chuttersnap-9cCeS9Sg6nU-unsplash

Demystifying the coffee supply chain

close
Written by algrano
on January 25, 2019

Sourcing coffee from Ethiopia is very difficult - that’s what they say. We say:  Things have changed and more than ever it is time for more direct involvement. Direct trade in Ethiopia? Here is how and why!

It is winter. Days are short, it is freezing cold outside and every day you are probably asking yourself: When is it warm again so that I can enjoy a yummy iced filter coffee in the sun? 

Actually, you should celebrate! The harvest season of Ethiopian coffee has just come to an end and it’s time to get involved with the producers of the best coffees in the world!

image

 

All jokes aside: This time of the year is particularly exciting for the coffee industry because every new harvest in Ethiopia unveils more of the seemingly unlimited potential of this coffee origin.

Ethiopia is the birthplace of coffee and still home to wild, unknown Arabica varieties. The soil is just perfect for the production of coffee and large areas of the country are at high altitudes around 2000 meters above sea level. Because the conditions for growing coffee are perfect in Ethiopia it is no surprise that the average quality from there is far ahead of other producing countries.

However, many people in the industry will tell you that buying from Ethiopia is super complicated.  The value chain is complex and legal requirements for exporting are tricky to understand. They are right in some ways. Ethiopia isn’t Brazil. If you apply the same mindset that you attained in relationships with Latin American producers you will probably encounter some unexpected issues in Ethiopia.

In fact, there is no need to worry! Do you want a direct trade relationship with an Ethiopian coffee producer? Let’s make it work!

We tell you 3 reasons why buying more directly in Ethiopia is not just possible but also smart!

The ECX Reform

One of the reasons why many shy away from working directly in Ethiopia is the EXC. (Wait, is that another Incoterm!?) The Ethiopian commodity exchange was established in 2008 with the goal to provide a secure marketplace for sellers and buyers of commodities. It is set up as a private company partially owned by their trading members in the ECX and the government. It offers a platform for the trade of wheat, beans, sesame, coffee, and other produce.

Before its foundation, the selling and buying of coffee was very unregulated and many dubious middlemen made the trade insecure for both sides. The ECX therefor required vulnerable producers to sell their coffee through the platform. Buyers had to register and deposit the payment into an account at the ECX before they could receive the coffee.

This system fixed many problems of the market and was a step in the right direction - for commodities. What was not respected at that time was the demand for traceability of high-quality coffee. Once offered in the ECX system a coffee received a generic quality grade and was only offered as such. Limu-3, Yirgacheffe-1, etc. are products of that grading system.

As this was counter-productive for a differentiated market in which buyers would be willing to pay significantly higher prices, the authorities introduced serious reforms in 2016 which came into action in the past two seasons.

Besides allowing for more transparency at the commodity exchange, the new rules and regulations also allow small coffee producers as well as private washing stations to sell their coffee directly to buyers or exporters. Before the reforms, this was only possible for larger private estates and the Unions - the representatives of cooperatives.

During our visit to Ethiopia this season we noticed that still many stakeholders are in disbelief about the freedom to trade freely because governmental institutions in Ethiopia seem to have a tradition of changing their minds overnight. At the same time, we met people who very clearly see actual improvements. We arranged a meeting with the head of the Coffee and Tea Authority in Addis Abeba, to have clarity over the new regulations.

Long-story-short: Buying directly from any coffee producer or washing station is allowed and the opening of the coffee market is supported by the authorities.

Consolidations with Algrano

Now let’s assume you find a fantastic coffee you would like to buy directly from the producer but you want to buy less than a container load, which is the case for many roasters who intend to buy directly. There are three main ways through which you can do this. 

image

 

Exporting coffee can be expensive. We offer smart solutions for the consolidation of small volumes. Photo by chuttersnap on Unsplash

In the first case, the coffee comes from a Cooperative, like for example Nano Challa in the Limu region. Every cooperative is part of a Union which acts as an umbrella organization and manages administrative matters like the exporting. In the case of Nano Challa, it is the Kata Mdugua Union.

Unions are only allowed to sell directly to buyers and cannot consolidate with other producer units like a private washing station. If you would like to purchase less than an amount that is feasible to be exported in an individual container you can add your coffee to our mixed container from Kata Muduga. Volumes can be as small as 20 bags for individual lots.

The second option is suitable for anyone who needs only a very small number of bags. With our online platform, you will be able to consolidate your order with other roasters on the same coffee lot to reach the minimum amount of 20 bags. If you have some befriended roasters you would like to share a coffee lot with, this option is for you! There will be an opportunity window of 4 weeks for each origin we work in.

For Ethiopia, the countdown starts on the 1st of February 2019!

The third potential case would be a relationship with a private farm or washing station. For next year we will arrange a supply chain through a flexible exporter who can purchase the coffee from your producing partner based on the agreed farmgate price and provide your coffee ready-for-export together with the orders of other roasters. We are enabling this way of buying with the help of Moplaco Exporters - a household name in the coffee sector in Ethiopia run by Heleanna Georgalis. In this case, there is no limitation to the origin of the coffee. We will be able to offer consolidation of coffees from Yirgacheffe, Harrar or Limu - all on one container. 

Why this is just the beginning

Ethiopia is the fastest growing economy of Africa. 10% growth in GDP per year; 200 thousand newborn children every month. Average age an Ethiopian citizen: 18.

Without a doubt, it is a country on the rise with a clever and ambitious youth leading its nation to a bright future. When we visited Ethiopia some weeks ago, we could feel that undeniably strong spirit of optimism when talking to people of all sorts.

However, looking at the modalities of coffee production in Ethiopia, especially the methods of processing, it is actually hard to believe the quality is generally that high. This doesn’t mean that coffee processors are doing a bad job, quite the opposite is true, but the techniques and tools are far behind the standards of other origins. As more technology and innovation will empower the coffee industry, the quality will jump up significantly. In fact, many coffees in Ethiopia have the potential to score 90 points and higher.  

image

The future of coffee. Kids at the Dalecho cooperative after school.

 

Let’s also have a look at lot separation: Generally, one coffee lot is equal to 100 bags of parchment which is based only on the capacity of a truck that will transport it to a warehouse. The production is very streamlined with little distinction in the applied methods. Cherries in - parchment out.

This will change. Producers are now much more motivated to differentiate their product, as the demand for distinct coffees in no longer lost in a non-transparent trading system.

In the future, we will see more processing styles, experimental lots and, where possible, also single variety lots.

 

There are exciting times ahead in Ethiopia and it is time to engage more with the makers of Ethiopian Specialty coffee! Eventually, it is the right incentive that will motivate producers to push the limits. By receiving honest and direct feedback from roasters, producers can better understand and finally tailor their product to the roasters needs. The best thing about a direct relationship in coffee is the teamwork in pursuit of better quality. 

Let’s make it happen!

Let Us Know What You Thought about this Post.

Put your Comment Below.

You may also like: