Utz Kapeh Supply and Demand Update Production & Market Trends

Transcription

1 Utz Kapeh Supply and Demand Update Production & Market Trends OCTOBER 2006 Utz Kapeh periodically provides an analysis to its participating producers and buyers about the historical and potential future supply and demand of Utz Kapeh certified responsible coffee. This is done to provide the best possible insight to support your entrepreneurial decision making. Please contact Utz Kapeh if you have questions or comments. In this Supply and Demand Update we provide 1) quantitative data on historical supply and demand, 2) a forecast of the 2007 and 2008 supply, 3) a qualitative assessment of the supply and demand situation. NOTE OF CAUTION WHEN USING THIS INFORMATION 2004, 2005 and 2006 figures are actual historical data collected by Utz Kapeh. The 2007 and 2008 figures are estimates. Producers and buyers should use these figures with care. Utz Kapeh makes no claim about their accuracy. Information will change over time. Content 1. Historical and projected demand 2. Trends in consuming countries 3. Trade 4. Additional note on availabilities 5. Update on supply 6. Trends in origin 7. Member Portal Contact us at info@utzkapeh.org. October 2006 Production and Market Trends page 1

2 1. Historical and Projected Demand Purchases of Utz Kapeh Certified Responsible Coffee: 2005: 29,000 tons (35% growth over 2004) 2004: 21,000 tons 2003: 14,000 tons 2002: 3,600 tons (entry in the market) In 2006, we are optimistic that purchases should increase to about 35,000 38,000 Mtons. This projection is based on growth projections provided by our current buyers, new buyers, and a number of buyers who are currently evaluating Utz Kapeh. The main demand for Utz certified coffees is currently in the Netherlands, Belgium, UK, Sweden, Norway, Japan and Switzerland. Additional growth is anticipated especially in Japan, U.K., Scandinavia and Switzerland. New markets on the Utz radar screen are France, Canada and importantly, the US. Notes for table 1 The first three columns of the table indicate the actual purchases of certified responsible coffee in 2004, 2005 and until Coffee is only called Utz Kapeh certified responsible coffee when it has been registered with Utz Kapeh through our sales announcement process and given a unique Utz Kapeh tracking and tracing number. The fourth and fifth columns show the actual amount of coffee certified as Utz at the End of the year 2004 and as of End August The fifth column and sixth column are the amount of coffee currently registered with Utz Kapeh in the process of becoming certified. This excludes any estimate of harvests which may be higher or lower due to many factors and does not include the many producers working towards their certification but have not yet registered with us. These figures should be used with care. Utz Kapeh makes no claim about their accuracy of the forecasts. The amount certified in 2007 and beyond will likely change over time, depending on harvest volumes, weather, prices, decisions made by produces and buyers other factors. Production and Market Trends page 2

