Cof­fee cul­ture is ris­ing to new heights in SA

Daily News - - VIEWS & ANALYSIS - GIL­BERTO BIACUANA

THERE has been a no­table rise in cof­fee cul­ture in South Africa in re­cent years, driven by an in­creas­ing up­wardly mo­bile mid­dle-class.

This, cou­pled with a grow­ing café cul­ture, con­tin­ues to in­flu­ence the pos­i­tive tra­jec­tory of the cof­fee in­dus­try.

Con­sumers are in­creas­ingly de­mand­ing bet­ter qual­ity cof­fee, with or­ganic and eth­i­cally sourced “Fair Trade” prod­ucts at the fore­front of this growth.

There has also been a gen­eral in­crease in the de­mand for spe­cial­ity and more pre­mium cof­fees such as ori­gin-spe­cific cof­fees, with a grad­ual shift from in­stant cof­fee to more au­then­tic or spe­cial­ity cof­fee con­sump­tion.

South Africa’s con­sump­tion of cof­fee beans in­creased from 29 760 tons in 2012/13 to 35 400 tons in 2015/16, a com­pounded an­nual growth rate of 4.4%.

The pro­file of the ev­ery­day cof­fee drinker is also chang­ing, with more young, black and up­wardly mo­bile con­sumers drink­ing cof­fee as their bev­er­age of choice.

This rise in the de­mand for pre­mium cof­fees has fu­elled growth in the num­ber of cof­fee roas­t­er­ies and cof­fee shops across the coun­try. South Af- rica has over 100 roas­t­er­ies com­pared to fewer than 20 roas­t­er­ies 10 years ago.

The do­mes­tic cof­fee mar­ket has also at­tracted the at­ten­tion of multi­na­tional cof­fee chains. The re­cent en­try into the South African cof­fee mar­ket of the global cof­fee chain Star­bucks is a case in point.

From spe­cial­ity roas­t­er­ies serv­ing trend- con­scious con­sumers in the cities to fran­chise cof­fee out­lets si­t­u­ated in the fore­courts on ev­ery ma­jor route in South Africa, cof­fee con­sump­tion is as pop­u­lar as ever.

The cof­fee value chain in­cludes cof­fee bean farm­ing; the pro­cess­ing of the cof­fee beans and roast­ing; the man­u­fac­ture of in­stant cof­fee by food-pro­cess­ing firms such as Nestlé, among oth­ers; and fi­nally, the cof­fee shops that sell the hot bev­er­age to the con­sumer.

Cof­fee shops are the ma­jor chan­nel through which cof­fee is con­sumed, par­tic­u­larly for spe­cial­ity cof­fee. The pop­u­lar­ity of espresso ma­chines among con­sumers at home has partly sup­ported the in­creas- ing trend in con­sump­tion of spe­cial­ity cof­fees.

De­spite the in­crease in the do­mes­tic de­mand for cof­fee, the coun­try does not pro­duce enough to meet this de­mand. Be­tween 2001 and 2016, cof­fee bean im­ports in­creased by an an­nual com­pounded growth rate of 4.1% – from 20.2 mil­lion tons in 2001 to 38.6 mil­lion tons in 2016. (Data from the In­ter­na­tional Cof­fee Or­gan­i­sa­tion.)

It is es­ti­mated that the global cof­fee mar­ket is worth over $100 bil­lion (R1.35 tril­lion) and is pro­jected to grow at 4.7% per an­num up to 2019. In 2016, ma­jor global cof­fee pro­duc­ers in­cluded Brazil (35.7%), Viet­nam (16.6%), Colom­bia (9.4%), In­done­sia (7.5%) and Ethiopia (4.3%), among oth­ers.

Global cof­fee pro­duc­tion com­prises Ara­bica and Ro­busta beans. Global cof­fee pro­duc­tion is dom­i­nated by Ara­bica, which ac­counted for 63% of to­tal global cof­fee pro­duc­tion in the 2016/17 sea­son. Ara­bica cof­fee vari­ants in­clude Colom­bian milds, Brazil­ian nat­u­rals and other milds. (Data from the In­ter­na­tional Cof­fee Or­gan­i­sa­tion.)

