Category Archives: Market News

New Year, New Content

Happy New Year Café Hound! In 2015 we are going to try to add some new content on the site for the first time in a while.

One element of the new content is going to explore various data sources and statistical techniques regarding aspects of the coffee industry. A quick and dirty preview to this exploration follows below.

Cafe Hound developed a way to download daily price data for Arabica and Robusta coffee taken from daily settling prices (in New York and London respectively) for futures contracts. The unit of measurement is U.S. dollars per pound. We use a website called Quandl.com  for the data. We use R as our data analysis software.

Prices for Arabica and Robusta Coffee

Prices for Arabica and Robusta Coffee

The overall trend line shows coffee becoming more expensive over the last fifteen years on average, although with a significant drop in price occurring after prices peaked in late August 2011.

Price Range: Arabica vs. Robusta

Price Range: Arabica vs. Robusta

Arabica coffee (starting in 2000) is three times more volatile than Robusta coffee in terms of price variance.

Now we will look at combined annual production of Arabica and Robusta coffee. This data was compiled with International Coffee Organization data that was manually inputted into a .csv file http://www.ico.org/new_historical.asp

Coffee Total Production by Year

Coffee Total Production by Year

Coffee Production by Type

Coffee Production by Type

International Coffee Organization data isn’t as precise as it could be but it allows us to understand that the increased global coffee production is being produced in countries that are capable of growing millions of bags Arabica AND Robusta coffee in any given year.

Coffee Production by Type and Country

Coffee Production by Type and Country

Increases in total production over the last few years appear to be driven by an increase in production from countries that are classified as producers of Arabica/Robusta and Robusta/Arabica coffee. In short, this means that countries that are producing both Arabica and Robusta coffee are responsible for driving the growth in global coffee supply. Specifically Brazil, Indonesia, and Vietnam appear to be increasing their share of global coffee production—likely focusing said production on the lower quality Robusta coffee.

That’s enough of a preview for now, but the basic takeaway from this information leads us to the conclusion that we should pay particular attention to the variables  affecting production from Brazil, Vietnam and Indonesia if we want to forecast annual coffee production. However, at this point we haven’t explored the factors driving price enough to fully understand what we should be observing. More questions than answers at this point –meaning MORE analysis and exploration to come! Enjoy the New Year and keep checking in for more here at cafehound.com

 

 

Buzz: Starbucks Unveils High-End Roastery-Tasting Room Concept 

 

Starbucks Reserve.

Using a barrage of adjectives like super-premium, unique, reserve and small-lot, Starbucks has just announced details regarding its new “premium coffee experience” store concept, as well as its flagship “small-batch” Roastery and Tasting Room, coming to Seattle’s Capitol Hill this winter.

The company says the new roastery will be a kind of interactive coffee museum and tasting room designed to showcase the company’s “small-lot” Reserve line of coffees. It will also be the flagship for Starbucks’ new store model, which will occupy some 100 locations in strategic markets throughout the globe over the next five years.

(related: Starbucks Piloting Mobile Trucks at Three U.S. College Campuses)

Adjectives abound, but if one phrase is an elephant in this particular room, it is “Third Wave,” one many around the high-end retail industry, including this blog, has avoided using for years. But it seems particularly apt here, as the company that embodies “Second Wave”-ness rolls out its new high-end, coffee-quality-focused brand.

Starbucks itself describes the new store concept as is a kind of higher rung in “customer experience segmentation,” part of the company’s retail “evolution.” Starbucks CEO Howard Schultz went so far as to describe the new roastery and tasting room as something that will revolutionize all of specialty coffee.

(related: Drama Unfolds with the Opening of Williamsburg’s First Starbucks)

“Everything we have created and learned about coffee has led us to this moment,” he said. “The Starbucks Reserve Roastery and Tasting room is a multi-sensory experience that will transform the future of specialty coffee. We plan to take this super premium experience to cities around the world, elevating the Starbucks experience not only through these stores but across our entire business.”

Here’s more from Starbucks on the new Seattle roastery:

A first-of-its-kind union for Starbucks of coffee theatre and manufacturing, this iconic Seattle destination will allow Starbucks to double its small-batch roasting capacity and grow its Starbucks Reserve® coffee presence from 800 to 1,500 stores worldwide, by the end of FY15. More than two years in development, this unprecedented experience will allow customers to engage with Starbucks passion for coffee in a 15,000 square-foot interactive retail environment devoted to beverage innovation and excellence.

