Starbucks deal to cushion $-billion coffee decline
Published:Sunday | May 30, 2010 | 12:00 AM
Avia Collinder, Business Reporter
A lucrative marketing deal with elite United States-based coffee house Starbucks could serve as a cushion to the blow Jamaica's high-end-earning coffee industry is expected to suffer from a US$12 million, or more than J$1 billion, plunge in sales, resulting from the extended drought conditions of the past several months.
The Coffee Industry Board (CIB), the government-run agency that regulates the local industry and manages the world-leading Jamaica Blue Mountain and Jamaica High Mountain Supreme brands,
The CIB's admittedly conservative estimate of the value of processed coffee coming off this year's crop is US$23.7-US$25 million, a major decline on the US$35.7 million earned from coffee exports last year.
Director general of the CIB, Christopher Gentles, has not disclosed the value or other details of the suspected multi-million US dollar trademark agreement with Starbucks Corporation, but said the deal was part of the multinational chain's planned roll-out of an "exotic single-origin coffee" programme at its more than 16,000 outlets in 50 countries worldwide.
On May 18, the listed Starbucks announced that it would be seeking to accelerate growth in its consumer products business with the introduction of new brands and products to more markets around the world. With 16,706 stores around the globe at December last year, the company is said to be the premier roaster and retailer of speciality coffee internationally, and grew net consolidated revenue by nine per cent in the quarter ending March 28, 2010.
Starbucks, according to the CIB, brews delicately balanced Arabica coffees, such as Jamaica Blue Mountain,
"Jamaica Blue Mountain coffee enjoys the highest premium price and the highest rave factor among coffee connoisseurs," Gentles said.
Last year, the weighted average farm-gate price paid for Blue Mountain cherry coffee was $124,986.69 per tonne, with non-Blue Mountain coffee fetching $73,560.15 per tonne.
The Starbucks agreement follows producer Mavis Bank Coffee Factory's recent contracts with the American Barnie's coffee chain. At the same time, the coffee board said it is engaging traditional and non-traditional market experts in Europe to create a paradigm shift in the marketing programme, particularly in the area of consumer marketing in Europe.
The coffee board is said to be pushing an agenda of diversifying the markets for Jamaican coffee, especially in premium coffee-consuming Europe.
In pursuit of this strategy, the CIB has also signed a new trademark agreement with Tchibo's, said to be one of the largest coffee shops and café chains in Germany, and has other agreements with companies in Russia.
This strengthening and diversifi-cation of markets for Jamaican coffee is at the top of the CIB's agenda for 2010 and beyond, its director general told Sunday Business.
The strongest market for Jamaican coffee is Japan, which has purchased an average of 85 per cent of Jamaican coffee for the last 10 years.
WEAKNESSES
"This recession has heightened the weaknesses of an over-dependence on a single market," said Gentles.
He added that the CIB, licensed coffee dealers organised as the Jamaica Coffee Exporters' Association, and the Ministry of Agriculture have been engaged in a series of coordinated measures designed to alleviate the effects of the recession and push market diversification.
"The resulting strategic marketing committee has identified the United States, Canada, and Europe as the main targets of our efforts to diversify our coffee market over the next five years, and is currently looking at developing the profile of the possible strategic marketing partners, who have the marketing capability to undertake significant consumer marketing within the United States, Canada and Europe," Gentles said.
The committee, he added, had identified critical brand charac-teristics, which will be the common thread running through marketing campaigns in these major locations.
"The CIB is determined to work with the licensed coffee dealers to diversify the sector such that no more than 40 per cent of our sales come from a single country after 10 years."
While pressing ahead to open up new markets, the CIB must also halt the production decline. For 2010, the High Mountain region posted a production of 58,215 field boxes of cherry coffee, and the Blue Mountain reaped 241,819.75 field boxes up to the end of March 2010.
The CIB estimates that another 25,000 boxes will be produced by the end of July, when the crop year ends.
The drought conditions are expected to return earnings to just shy of the 2008 levels, when US$26.5 million worth of coffee was exported. In 2009, better weather conditions permitted the volume of coffee berries delivered to processing plants during the 2008-09 crop year, which runs from August to July, to increase by 37.9 per cent to 12,456 tonnes, compared with the 2007-2008 year.
The 2007-2008 year saw a 40.2 per cent decline in production, attributed to Hurricane Dean, which caused some $855 million in damage to the coffee industry.
In 2009, deliveries of Blue Mountain cherry coffee increased by 28.7 per cent to 10,042 tonnes, while non-Blue Mountain coffee production was up 95.8 per cent, to 2, 414 tonnes.
avia.collinder@gleanerjm.com