Kenya Repositioned as Coffee Trade Mark

Written by Wanjiru Waithaka

Taking a page from Ethiopia, Kenyan branded coffee will soon be available for export in a move to earn more by trade-marking the beans. Under a project started by the Kenya Planters Co-operative Union (KPCU), one of Kenya's largest coffee marketing and processing firms, coffee from specific regions will be branded based on qualities that differentiate it. Coffee beans originating from Nyeri and Kirinyaga will be sold as Mt Kenya, those from Central Kenya areas like Kiambu and Ruiru will be called Aberdares and coffee from Kisii, Bungoma and Kericho will be Kenyan Blue Mountain. Currently, coffee beans are graded as AA, AB, C grade and so on based on bean size and density. "Farmers will benefit from higher premiums on their coffee especially Blue Mountain, so-called because it has similar attributes to Jamaica's Blue Mountain which is the most expensive, and fetches $45 per pound (Sh4,000 per kilogram)," said Mr Sylvester K'Okoth, value addition and marketing manager for KPCU. Farmers garner just about 10 per cent of the profits from coffee, losing large chunks to various middlemen in the chain. From ten years ago when coffee-producing countries earned $10 billion on retail sales of around $30 billion, today those countries earn just $6 billion on sales of over $70 billion, according to Global Policy Forum. Most coffees from east Africa are blended with inferior varieties from other producing areas, yet maintain the African label to add to resale values. "You'll see a lot of brands out there labeled as Kenyan coffee yet they only contain about 10 per cent of our coffee," said Mr K'Okoth. Ethiopia has faced the same struggle. Starbucks, the massive cafe chain, uses Ethiopian names like Sidamo to market its coffees, for which consumers pay a premium. But while Starbucks reaps the benefits from this brand recognition – selling these coffees for as much as $26 a pound–Ethiopian farmers get only 5-10 per cent of that. Coffee producing countries are now exploring options such as branding their beans in an effort to capture more of the value addition on their products. But middlemen and retailers are resisting the efforts. Ethiopia's campaign to trademark its coffee beans–Yirgacheffe, Sidamo and Harar–kicked off a row with Starbucks, which Ethiopia accused of blocking its efforts. Mr Ron Layton, a Washington-based lawyer with Light Years IP, an intellectual property firm advising Ethiopian producers, says successful trade-marking could add $88 million a year to Ethiopia's export earnings. Europe, Japan and Canada have already registered the trademarks and the US trademark office could do so were it not for Starbucks' opposition, he said. Tariffs are another barrier. While Kenya could gain immensely from roasting and packing coffee locally and selling finished products with a 100 per cent Kenyan tag, roasted coffee attracts high tariffs of 19-25 per cent in the United States a key destination for Kenyan coffee says Mr K'Okoth. In Europe the tariffs are even higher but export of green beans has zero tariffs. Even if a company was able to pay these high tariffs there are other obstacles that increase the cost of marketing and distribution. For instance Wal-mart, the American retail giant with nearly 7,000 outlets globally. A roaster in Kenya would need to deliver straight to the shelf, monitor stocks in all outlets and avoid stocks running out, said Mr Eric Omondi, the general manager of Dormans, a local roaster and retailer. "A big retailer like Wal-mart makes its money at the till and doesn't want to bother with stocks. You need to allocate 20 per cent of projected volumes for marketing and have a $1 million insurance policy for every state you operate in so penetration is very costly," he said in an interview. As a result, Dormans which already has a brand, plans to start with smaller retailers first and grow demand slowly mostly through word-of-mouth as people taste the coffee and recommend it to others. Certification standards such as Utz and FLO fair-trade can help fetch better prices and niche markets if coffee estates, retailers and roasters manage to meet their criteria. The standards take in chemical inputs, labor standards, quality and sustainable programs for workers among other factors. Dormans is the first roaster to be certified and has converted two of its key clients - Kenya Airways and the Fairmont Group (which runs the Norfolk, Mt Kenya Safari Club and Aberdare Country Club) – to exclusive clients of its coffee, said Mr Omondi.