3 Table 1 Historical and Projected Demand Production and Market Trends page 3

4 2. Trends in consuming countries The Netherlands: Nearly 30 % of the Dutch market is now Utz Kapeh certified. The Netherlands are the great example of how the Utz Kapeh concept works in price-sensitive markets for mainstream brands. We expect this market to continue its growth trend. Ahold Coffee Company buys 100% as Utz Kapeh certified and supplies several retailers in the Netherlands, throughout Europe, and USA. Strong and increasing commitment from Sara Lee Douwe Egberts (9,000 12,000 tons in 2006) plus the Autobar group, Drie Mollen, Simon Levelt and some smaller regional roasters. Strong interest in the out-of-home (OOH) market. Belgium: Retailer Delhaize now purchases nearly all of its own-label coffee as Utz Kapeh certified, Douwe Egberts and Autobar plus some more regional roasters account for likely 10 % of the whole coffee market to be Utz Kapeh certified. Rombouts Koffie has signed up and starts to become active. Further growth expected. UK: Retailers ASDA and Somerfields purchase its own-label coffee as Utz Kapeh certified. Douwe Egberts now has a fully-traceable product line in several supermarkets. Interest has been expressed by a number of smaller brands and some well known brands are currently evaluating Utz Kapeh. Strong interest in OOH market. Ireland: Market leader Bewley s getting started with Utz Kapeh Norway: Market leader Friele as well as Joh Johannson and Coop Norge Kaffe (no 2 and 3 of the Norwegian coffee market) are all purchasing Utz Kapeh coffees. Sweden: ICA, Sweden s largest retailer, purchases all of its own-label coffee as Utz Kapeh certified. Arvid Nordquist became an active buyer during Löfbergs Lila signed up with Utz Kapeh in February There are strong signs of interest from Swedish OOH companies. IKEA is selling their coffee as Utz certified with logo (in IKEA stores world-wide!) Denmark: Chokolade Compagniet and ISO Supermarked and Sara Lee s out-of-home brand Merrild are all actively working with Utz. Switzerland: Illycafé has signed up recently. Drie Mollen group is already a member. Several roasters currently evaluating Utz Kapeh. USA: Java Trading Company has been member for several years; Stop & Shop and Giant supermarkets carry Utz Kapeh certified own-label products; several roasters are buying Utz Kapeh (although not yet marketing it) and several are currently evaluating the program. Utz Kapeh will have a Sales Representative in the US within the next few months covering both the US and Canada. Canada: Terra Coffee, Level Ground Trading and Oughtred Coffee and Tea have all started purchasing and marketing Utz Kapeh coffees. Japan: More than 30 buyers signed up in 2005, including AGF, UCC green coffee, Key Coffee, Mitsui and Mitsubishi. With the new food law and our Representative Mrs. Miyuki Ortiz supporting buyers, we already see increasing purchases from Japan. Production and Market Trends page 4

5 3. Trade The involvement of the trade is critical in terms of developing the right supplies of certified coffee and giving their clients the same service for Utz Kapeh coffees as for commercial coffees (i.e., handling of logistics, splitting of containers, spot market, payment terms etc). We see the commitment of the trade increasing as a serious part of their business. All leading trading houses in Utz Kapeh are active in both mobilizing and facilitating new supply and facilitating demand from buyers: Ecom, Neumann Gruppe (Bernhard Rothfos, NKG, InterAmerican) and the Volcafe (Volcafe and Gollücke & Rothfos). In addition smaller, regionally specific traders are also mobilizing producers, and important exporters are active in key countries such as Brazil, Colombia and Vietnam. 4. Additional note on availabilities Athough there is in general sufficient supply; buyers have reported that Utz Kapeh coffees may sell out quickly. Depending on the market and/or weather and or currency exchange conditions, producers may sell their coffees at the beginning of the harvest if they find differentials good enough. We therefore recommend to our roasting members to buy their Utz qualities at the beginning of the new crops before coffees are sold as conventional coffees or into other markets. This is the only way to ensure sufficient quantity of the desired quality. 5. Update on Supply The following is Utz Kapeh s report on trends in production. This represents Utz Kapeh s best insight into the situation around the world but it is not possible to provide guarantees about supply. Weather, prices, decisions by producers, and many other factors may affect the development of supply of certified coffees. Overall view The amount of certified coffee is growing steadily. In September 2006, the total volume certified was 160,000 metric tons, or roughly 2.65 million bags. This represented about a strong increase over the previous year. We see several reasons for this strong growth: - Producers and traders have heard the signal from Utz Kapeh buyers and are moving forward now that they see that trends towards increased demand for certification are real. - Utz Kapeh s training programs and collaboration with coffee organizations has led to a healthy base of technical expertise that is reaching growers. - In many regions, the interest from producers is not simply an effort to get better prices for their coffee many if not most are telling us that the benefits to their farms are real and worthwhile. Despite real on-farm benefits, supply clearly follows demand and market opportunities. Production and Market Trends page 5