Glob­ally, cof­fee beans are the sec­ond most traded com­mod­ity af­ter crude oil. Ara­bica cof­fee beans fetch a pre­mium in the mar­ket com­pared to Ro­busta cof­fee beans.

The global price for Ara­bica beans was R43.7per ton in Au­gust 2017– up 0.9% from the pre­vi­ous month. In the same pe­riod, Ro­busta cof­fee beans were R30.4 per ton, up 0.3% from the pre­vi­ous month.

From a pric­ing per­spec- tive, there has been an up­ward trend with both Ara­bica and Ro­busta bean prices. Global cof­fee prices in­creased by more than 6% in Jan­uary 2017, fur­ther to a 30% in­crease in 2016. (Source: The World Bank.)

The grow­ing de­mand for cof­fee con­sump­tion do­mes­ti­cally and in­ter­na­tion­ally presents an op­por­tu­nity for South Africa to in­crease its cof­fee pro­duc­tion.

Over the years, cof­fee farm­ing in South Africa has been lim­ited to rel­a­tively few produ- cers in the con­ducive grow­ing ar­eas of Mpumalanga, Lim­popo and KwaZulu-Na­tal.

Cof­fee pro­duc­tion has the po­ten­tial to give farm­ers a good re­turn while at the same time pro­vid­ing much-needed job op­por­tu­ni­ties for ru­ral com­mu­ni­ties, as its pro­duc­tion is labour in­ten­sive.

Cof­fee trees si­mul­ta­ne­ously bear flow­ers, green beans and ripe beans and hand-pick­ing of ripe fruit is widely used. Agri­cul­tural-sec­tor play­ers can take ad­van­tage of this to cre­ate em­ploy­ment op­por­tu­ni­ties in subtropical ar­eas such as Lim­popo, Mpumalanga and KwaZulu-Na­tal, the coun­try’s best suited grow­ing re­gions.

Op­por­tu­ni­ties do not only ex­ist in the pri­mary sec­tor of the value chain. The far­m­value ad­di­tion of the crop cou­pled with agri-tourism in grow­ing re­gions has the po­ten­tial to cre­ate fur­ther em­ploy­ment op­por­tu­ni­ties.

There is also some po­ten­tial for ex­ports of cof­fee from South Africa, which could ben­e­fit the in­dus­try.

The growth in the con­sump­tion of cof­fee is not unique to South Africa.

Con­sump­tion has been ris­ing in de­vel­op­ing coun­tries such as India, China, Latin Amer­i­can and other African coun­tries due to the rapid growth of the mid­dle class and the high pace of ur­ban­i­sa­tion.

The In­ter­na­tional Cof­fee Or­gan­i­sa­tion es­ti­mates global de­mand for cof­fee will in­crease by 10.5 mil­lion tons by 2020.

This pro­jected trend in the global con­sump­tion of cof­fee pro­vides a lu­cra­tive op­por­tu­nity for South Africa to in­crease the pro­duc­tion of cof­fee beans to meet both do­mes­tic and ex­port de­mand.

It is worth not­ing that some cof­fee bean pro­duc­ers in South Africa, such as Beaver Creek, are al­ready ex­port­ing to coun­tries like Ja­pan, the UK, the US, Denmark and Ger­many.

How­ever, the po­ten­tial to ex­tract more value through­out the cof­fee value chain should con­tinue to be ex­plored by the agri­cul­tural sec­tor.

Gil­berto Biacuana is an econ­o­mist serv­ing as a re­search an­a­lyst for com­modi­ties at the Land and Agri­cul­tural De­vel­op­ment Bank of South Africa (Land Bank)

PIC­TURE: DAVID RITCHIE

A barista plies his trade at a cof­fee shop in Cape Town. South Africa’s con­sump­tion of cof­fee beans has in­creased con­sid­er­ably. The pro­file of the ev­ery­day cof­fee drinker is also chang­ing, as more young, black and up­wardly mo­bile con­sumers drink cof­fee.

PIC­TURE: BON­GANI SHILUBANE/ANA

Jan­ice Mnkandla en­joys her cof­fee while read­ing a news­pa­per at Café Riche in Pre­to­ria.

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