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Coffee and Tea Reports from the Front Lines

Starbucks Demonstrates Its Commitment to Social

U.S.A - Company Improves Environmental Impact of Its Paper Cups, Exceeds Goals for Sustainable Coffee Purchases, and Increases Purchases of Renewable Energy

In its fifth Corporate Social Responsibility (CSR) Annual Report, Starbucks reports on the progress made to operate its business in a socially responsible way.

Announced at Starbucks Annual Meeting of Shareholders recently, the report, entitled “Beyond the Cup,” continues to demonstrate the Company’s commitment to increased transparency, public disclosure and stakeholder feedback. Throughout the report, Starbucks shows its iconic white cup as a way to offer more candor and disclosure to its readers by using this as a vehicle to address frequently asked questions from a variety of stakeholders.

“We believe that being a good corporate citizen is key to our future growth and success,” stated Jim Donald, Starbucks chief executive officer. “We are proud of the progress we are making and look forward to continuing our efforts to encourage the sustainable production of high quality coffee, reduce our environmental footprint and give back to the communities we serve.”

In addition to providing new information about corporate governance, ethics and sustainable trade, the report highlights several of Starbucks key CSR accomplishments during Fiscal 2005, including an industry first: the recycled cup.

Starbucks’ environmental leadership drove development of the first-ever hot beverage cup to contain post-consumer fiber produced by a process that has received a favorable safety review from the Food and Drug Administration (FDA). Designed in collaboration with Starbucks suppliers, Solo Cup Company, MeadWestvaco and Mississippi River Corporation, the new cups contain 10% post-consumer recycled paper and will begin rolling out to Starbucks U.S. stores during the second quarter of Fiscal 2006.

Tata Tea Gets Ready to Exit from All Plantations

India - After the success of the Kanan Devan model in its southern estates, Tata Tea has decided to exit from all plantation activities. Currently, it is preparing a similar formula for its gardens in the North-East, India’s Financial Daily reports.

In line with this policy, the company will also get out of its Sri Lankan joint venture, Watawala Plantations Ltd., said R.K. Krishna Kumar, vice chairman. (It is a joint venture with Estate Management Pvt. Ltd. Set up in 1992 and spread over 12,442 hectares, 41% of the plantation is tea, 18% rubber, and 8% palm.)

According to Krishna Kumar, Tata Tea is looking at a global canvas to increase its presence. It would be in the beverage sector, but not just restricted to tea. The company is considering setting up a greenfield project in China.

“We have decided to step back from the plantation sector but in a phased manner. We will not sell off our assets. We feel that it should go to the workers and their co-operatives but we will remain attached to it,” he told reporters.

In this context, he said the company was preparing a Kanan Devan-type model for the Assam-based tea gardens. Tata Tea will hold less than 20% stake in that company.

“The model will remain the same, but we will develop on it by adding some more facility and variety. We would like to complete the whole process by the end of the next fiscal.”

According to him, the strategy of exiting the plantation business has also paid off as the company’s bottomline has improved, as reflected in the first nine months of 2005-06.

On foreign acquisitions, Krishna Kumar said within the next six months the company would take a final decision on a China greenfield venture, but categorically stated that it would not be plantation activity.

Tea Production Declines

Nairobi - Tea production has declined by almost 50% due to drought. Production for January was 17.9 million kgs compared to 34.1 million kgs recorded in the same month last year. This represents a 47% drop.

The highest drop in production was recorded in tea growing regions west of the Rift Valley where production fell by 62% (12.5 million kilograms), according to the latest report by the Kenya Tea Board.

However, the east of the Rift Valley recorded a relatively lower decline of 26% (3.6 million kilograms).

The board’s acting managing director, Phrasia Mwangi, said tea estates west of the Rift Valley were the most affected by the drought, with production going down by 61%.

However, less impact was felt among the small-scale growers, where a 38% drop was recorded, she added.

“The effect of drought in tea growing regions has resulted in withering of vulnerable tea bushes, temporary closure of tea factories and under-utilization of the factories’ processing capacity,” said Mwangi.

With hot and dry weather expected to persist as predicted by meteorologists, she said that tea output is expected to drop further.

The board projects a 16% drop in tea production this year, from 328 million-kgs recorded last year to 276 million-kgs. “The impact is reminiscent of the 1997 and 2000 drought, when tea production declined by 14% and 15% respectively,” she said.

Last month, 29.7 million kgs valued at Sh3.7 billion were exported compared to 27.2 million kgs worth Sh3.4 billion that were sold during the same month last year, she said. However, she added that the export unit price remained at Sh125 a kilogram.

“Due to the drop in production that was registered in January, the export volume for February is expected to drop, while the prices are expected to increase marginally,” she said.

New Coffee Marketing Rules to Be Gazetted

Nairobi - The government is set to post new rules and regulations to govern the sale of coffee from the farm in Nairobi, agriculture minister, Kipruto arap Kirwa said to The East African Standard.

He said direct coffee sales would be allowed to go along the traditional central auction system at the Nairobi Coffee Exchange.

“More marketing agents are expected to be licensed to encourage competition in the marketing of coffee and enhance efficiency,” the minister said.

Kirwa was speaking during the launch of the Coffee Board of Kenya (CBK) website at the Kenya Agricultural Research Institute headquarters, in Nairobi. He said the new move to market coffee from the farm would boost farmers’ income and improve production.

Kirwa also announced that the government was working out a mechanism to wind up the Coffee Farmers’ Bank. The bank, with an estimated Sh700 million that was deducted from farmers 10 years ago, has never taken off after the Central Bank of Kenya declined to issue it with a license.

Kirwa said the government was working out modalities of paying another Sh641 million that CBK owed farmers in delayed remittance of coffee sales carried out in 2001. CBK predicts the prevailing drought is likely to slash the domestic harvest in 2005/06 (October to September) by between 15-20% from an earlier estimate of 65,000 tons.

The drought has badly affected the northern and eastern parts of Kenya, and it is slowly being felt in central Kenya, where 80% of their coffee is grow.

Though farmers expect a little wilting on their bushes in the dry months of January and February, they say they are alarmed by the number of dry leaves falling to the ground as bushes shed them to survive the lack of water. They predict a major crop failure, if the rain, which normally blesses the green hills of Kenya’s coffee country, does not come in the March-May wet season.

“We can see moisture stress on the trees. If the rain doesn’t come, that will be a disaster because it means what we are having now on the farm will be lost,” said Bernard Gichovi, the coffee board’s manager for the Mount Kenya west region, which covers key growing areas of Nyeri, Kirinyaga and Embu.

Coffee trees, which are more resistant to drought because they have deep roots, are struggling and many farmers have decided not to till the farms to avoid exposing the little water underneath the soil to evaporation

Farmers said if the rains come in March, they expect to harvest a bumper crop because it would aid the stressed bushes to flower faster and more robustly. About 65% of Kenya’s coffee farming is rain-fed and grown by small-holder farmers like Ngare on tiny farms averaging between a half acre and one acre.

“The problem is irrigation is almost stopped everywhere because there is no water. The rivers are dry,” Delbar Etienne, the chairman of Kenya Coffee Growers & Employers Association and director of Socfinaf coffee producers and marketers reported.

Zakaria Gakunju, a prominent coffee grower, appealed to the government to provide coffee farmers with financial aid. “Farmers need financial support so that they can revive their coffee because most of it is gone,” he told Reuters.



Tea & Coffee - April/May, 2006
ASIC 2014

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