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Tea & Coffee's Business Classifieds!
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Coffee Tea Business Mag

Tea & Coffee's Business Classifieds!

Tropical Depression:
Brazil at the Worst of Times (continued)
Guerrilla Marketing
Four million dollars isn’t much in the face of Colombia’s annual marketing budget of an estimated $30 million. Joao B. A. Staut, of P&A International Marketing, which was a consultant to Brazil’s 18-month campaign, says that the funds were enough to establish the foundations for more aggressive marketing in years to come, to start to reposition Brazilian coffees as a quality product and to participate at some trade shows. The theme was Cafés do Brasil, “One Country, Many Flavors.” To prove it, they set up a cupping room for the biggest buyers at the trade show of the Specialty Coffee Association of America (SCAA). “They knew Brazil had good coffees, but they needed to know where the coffees came from,” Staut says. “We offered them coffee from 14 different areas of Brazil.”

Staut has noticed a budding phenomenon in Brazil. For the first time, a few co-ops are branding their coffees for marketing to consumers who want micro-regional coffees. The strategy reflects a new awareness among not only producers but consumers as well. In Brazil, if not yet the world, coffee drinkers are realizing that “Cafe Santos” has no meaning in a country so vast and full of coffees. Staut admits that the short-term scenario is not pretty, but in the long term, Brazil will come out ahead. “The crisis is finite,” Staut says. “It will pass, and Brazilian coffee will remain and will be better than ever.”

One coffee destined to survive the crisis is that of Fazenda Vista Alegre, which is almost fully devoted to exporting its high-quality products. The farm was established by a man with money who had the objective of producing the best quality coffee at any price. FVA is located near Belo Horizonte, the capital of Minas Gerais, an area of very bland soil, not much rain and no other coffee farms. The rather neutral conditions allow farm director Alexandre Gonzaga to use a drip irrigation system to fine-tune the nutrients that go to the coffee. The lack of rain lets him hold off on the harvest until a good number of beans have actually dried on the branch. In fact, Gonzaga was one of few coffee growers who were praying for no rain while the plants were blossoming. He wanted to keep tight control over his flowering.

FVA is also one of few farms that ignores the price of coffee on the New York market and simply sets a price that will cover operations. Every once in a while, FVA’s excellent coffees, most recently selling for more than four times the price of commodity coffees, sells for less than the coffees of far lower quality. Gonzaga explains that FVA coffee carries a premium price because it is far more expensive to produce than coffees that depend on naturally good soil and well timed rains. The FVA infrastructure is technologically sophisticated, which in turn demands greater professionalism at the management level and special training and knowledge at the worker level, all of which demand ongoing investment.

Gonzaga predicts that the crisis will weed out a lot of the less-than-professional newcomers who thought coffee and profit were synonymous. “It’s too easy to get into coffee in Brazil,” Gonzaga says. “The land is cheap, seedlings are cheap. The climate is agreeable. But planting coffee is like having children. The planting is easy and exciting, but then it gets expensive.”

Gonzaga says that residual fertilizer in the soil will lead to a reasonably big crop next year despite lack of care by many growers. That will keep the price down and will finish off a lot of farms. Then production will drop, and those who can afford to maintain quality until then will do well.

FVA has an interesting problem. Sometimes the quality of its natural dry or shadow dry coffees becomes too good. For the sake of consistency, they have to keep that exceptional coffee off the market or blend it down to the quality of previous years.

The Place Where It Always Rains
A region far more naturally amendable to the planting of coffee lies to the south of Minas Gerais and for that reason is called Sul de Minas. Here you find the mountain range called Serra da Mantiqueira - an Indian word meaning “the place where it always rains.”

Near the border with Sao Paulo state, in Sao Sebastiao do Paraiso, the Cooparaiso co-op gathers coffee from over 2,800 growers in the Sul de Minas region. This is the second-largest coffee co-op in Brazil, yet 85% of its members grow their coffee on less than 25 hectares. “It’s the small farms that produce the best coffee,” says Marllon Braga Petrus, manager of the coffee department at Cooparaiso. ”They pay attention to what they’re doing and take the most care of their plantation.”

Paying attention and taking care seems to be working. Among Cooparaiso’s thousands of customers around the world are two especially demanding clients. One is the Congress of Brazil. The other is the Vatican.