6 6. Trends in Origin The following paragraphs describe new developments in production. Members should access the Utz Kapeh Member Portal to determine which producers and exporters are already active. General Utz Kapeh continues to improve the code of conduct and the certification process, as well as our representation in producing countries. Our goals are to make the program more clear and accessible, particularly for small-scale producers, while also striving to lower compliance costs. Interpretation workshops have been held in Vietnam, Kenya, Uganda, Guatemala, Costa Rica, Colombia, Peru and Brazil. These will lead to regional interpretation guidelines and a draft Implementation Guide that is being tested and will be published in early In Colombia, Utz Kapeh and FNC have jointly developed an internet-based e-learning system based on this Implementation Guide to train agronomists who are in turn training producers on professional coffee practices as required by the Utz Kapeh Code of Conduct. Brazil Groups of small scale producers have been certified and create a broader base of availability to the earlier list of large professional estates. These farmer groups are also represented in the market by international traders. Some 60,000 tons of coffee have been certified and new producers continue sign up. International trading groups have been active on promoting certification and are working with their supplier base to increase certified volumes. More presence of cooperatives and associations are expected for 2006/7. The trade is becoming more involved and is developing the spot market, Cash & Carry and Futures markets for Utz Kapeh certified responsible coffee. The local market is developing with Utz Kapeh certified coffee brands in supermarket chains. Colombia FNC agronomists have been working with producers in the most important coffee regions. There is now availability of all qualities that the market is demanding. Expocafe has been selling Utz Kapeh coffee for several years. Maximo has brought Utz Kapeh to new markets and has increased certified production with more professional farms in Caldas and with smallholder groups in Huila. The most recent Utz Kapeh Producers Day in Manizales had more than 200 attendees, with great interest not only from producers and exporters but also from local government keen to use Utz Kapeh to develop and promote their professional producers. New exporter members are promoting sales of Utz Kapeh coffee from newly certified producers, including some of the smaller exporters as well. Certified production has reached 235,000 bags (70 kg) of various qualities which is a comfortable level for current demand. Production and Market Trends page 6

7 Peru The certified production is considered to grow to 160,000 bags. The organizations COCLA, PRONATUR, LA FLORIDA y CEPICAFE currently manage the biggest volumes of sales of Utz Kapeh certified coffee in Peru. In November 2006, an Utz Kapeh Producers Day will be organized in Peru. Guatemala Our partnership with Anacafe has risen to a higher level, with fruitful combined efforts to train producers and support producer organizations. We see a good acceptance of Utz Kapeh throughout the country resulting in more producers working to implement the professional practices of Utz Kapeh. Fedecocagua will expand their production this year with 10 additional coops. There is interest from more exporters, although a bit hesitant to take the first step. Interested groups like COEX, Sertinsa (Neumann Gruppe) and Fedecovera are working with several farms and 3 large coops for mainly SHB. Utz Kapeh has trained more inspectors and approved additional regional certification companies, which has increased certification capacity. There is good support from donor organizations like AECI (Spanish Government) and Irish Aid for certification projects with small-scale producer groups. Honduras Utz Kapeh signed a MOU agreement with the national Coffee Board Ihcafe in the spring of In cooperation with Ihcafe and the whole coffee sector (exporters, producers and donor organizations from US, Spain, Switzerland, Holland and Ireland), we have recently initiated a national program to implement professional coffee practices at farm level and in central washing stations should therefore see a large increase in availability of Utz Kapeh certified coffee of SHB and HB, including some specialty cups. Sogimex (Ecom) has expanded their project to a larger group of producers and is becoming an important supplier of Utz Kapeh certified coffee. La Central has plans to expand to other cooperatives and we see exporters like Cigrah and Inaginsa working with their producer groups to implement Utz Kapeh practices. Nicaragua Adding to a strong base of supply, exporters like Atlantic (Ecom) are interested in having their suppliers certified. Bencafe/CTCS has interest in getting a volume of 3000 bags certified through 3 of their supplying farms. Cisa (Mercon) is supporting farms to get certified Utz Kapeh. The participation of Utz Kapeh at Ramacafe generated even more interest in the coffee program. Together with CSN we are working out projects for farmer groups and see interest of international donor organizations to support these projects. Production and Market Trends page 7

