Coffee and Tea Reports from the Front Lines
Coffee Quality Week in Brazil
Brazil - Sao Paulo’s Secretary of Agriculture together with the Sao Paulo Coffee Industry Union (SINDICAFE) and along with other coffee-related associations, recently launched a widely-publicized “Week of Coffee Quality.”
Nathan Herzkewicz, president of Sindicafe and largely responsible for the planning and organizing of the promotion, presided at the opening ceremonies, explaining the program’s objectives and introducing the principal speaker, Lourival Carmo Monaco, Secretary of Agriculture and other representatives of the industry. Sindicafe, after extensive studies with coffee trade interests, designed a “Seal of Quality” campaign which was the motive for the announced “Week of Coffee Quality.” The campaign, developed by roasters and retailers, promotes the classification and differentation of roasted coffee qualities into three categories - Traditional, Superior, and Gourmet. The last two classifications receive a “Seal of Quality” stamp identifying the brand on the grocers’ shelves as a higher quality product.
In following days the campaign was extended to eight other cities and regional locations of the State of Sao Paulo. In each location a follow-up was promoted with the principal restaurants and retailers indicated by the Sindicafe suppliers.
The prinicipal objective of the promotion is to educate Brazilian consumers to coffee quality differences and to increase consumption of higher grade coffees for the pricing benefit of all sectors of the industry from producer to roaster to retailer.
Coffee consumption in Brazil was estimated to reach 13.5 million bags during 2001. The industry consists of more than 3,000 roasters, mostly small- to medium-size national regional operations but with about 37% of the market in the hands of multinational firms, Sara Lee, Melitta, Strauss-Elite and Segafredo Zanetti. It is reported that other foreign firms are interested in entering the large and growing Brazilian domestic market but are presently “on hold” awaiting political and economic developments.
Another reported objective of the “Seal of Quality” programs is to encourage and promote the exporting of the Brazilian roasted product. However, many in the trade are skeptical of the success of exporting an economic volume of roasted coffee due to the reigning and heavily marketed brands and blends of the large multinational and regional roasters in the principal consuming markets. There is also the possibility of a conflict of interests in competing with the main customers for Brazilian green coffee.
- Harry C. Jones
Venezuela Hosts Barista Competition
Venezuela - The First Venezuela Barista Competition is set to be held in Caracas in February of 2003.
The organizers say, “As coffee professionals, you do your best at your place in the coffee chain to ensure that those cherries result in a perfect cup of coffee. You grow the best bean possible or you sort and roast it using the most technologically advanced machinery and, finally, you hand over your precious product to the last stop on the train, the barista. This is why competitions like this are so important.”
Venezuela’s Café Flor de Patria is busily preparing for the first ever Venezuela Barista competition. The competition will determine what it takes to be the best Barista through tournaments one can enter, hone skill and win.
Law to Guarantee Authenticity of Hawaii Coffee
Hawaii - It was recently announced that Hawaii Governor Benjamin J. Cayetano was to sign into law a bill that will require specific disclosure of the percentage of Hawaii coffee used in coffee blends. It is House Bill 2169, and it amends existing statutes regulating coffee labeling for locally produced coffee. “This is a very important development for our industry,” said Hawaii Coffee Association (HCA) President Frank Kiger. “The labeling requirements in the revised law will allow consumers to clearly distinguish a 100-percent Hawaiian coffee and foreign coffee,” he explained. “Most of the coffee roasted and sold in Hawaii that carries Hawaii identifiers are blends. [The new laws] will distinguish a Premium Blend coffee - one that may contain 30 percent or 50 percent Hawaiian Coffee - from one containing only 10 percent.”
The new measure is the result of two years of work spearheaded by the Hawaii Coffee Association. “The Hawaii coffee industry represents an extremely wide array of perspectives: five-acre family farms, large corporate farming operations, local and regional coffee roasters, and retail coffee vendors of all sizes,” said Steve Hicks, HCA vice president. “We met and worked with the Kona Coffee Council, Kona Farmers Alliance, Hawaii Farm Bureau, members of the Hawaii Coffee Association, and the Department of Agriculture in order to reach a common ground on the issue of labeling. The consensus reached focused on consumer awareness,” Hicks added.
The new law allows coffee producers with existing label supplies that do not comply with the new requirements one year in which to use them before re-printing labels. “The Hawaii Coffee Association will post the new requirements on their Website and work with any interested party that may be affected by this change over the next year,” Hicks said.
The Hawaii Coffee Association web site is located at www.hawaiicoffeeassoc.org.
Starbucks vs. Tully’s in Japan
Japan - Starbucks Coffee Japan Ltd. and Tully’s Coffee Japan Co. are in stiff competition in Japan’s coffeeshop market reported the Nikkei Weekly recently.
In the fiscal year through March 2003, the two firms each plan to open 100 or more coffee shops nationwide. At the end of March, Starbucks had had 345 shops, nearly seven times the number of Tully’s coffee shops.
With the cost of setting up one store totaling about ¥70 million, Starbucks will use ¥8 billion for store openings, out of proceeds of ¥13 billion from selling new shares in October 2001 when the company went public. Although Tully’s procures coffee beans from Seattle-based Tully’s Coffee Corp. under a licensing agreement, it is an independent company, meaning that it does not have the financial strength of Starbucks. When Tully’s went public in July 2001, it raised ¥500 million through the initial public offering. Cash and deposits at the company at the end of last December stood at about ¥1.9 billion, about a quarter of the amount of Starbucks.
Starbucks, which posted a 4% fall in same-store sales in fiscal 2001, is trying to bolster the number of visitors by upgrading the menu, including adding six tea drinks. The company is moving to reshuffle the existing line of about 70 items to broaden its customer base, which now consists mainly of 18-40 year-olds. Tully’s, which marked a 7% increase in same-store sales in fiscal 2001, appears reluctant to extend the menu to include non-coffee items, states the paper.
A common challenge for both firms is to curb material costs and administrative expenses that have been pushed up by rapid expansion. In April, Starbucks introduced a computer system to calculate the appropriate number of employees at a shop based on year-on-year data, such as the number of visitors and sales according to operating hours. Such information is accessible via intranet at each shop. It also brought down the growth rate of number of full-time workers to below the growth rate for sales. That lowered sales and administrative expenses to less than 67% of sales last fiscal year, up 1 percentage point from the earlier year.
Starting in the current fiscal year, Tully’s is roasting coffee beans in Japan to take advantage of the lower import tariffs for raw beans than those for roasted beans, reckoning that this approach will reduce purchase costs by about 10%.
Tea & Coffee - December/January 2002
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