In addition to the approximately 100 new premium stores, Starbucks is also unveiling new smaller-footprint and drive-through “Express” store models, where there will be a focus on quick service and developing Starbucks’ mobile ordering platform. These stores, the company says, will “address the increase in urbanization and decentralization of retail.”

(related: Cupping at Starbucks: The Sound of Silence (and Slurps)

Including its traditional retail stores, its premium stores and its express stores, Starbucks is on track to open some 1,550 outlets globally in 2014, and plans to open 1,600 in 2015, including 300 net new locations in the U.S.

Source: Daily Coffee News, http://dailycoffeenews.com/2014/09/05/starbucks-unveils-new-dont-call-it-third-wave-concept-plans-seattle-roastery-opening/

Buzz: Starbucks Launches Posh Store in Colombia

Yesterday, Starbucks officially arrived in Colombia.

After years of keeping the multinational specialty coffee powerhouse at bay, Juan Valdez will no longer be able to avoid battling Starbucks in its native market of Colombia. Starbucks, after being challenged by Juan Valdez in the US market in the early 2000s, and trying its own marketing foray into now defunct specialty coffee concept (15th Avenue Coffee), has launched its first retail coffee bar in Bogota, Colombia.

Instead of running from what many perceive as its strongest asset, the Starbucks brand, Starbucks is fully featuring its logo outside of this centrally located destination. Perhaps after completing decent market research, Starbucks realized that many in the growing global middle class aspire to an affluent lifestyle characterized by iPhone ownership, Starbucks specialty drinks, Coach products, and other premium brands. One of the most attainable products accessible to any income bracket is a simple cup of coffee and a snack. Juan Valdez, with its elegantly designed retails stores, has long taken advantage of growing wealth and a cultural disposition towards public life –of which the coffee shop culture plays a role. Since 2002, Juan Valdez retail locations have represented a place where folks can meet for business, for spending time with old friends and family, or on a date. It is seen as hip for younger generations while also as respectable and safe by older generations. It is also a source of national pride.

In reality, Colombia has been ripe for the arrival of Starbucks for a decade, but the terms  of that arrival have constantly evolved. This is emphasized in the version of Starbucks launched in Bogota, which is clearly meant to improve upon the Juan Valdez concept. They are aiming higher in terms of premium status, and likely want to differentiate Starbucks from Juan Valdez along those lines. In the short-term, it is likely that Starbucks will focus its Colombia expansion on only the most desirable, high-end, urban locations in order to solidly establish the luxury brand concept. It remains to be seen whether they creep down the price continuum to “Starbucks Express” and kiosk locations in a market that is already saturated with Oma and Juan Valdez competitors. There is nothing economical or middle class feeling about the Parque de la 93 location of the new Starbucks. Although a fairly small, quaint and stylish area, it is essentially a mashup of Georgetown DC and Central Park West NY  (Embassy Row clientele mixed with the wealthiest from the nearby financial district).

The Bogota cafe makes use of locally sourced wood, antique- and hammered-brass light fixtures and sells Colombian-inspired food such as cheese sticks and croissants with a sauce similar to dulce de leche. Source: Starbucks Corp. via Bloomberg

No doubt, there may some Starbucks clients that struggle internally with whether to support their  homegrown hero, Juan Valdez. Although, in the end, it appears that the Federation (Federación Nacional de Cafeteros) ensured local growers would benefit regardless of the new competitor– Starbucks in Colombia claims to source 100% of the coffee used in Colombia from Colombian growers. Starbucks’ unambiguous strategy to rapidly expand in Colombia, Brazil and throughout the region, could negatively impact the bottom line for Procafecol S.A., the parent company of Juan Valdez stores. In fact it could be devastating for an enterprise that claims to be preparing for an IPO and has struggled in its attempts to expand in the US and abroad.

For more pictures and the official press release from Starbucks, click here.

Consumer Habits: Coffee “To-Go” in Europe

22 October 2012: by Bob O’Brien
Global Senior Vice President at The NPD Group

I’m reading “Zero History” by William Gibson.  It is the last book of a trilogy that pretty much predicted YouTube and applications like Layar before there was any reasonable way for either to exist. And, yes, he gave us the term “cyberspace” in 1982.