Coffees in Sul de Minas do indeed demand more care. The terrain is too hilly for mechanized harvesting, and even if it weren’t, the weather wouldn’t allow a mechanized mass-picking of beans in various stages of maturity. The region tends to get plenty of rain, but sometimes it’s too much or at the wrong time. In the spring, each rain brings a separate flowering, so in the fall, the beans ripen at different times. And once in a while - like for the last two years - the rains are too late or too little, and the harvest takes a nosedive.

On the other hand, when the rains are right and the frost doesn’t hit, Sul de Minas is a perfect place to grow coffee. The altitude averages out to a bracing 3,000 feet, and the temperature tends to bounces around the range of 71-75°F. The soil is good and needs little correction. In other words, it’s a nice place to grow coffee, albeit a bit tricky. To help with the tricky part, Cooparaiso reinforces its members with a crew of agronomists and technicians. The effectiveness is clear in production statistics. In the year 2000, the average coffee grower in the Cooparaiso region produced 15 sacks per hectare. The average co-op member products 20.5. The average co-op member who used the technical services produced 28 sacks.

Fears of a 50% drop
But that was then and this is now. Even with the best efforts of agronomists and technicians, the harvest in Sul de Minas was generally looked to be down at least 30%, and with the crop still coming in early September, Cooparaiso managers were whispering their fears of a 50% drop - a disaster badly balanced by a worldwide inventory that was suppressing prices.

Not too far away, in Guaxupe MG, the Cooxupe co-op is doing its best to keep its members above water. With over 9,000 members, this is the largest coffee co-op in Brazil, undoubtedly among the largest in the world. The coffee comes in on truck trailers, ox carts, the roof racks of VW bugs. But this year, as the farmers delivered the product of their sweat and expense, they were disappointed, if not deeply depressed, when they saw the computer monitors that report the prices on the New York market. In corrected dollars, prices had not been lower since 1929.

“We need quality to survive,” says Joaquim Libanio Ferreira Leite, export director. “To sustain quality, we need to sustain the grower. We need to be careful with every detail. But this costs money, and with prices so low, money is short.”

Cooxupé brings in coffee from not only the Cerrado and Sul de Minas regions but from the Mogiana region of Sao Paulo state as well. Its warehouse is a dark and labyrinthine canyon of bags stacked high, each stack identified by source. The co-op’s main warehouse can hold over half a million bags. Its local warehouses hold that much more, a total of 1,175,000 bags at a given moment. In a given year, 2.5 million bags come into the co-op’s fold, and in a good year that many go out.

These coffees supply much of the internal market and no small part of the world’s specialty market. The best of the Cooxupé coffees go to Germany, Italy, Belgium, Finland and Japan. Much of it ends up in espresso roasts. Much of the coffee retains its regional identity at least until it reaches a roaster.

In fact, Cooxupe has attained such technical excellence that it can receive coffee from a given producer and classify it with such precision that if the producer wants it back later, a coffee of identical quality can be returned. This precision pleases not only the growers, who know they can trust their co-op, but customers as well, who can count on getting what they’ve paid for.

The story is no more optimistic at the Cooperativa dos Cafecultores da Zona de Varginha, where the lack of rain, last year and this, has been especially acute. The Varginha area has historically been a big producer, thanks to its fertile soil and moderate altitude. Its coffees tend to carry a pleasant citric acidity that is gently balanced with a natural sweetness made possible by dry weather. The drier the weather, the longer the bean can stay on the tree, absorbing sweetness as it passes peak ripeness and begins to dry.

But when dry comes to drought, quantities and quality suffer. The region sustained its quality last year, but this year, it undeniably declined. The best of the Varginha coffees are earmarked for export; the rest are destined for the internal market.

Yes, School Lunches
In an effort to increase the internal market, the Varginha co-op has been working with the Brazilian Coffee Industries Association (ABIC) to provide coffee for school lunches. The immediate program benefits 17 schools in the Varginha region. If it is successful, children all over Minas Gerais could be sitting back with a cup of joe after lunch. Someday, ideally, coffee will be part of the daily diet of 50 million new consumers.

Yes, school lunches. According to a study conducted by Dr. Darcy Lima, a Brazilian professor at Vanderbilt University and the Federal University of Rio de Janeiro, coffee has proven beneficial to the learning ability and attention span of children. Dr. Lima also says that certain compounds in coffee can combat alcohol addiction. ABIC and the Varginha co-op therefore hope that by providing coffee to school children, they will increase national consumption, encourage the preference for coffee as a beverage, and promote better learning among children.