8 Costa Rica More high quality Utz Kapeh certified coffees have won prices at cupping contests, allowing also specialty buyers to source their coffees as Utz Kapeh certified. There is more interest in the certification program from larger farms in Turrialba which could supply around 5,000 bags of Utz Kapeh certified coffee. Other cooperatives that are related to Coocafe expect to certify an additional 5,000 bags. Salvador Muyson Avila (Neumann Gruppe) is in process of having 5 farms of their group certified. There is interest from various farms and cooperatives in order to further develop the international markets with a main focus on USA. Mexico AMSA (Ecom group) is interested in developing more certified coffee through farmer groups and private farms in Oaxaca, Veracruz and Chiapas after having seen the success at some of their earlier projects in getting certified. The participation of Utz Kapeh in the international coffee conference in Veracruz, Excorcafe, developed more interest from producers and the coffee sector and we see registrations increase. Kenya Currently Utz Kapeh is hot in East Africa; farmers see the benefits that certified farms have realized in farming practices and want to join to improve their level of production and quality. Recent cupping contests also show Utz Kapeh certified farms in the top five of each country. Kenya is the leading Utz Kapeh country in East Africa with 23 farms and 2 cooperatives certified with around 10% AA, 50% AB and 40% grinders now count for around 15% of total Kenyan production. All certified farms are reporting reduced costs, increased quality and yields and many side benefits. For example, Socfinaf marketing agency is charging certified producers a lower tariff of 1.7% compared to 1.9% for non certified coffees. These developments have spread in Kenya like a bushfire, causing more coops and farms to work on the implementation of the Code. Kenya is playing an exemplary role that affects producers in other countries in East Africa. There is close coordination with local organizations for support to producers. The Coffee Board has informed producers of the need for certification and requested all cooperatives to be certified within the next 2 years. Out of the existing programs the Coffee Board promotes Utz Kapeh as the best alternative due to the improvements achieved by the implementation of professional practices and the presence/acceptability of the program in the market. International financial support from World Bank, CSN and Drie Mollen has resulted in the recent certification of various farmer groups. This support is being expanded and more projects with small scale producers are being developed. Exporters are getting actively involved in assuring supply and promoting certified coffee. At the next main crop in 2006 there will be also the top quality coffees (FAQ++) certified, allowing supply a wide range of quality to different buyers in mainstream and specialty Production and Market Trends page 8

9 markets. Exporters are undertaking chain of custody audits for their exporting operations and mills to assure full traceability. National market is developing through some local finished certified products and Kenya Airways who is now using 100% Utz certified coffees. Tanzania Some of the best farms have been certified or are close to be certified. There is sufficient volume of high and medium quality Arabica. Some coops with Robusta are working on implementation of the Utz Kapeh practices. The Utz Kapeh Producer Day in February this year attracted 150+ buyers, producers and representatives from the coffee sector to have a close encounter with a highly professional farm. Farms like these set the examples for producers and mills to follow and have resulted in the Chain of Custody certification of a large international processing mill. Zambia Although the national volume is small compared to other countries, Zambia has taken the lead in the share of certified coffee in their country: 25% of the total production is currently certified as Utz Kapeh and 40% of the smallholders are in transition. With more interest from larger farms and the majority of its coffee certified, we see that Zambia is positioning itself to become a more structural supplier to export markets. Utz Kapeh, CSN and ITC (International Trade Center of the WTO) are coordinating a project to implement Utz Kapeh practices, improve export quality management, train on price risk management and set up local inspection capacity. Uganda There will be continued expansion of supply for the coming 3 years with 5 different producer groups supported by either the EU, Dutch or local funds. End 2006 we estimate that 25,000 small scale producers will be certified. Competition among buyers at producer-level could play a role resulting in a reduction of certified volume of up to 20% as some certified coffee is sold as organic. Yield and quality at producer level has increased which will result in higher production from existing producers. These factors balance each other; expected availability for next crop to 80% of the certified volume in Ethiopia Ethiopia has now been developed into a large source of Utz Kapeh coffee; most of the important regions now have certified producer groups and two are in transition. Several projects are implemented or have been initiated with CSN and ITC to implement professional practices and some basic farm and milling infrastructure to assure good quality coffees from all regions. There is interest from locally-operating international donor organizations to combine forces on improvement projects including social and environmental issues. We see great improvements at producer level on quality and production and exporters are very keen to start up new business relationships. In July 2006 an Utz Kapeh Producer Day was held with representatives of the most important players in the coffee sector, of which the majority is now active in Utz Kapeh. A new Utz Kapeh representative is now active in Ethiopia, Mr. Assefa Tigneh. Production and Market Trends page 9