This book is nominally about marketing…or maybe not, it’s hard to tell.  It was a little unsettling when he had the protagonist (Or maybe she’s not. Again, hard to tell.) stay in the same random Paris hotel where my wife and I mistakenly spent the first night of our honeymoon.  It was more unsettling when I read this:

“…she wondered exactly when coffee had gone walkabout in France.  When she’d first been here, drinking coffee hadn’t been a pedestrian activity.  One either sat to do it, in cafes or restaurants, or stood, at bars or on railway platforms, and drank from sturdy vessels, china or glass, themselves made in France.  Had Starbucks brought the takeaway cup? she wondered. She doubted it.  They hadn’t really had the time.  More likely McDonald’s.”

I love the term “gone walkabout.”  No offence to my fellow NPD bloggers but that little snippet is likely the best writing you’ll come across in this or any NPD blog.

For the past couple of years, I’ve included my own little riff on this in presentations I’ve done at conferences.

In 1997, when I was meeting with folks from our various European offices to brief them on CREST foodservice industry research and how we use it to help the industry make decisions, an Italian guy in the audience raised his hand and said “that chart is wrong”.  We were looking at a chart that showed how consumers in the US consumed coffee.  It showed the dayparts.  It showed the restaurant channels.  It also showed where consumers actually drank their coffee.  That part of the chart showed that about 40% (maybe more, I don’t remember exactly now) was consumed off-premises…on the go.

My colleague said that this couldn’t be correct.  ”Coffee is not for carrying!  Coffee is to be ordered from a bar and consumed at the bar or at a table, with someone.”  We discussed the issues and concluded that the chart was correct and that Americans were ridiculous, which I’ve found is a satisfactory conclusion to conversations for most people in the world.

Further to this conversation, I heard a presentation by a woman named Vanessa Kullman, the founder of Balzac Coffee in Hamburg.  She told the story of how, interviewing people walking by the front door of what was to be her first shop, they universally rejected the idea of buying coffee in a paper cup and taking it away.  She had to buy the cups and tops in the US and warehouse them in Germany because there was no European source.  At the time of her presentation she had over 50 shops.  Gutsy.

But:  in 2000, as the chart below shows, nobody bought coffee to go in the countries we track.  Today, a huge chunk of Northern European consumers buy coffee to go.  Coffee hasn’t just “gone walkabout” in France. It’s everywhere.  And, it’s not just a global brand that did it, Vanessa Kullman and other gutsy business people did it all over the place.

Market News: Crop Fears Drive Kenyan Coffee Prices

Source: Agrimoney.com

The coffee industry has been experiencing incredible upward pressures on ‘C Grade’ prices over the past year.  The specialty coffee market is facing even more acute pressures as demand surges and supply is scarce.  Nairobi’s Coffee Exchange illustrates the scenario playing out in specialty coffee hotspots globally with the recent sale of one 340kg lot of premium AA for $1,011 per 50kg bag (approximately US$9.20/lb) in country! Applying standard export mark-up premiums to such a large purchase, assuming a US specialty coffee buyer was interested, could fetch anywhere between $30-60 a pound for this same coffee by the time it retailed in the United States.

Agrimoney Article Begins:

Could coffee become more valuable than your average base metal?

It is beginning to look that way – at least for top quality arabica beans in Kenya, where dry weather has dashed hopes of a production rise this season.

A lot of premium AA grade coffee sold at the Nairobi Coffee Exchange on Tuesday for $1,011 per 50kg bag, 40% higher than it was achieving last month.

The 340kg lot originated from a central Kenyan growers co-operative, Kiomothai, and was bought by East African specialist C Dormans, which sells to foreign markets besides running a chain of Kenyan coffee shops.

Dornams paid the equivalent of more than $20,000 tonne, making the coffee more than twice as expensive as copper, and approaching the levels that the likes of aluminium, nickel and tin trade at.

‘Outlook robust’

The price reflected the dearth of high quality beans for sale, Daniel Mbithi, a Nairobi Coffee Exchange official, said.

“There is no coffee and the market is grabbing the few available offers,” he told Reuters, the news agency, adding that “the price outlook remains robust going into the coming weeks”.

“Supplies remain tight.”