Northwest of Varginha, in the heart of the Sul de Minas region, two producers in Pocos de Caldas are generating some of the best coffee in all of Brazil. The three farms of Bourbon Specialty Coffees and the nearby Fazenda Lambari are the only producers in the country to have earned awards in the top category of the OIC Project Gourmet competition for two years in a row.

The family of Gabriel de Carvalho Dias owns the three farms that produce the Bourbon coffees: Fazenda Cachoeira, Fazenda Recreio, and Fazenda Rainha. For three generations, these farms, which saddle the border between Minas Gerais and Sao Paulo, have been producing coffee of the bourbon strain, one that most other farms have all but eliminated because of its relatively low production. Bourbon will typically produce 20-30% less than the more common Novo Mundo and Catuai plants.

When Gabriel inherited Fazenda Recreio, he first intended to replace the farm’s bourbon plants with something more productive. But then he got to thinking about it. Bourbon is a highly desirable coffee, and some of the trees on his farm were still producing substantial crops. He thought that it might be more profitable to produce a coffee of unparalleled quality even if in relatively low quantity. His suspicion paid off. In 1999, Illy declared his coffee the best espresso in all of Brazil. In that same year, he won first and tenth places in the OIC Project Gourmet competition, which in the following year awarded him second and fourth.

Gabriel’s devotion to bourbon paid off again this year. While everyone else is suffering poor harvests, his crop has retained its quality and unique marketability. His coffees range from specialty to gourmet.

Bourbon has been an innovative leader in the market with espresso-related products. The brand is called Spresso. It comes in vacuum packs, pouches for coffee machines and pods for espresso machines. In fact, Bourbon will be glad to sell you a Spresso espresso machine for your Spresso espresso pods. The pods and pouches have opened several lucrative and high-visibility markets, among them hotels, airlines, country clubs and upscale bars and restaurants.

Lambari Exportacao e Comércio de café owns two nearby farms, Fazenda Lambari and Fazenda Rancho Grande. The former is in Sul de Minas, the latter in Sao Paulo state’s Mogiana region. Under the critical eye of owner Raymond Rebetez, these farms produce excellent coffee that is being exported under the brand name Astro.

One of Lambari’s smarter moves, besides planting coffee in such a perfect area, was hiring agronomist Eduardo Sampaio as a consultant to oversee operations. Under his guidance, the farm has achieved remarkable results, including a top-10 award from the OIC Project Gourmet. Sampaio is among those who feel that Brazil must suffer in order to improve. He says the price crisis will continue for at least three or four more years, until enough farms have gone broke to cause a lowering of inventory. At that point, only the best of farms will be left. Other than a serious climactic factor, the lowering of prices is the only selecting factor that can lead to lower production,” Sampaio says.

A veritable philosopher of coffee, Sampaio is fond of pointing out the many problems ingrained in the Brazilian coffee business. He says that the spread of coffee farming to the north [toward the equator], where soils are poorer, has led to an increase in dependency on fertilizers, which are priced against the dollar and rising. This is a bad combination with a product whose value against the dollar and falling.

Despite this year’s poor harvest, Sampaio says, high inventories remain from years past, and higher production in the future, possibly even in 2002, will compromise prices for a long time to come. The long-term overproduction is the result of expanded planting during the heady days after the frost of 1994 and the failure of the Brazilian government and the coffee co-ops to warn planters of impending overproduction in Brazil and Vietnam. The state of Bahia’s subsidizing of new coffee plantation has only aggravated the situation. The inept and doomed coffee retention plan made things even worse.

A few factors are working in Brazil’s favor. The worldwide increase in consumption of espresso has increased the demand for Brazilian coffee. The Brazilian Specialty Coffee Association has made great strides in promoting the concept of sustainable coffee farming - “sustainable” defined as balancing economic feasibility with social and environmental concerns. And pulped natural technology continues to improve quality while reducing harvest costs.

Sampaio sees a revolution coming. As competition grows more fierce and desperate, production of pulped natural will increase to five to ten million bags per year. Mechanization will move toward harvesting only ripe fruit. Mountain harvesting will be made cheaper by terracing. Color sorting will be done at individual farms instead of only at co-ops.

And after the revolution, the survivors will do just fine. It’s a cruel way to go, but that’s the way of nature, and as nature goes, so goes coffee.

Tea & Coffee - Dec. 2001 / Jan. 2002


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