%

Co-op.

2%

Marketing A./Millers

Levies

1%


25/28

25

U.S.A MARKET Americas (USA &Brazil) highest consumers of coffee.

Fig d: Global Coffee C onsum ptio

Centra l & Eas t

Europe

8%

As ia & Pac i

14%

Afr ica & Mid

Eas t

7%

Amer ica

3 8%

W este rn Euro

33%


26/28

26

THE SPECIALTY/GOURMET MARKETSEGMENT Fastest growing market segment in U.S.A

U.S market countries to dominate specialty sales, courtesy ofS.C.A.A efforts.

International Trade Center segments the specialty coffees into

three categories:- Exemplary quality High quality/premium brands Mainstream qualities

SCAA efforts to establish standards for certification of coffeeacknowledged.


27/28

27

POLICY SHIFT Coffee Board of Kenya regulatory role while marketing

function is privatised.

Inclusion of direct sales parallel to central auction

Operationalization of coffee development fund Government allocation of Ksh. 500 million in current

budget

Encouragement of private investment in value addition

Facilitation of joint ventures or partnerships with roastersand buyers


28/28

28

CONCLUSION Introduction of second window (Direct Sales) a good

opportunity for investors

Traceability of their product.

Relationship marketing (joint ventures/partnerships)

with producers Branding (Geographical indications Gis/Appellations)

- E N D -

the coffee sector presentation - kenya

Documents