Production downgrade

Kenya, unlike some other African countries, has suffered poor coffee growing weather with unusually late and heavy rains early in 2010 damaging flowering before dry conditions later in the year damaging yields of fruit which did set.

The Kenya Coffee Board on Monday cut to 40,000 tonnes its forecast for the country’s coffee output in 2010-11, from a previous forecast of 49,000-55,000 tonnes, and leaving the crop on track to fall short of the previous season’s output of 45,000 tonnes.

The influential International Coffee Organisation last week lifted its estimate for world coffee production this season citing better weather in many major African producing nations, with the likes of Ethiopia, Tanzania and Uganda enjoying improved conditions.

In New York, arabica futures for March delivery stood 1.0% higher at 234.60 cents a pound, equivalent to $5,172 a tonne, at 11:45 GMT


Cafe Hounding: Cafe Samba – Bogota, Colombia

Cafe Samba
Bogotá, Colombia
Cra 7 # 58-48
Tel: 348 1697

Unfortunately, I enjoyed Café Samba so much that I’ve barely even took a photograph of the place, though having frequented it on many occasions spanning from 2006 to 2010.

It is difficult to state what the best part of the lounge/cafe/bar located on the Septima is: the coffee products, natural juices, and cocktails are simply the best in that part of Bogotá; the moderately sized food selection is equally impressive in quality. They make the most of what they have when it comes to ambiance of the place (lounge feel even without the chic lounge budget of the Chico and Parque 93 neighborhoods). Service is superior for the price range and the couch located at the front of the shop always seemed to be reserved for me. Also, the clientele is an attractive youngish blend of professionals and students.

My favorite item on their menu would be a fresh blended non-alcoholic natural joice cocktail of Maracuya, Mango and Orange Juice mix. The quality of their coffee is above average for a country that exports the majority of their high quality beans.  They use a high quality vintage Elektra espresso machine and decent coffee roasted in country.  I imagine they could improve their coffee quality if they sourced their coffee from a better roaster.

Musically, this café makes an impression on locals and visitors alike considering the high quality sound system wired from wall-to-wall and mounted in the ceiling. The “DJ” tends to be whatever barman  has a free moment. Luckily, all have terrific taste when it comes to selecting a good playlist.

View of Bogota afternoon from front of Cafe Samba

If you make it to Colombia, Cafe Samba is well worth a stop along the way.

Mushrooms, Aromatica Tea, Fruit Drinks in 2010

– Maher Hound

Angolan Coffee: Cafe Ginga Lobito

AngoNabeiro / Cafe Delta / Cafe Ginga
Estrada do Cacuaco Km 5
PO Box 5727, Luanda
Email: anabeiro@snet.co.ao
Tel: +244 222 840161 / 62

How is the coffee?  How well is it delivered?

My expectations for any coffee that is roasted in a hot and muggy coffee producing country and transported to the United States in luggage are generally pretty low.  Opportunities for the coffee to be damaged by heat, humidity, and poor packaging are far too great. Upon receiving this kilogram of roasted whole bean coffee I politely thanked the gift bearer and placed any hope of this coffee stimulating my palate far from the reach of reality.  A couple of days later, I used my 480-watt Baratza Virtuoso burr grinder to grind up a fine espresso sample of the beans for use in a Gaggia Classic modified machine with a Rancho Silvia wand.  About 23 seconds later, a full Illy cup of syrupy espresso was ready to be slurped.  My initial surprise was that the machine pulled the shot surprisingly well for a first try.

After sipping the shot I was surprised again with the freshness and fruitiness of the drink.  The aroma of the beans was not nearly as satisfying as the drink itself.  The quality of the beans themselves did leave a little to be desired.  The roast was not consistent enough to be considered specialty quality – with some beans barely brown and others burnt to a crisp. Also, some were very small and damaged while others were huge.  Furthermore, I found a piece of metal wire resting in between a few beans when I was pouring the bag into a storage container – reflecting less than ideal quality control standards by the processing company. The packaging for the beans is metalized with an additional layer of multicolored labeling and a valve application for allowing gases to escape after sealing – a high quality packing meant for beans that a company would expect to export and/or sell retail.