10 Burundi & Rwanda Producer groups in both countries are now working on certification. Two professional projects are managed by the international trade and are expected to have certified 500Mt of washed Arabica per country at next harvest. We expect that 100% of this volume will be available for purchase as certified. CSN is supporting farmer groups and projects with a locally trained agronomist and there is interest from international donor organizations to support these and future projects. India Interest for Utz Kapeh program in India is increasing steadily with some new exporters joining the program. The ECOM group has assisted several producers to join the program. Currently there is around 12,000 MT Utz Kapeh certified coffee of both robustas and arabicas. Vietnam Vicofa, Ministry of Agriculture and Rural Development and Cafecontrol have shown increasing support to the program. Based on experience in the last 5 years, Utz Kapeh fits right in the agenda of quality improvement, traceability and transparency in the Vietnamese coffee sector. With this acceptance, most improvement projects in Vietnam will be based on Utz Kapeh Professional Farming principles as designed earlier this year in a two-day round table workshop with local experts, government representatives and certified producers. End October 2006 Utz Kapeh will open an official representative office in the coffee capital Buon Ma Thuot in DakLak province. Currently Utz Kapeh is managing a national project with CSN support on several large state farms and groups of small scale farmers. With the supply of Utz Kapeh certified coffee increasing to 27,000 MT end of this year and to 40,000 MT next year, more exporters are coming on board to promote the product. Acom (Ecom) has a successful small-holder project. Armajaro is one of the traders newly involved in the Utz Kapeh program and has started to implement Utz Kapeh with its current supplier base. Also the local Neumann operations are getting active in Utz Kapeh. Indonesia Currently there is certified Arabica coffee in Aceh province through Holland Coffee and PT Indocafco (Ecom). A new player on the specialty market is Aceh Coffee Company who is working with Gayo Mountain Cooperative toward certification. UNDP and Terre des Hommes are preparing an improvement project in the Aceh Province supporting Gayo Mountain Cooperative and others to also become Utz Kapeh certified. The Ministry of Cooperatives has agreed to cooperate with Utz Kapeh in strengthening local farmer organizations. South Sumatra Robusta is being certified most likely in the last months of 2006 with Ecom in Lampung. Key Coffee (Japan) is on track to certify its Indonesian estates. PTPNXII is still the largest producer in Indonesia with mainly Robusta and some Java Arabica. PT Indocom is joining with Robusta projects in Java and Lampung and Arabica in Aceh. Other exporters like PT. Menacom, PT Mandago Intl. and PT Gergas Utama are showing serious interest. Production and Market Trends page 10

11 Last week of September 2006 Utz Kapeh organized workshops in North Sumatra (Takengon and Medan) and East-Java (Surabaya) to producers, exporters, certifiers, ICCRI (Indonesian Coffee and Cocoa Research Institute) SCAI and AEKI (Exporters Association) to increase the knowledge of the program and expand certified production in the main regions. Papua New Guinea This origin is opening up through a CSN funded project operated by Ecom to get their suppliers certified. Expected certification is at next harvest in Member Portal Find out more about Utz Kapeh Supply & Demand in the Member Portal! The Utz Kapeh member portal is an important password-protected section of the Utz Kapeh website where members can find more information about the supply and demand of Utz Kapeh certified coffee as well as valuable market information. The member portal offers registered members the following 2 unique tools that will help members in their entrepreneurial decision making: Member List: The member portal links Utz Kapeh certified producers to registered buyers by providing a complete member list with all the contact details and business information of registered members. Here buyers can learn about producers available coffee qualities and producers can find the direct contact details of Utz Kapeh buyers. Market Information Diagrams: The member portal provides aggregated market information diagrams on (1) Utz Kapeh certified coffee volumes sold, and (2) average Utz Kapeh premiums paid per country. These diagrams give you valuable information for contract negotiations. In addition, the Member Portal has a news center that contains important Utz Kapeh announcements, and a download library where members can find important Utz Kapeh documents. Go to and login to the member portal using your personal login details to get access to a world of valuable Utz Kapeh information. Production and Market Trends page 11