Again, the taste was exotic and I was encouraged enough to make an entire pot of drip coffee with the same beans.  The end result was a bit less to my specific liking – I like a brighter coffee with a lighter roast and more mild finish.  Although, on colder days I like a drip coffee with a bit more character in the body than my usual Central American and Colombian varieties.  I’ve begun mixing some beans from Cundinamarca, Colombia with my Angolan coffee that apparently originates on an estate (fazenda) called Lobito (not to be confused with the port city of the same name) and am pleased to drink this blend in both espresso and drip coffee form.

What’s in a name? Ginga’s backstory

The Ginga (Njinga) name is distinctly Angolan, as it refers to a queen dating back to the times of the Ngondo Kingdom in Africa.  The Ngondo Kingdom was originally a tributary kingdom of the Kingdom of Congo – existing before the Portuguese colonizers arrived in 1482.  The Ngondo Kingdom was governed by Ginga’s father, Ngola Kiluange(Kiluanji), when the Portuguese arrived. He fiercely resisted the Portuguese as well as all other foreigners until his eventual decapitation. The Portuguese attributed the name Angola to the lands now known as Angola, not knowing/caring that the Ngola was the name of the ruler, not the lands.

Queen Ginga is a legendary figure in African history and the object of pride in Angola, as she is viewed as one of Angola’s most shrewd diplomats, rulers, military minds and intelligent leaders.  So much is written on her that her entire history appears to be in dispute and includes elements of near-mythology – certainly originating from the 16th century equivalent of smear campaigns and propaganda.  She is rumored to, at times, have adopted cannibalism, a very pious Catholic lifestyle, and – according to Maquis de Sade’s “Philosophy in the Bedroom” – she sacrificed elements of her all male harem of lovers immediately after lovemaking. In other words, there is much mystery and intrigue surrounding her life but she is most certainly a key historical figure in the Angolan national identity.

Throughout her political career, Queen Ginga both resisted and compromised with her Portuguese occupiers.  There seems to have been a relative interdependency between Ginga and Portugal.  She converted to Christianity, adopted tribal customs, and went to war with the crown and neighboring tribes – whatever ensured her survival.  Perhaps this is why the brand name Ginga is appropriate for a coffee company that claims to be 100% Angolan, yet is very much entangled in a past connected to Portugal. Ginga is one of two coffee brands connected to a holding company called AngoNabeiro, the other being Delta Café (a widely known Portuguese brand).  AngoNabeiro is part of a Portuguese conglomerate known as Nabeirogest, or more informally, Grupo Nabeiro.  One of the strongest performing companies in this group is Café Delta.  Café Delta dominates the coffee market in Portugal, is expanding rapidly in Angola and Brazil, and has long been active in segments of the East Asian market for roasted coffee (see Macau).

But, the Portuguese connection dates back to before Angolan Independence when AngoNabeiro was setting up coffee production operations in 1973 right before Portugal experienced a coup d’état in 1974 and, as part of a larger Portuguese agreement, Angola was liberated from colonization through the Alvor Agreement (Acordo do Alvor) in 1975.  Between 1975 and 2002, Angola endured a violent civil war that ravaged the countryside and made sustaining its agricultural economy very unpredictable. As in nearly all civil conflicts, land/property rights were constantly challenged creating terrible instability for coffee farm owners.

During the earlier part of the difficult times in Angola, Rui Patricio oversaw daily operations and ownership of AngoNabeiro inside of Angola.  Production continued, although at very small quantities, until 1983 when the company closed due to lacking technical assistance and know-how.  The physical infrastructure where AngoNabeiro’s main facility was located was loosely protected, unproductively, until 1998 when Delta Café proposed a revitalization of its coffee production in Angola.  By 2000, the Café Ginga brand emerged and by 2002 the civil war in Angola finally ended. Café Ginga and AngoNabeiro has grown steadily since, with an estimated US$1.2 million of annual revenues in 2005 according to Director General Rui Melo. Part of their growth has been thanks to a business structure where the mixed-capital Angolan company, AngoNabeiro benefits from Grupo Nabeiro’s know-how and financial largesse (capital and cash-on-hand). Café Delta is one of many companies housed within Grupo Nabeiro and it has been tremendously successful over the past decade.  As Ginga changes outside perceptions of high quality coffee within the Angolan market their ambitions are set on carving out market share in nearby South Africa and other countries in their immediate vicinity.

Rui Melo interview on history of AngoNabeiro (Portuguese): http://www.winne.com/dninterview.php?intervid=1686

Mr. Rui Melo
Manager / Director General of AngoNabeiro