The true picture of the coffee industry

AS for the concept of mass manufacturing of coffee for export from PNG, this is an old bone chewed by many dogs over the years. CIC has made available a number of reports analysing the proposition that coffee should be manufactured and shipped as a consumer-ready product, including that old favourite of  politicians and other would-be experts, the production in PNG of instant or soluble coffee.
All the groundwork and evaluation of these ideas has been done. The result is, effectively – “don’t even think about it except as a small-scale specialist enterprise”.
There are a number of such small specialised enterprises operating in PNG; two in Goroka (one of which, Goroka Coffee Roasters, began operations way back in 1965), one in Simbu province, and two at Mt Hagen.
Have a look at CIC’s annual published statistics to see the sales volumes achieved by these hard-working and committed small manufacturers, and you will come away with a realistic view of the potential for such a business. It’s not about setting up the machinery and producing a product. It’s all about penetrating overseas markets with an unknown brand; markets dominated by the major roasters who are the customers for our raw bean.
PNG’s coffee-drinkers overwhelmingly prefer imported soluble or instant coffee over the local roast-and-ground product, so local sale of the locally-produced brands is slow. It is worth mentioning here, however, that the most popular instant brand in PNG, Nestle’s Niugini Blend, is a blend in which the major element is, indeed, PNG-produced Arabica coffee, with added Robusta beans to give it its “punch”. This coffee is made at a factory operated by Nestle in Queensland, and packaged in Lae.
If PNG itself consumed a major portion of the coffee it produces each year, the situation would be very different for would-be coffee manufacturers. Here, either by combined effort on the part of growers or by government intervention, the market could be tied up for the local growers’ benefit. In the real world, though, the major consuming countries are in the colder, northern hemisphere, where coffee can’t be grown, and the producers are confined to the tropical zone. The only producing country which consumes a major portion of the coffee grown there is Brazil, which is both a huge country with a well-developed economy, and a traditional coffee-drinking society.
Aside from the reality of the market, a manufacturing plant to process and package the 60,000 tonnes of raw product which represents annual coffee production in PNG will be a huge monetary investment and very unlikely to attract major corporate financial participation because it predicates an unrewarding marketing regime. How will PNG get a large volume – don’t forget we are talking of about 50,000 tonnes a year after roasting and further processing – of  packaged product, being an unknown brand in strange packaging, onto supermarket store shelves, worldwide?
Common-sense tells us that this is an insurmountable problem. Everyone has their family favourites in terms of the groceries they buy, and few of us will spend money just to try something new which may not be to our taste, particularly if it’s obviously from an unknown country. This is as true of shoppers all around the world as it is of shoppers in any PNG supermarket.
Another often-spoken opinion stated as “fact” is to the effect that PNG’s coffee is hailed around the world as of very high quality. This is simply not true. Even though the best of PNG’s coffee – that which is shipped as PNG A-grade and PNG X-grade – is certainly very good, it is a comparatively small proportion of total shipments each year where the smallholder or village-produced PNG Y-grade type is our main exported grade.
The story of PNG coffee being recognised around the world is a myth put about by the visiting “feel good” marketing people who want to set up small, specialised coffee-marketing organisations such as I spoke about earlier in this two-part article.
PNG’s coffee is recognised only within the world’s coffee-trade and not by the public at large or by consumer-country retailers. Potentially, all of PNG’s coffee is very good, indeed. However, the mode of production of dried coffee beans at small-grower or village level is such that defective beans, taints and uneven moisture content is very common.
Thus, broadly-speaking, village-processed dry beans are not first-rate. This coffee has some inherent characteristics (such as “fruitiness”) which while useful to some roasters, bars it from consideration as a “top of the market” or connoisseur-standard coffee. Here again, good roads which provide the means to sell ripe coffee berries freshly picked from the tree and sold in the afternoon of the same day will provide small growers with better prices than they can achieve by processing the coffee themselves at home.
This has been the case in the Waghi Valley for many years where growers have benefited in this way, and where good-quality village-grown coffee is tipped in with that picked on well-managed plantations and becomes part of some of the best coffee shipped from PNG. Roads and the end of rascals and hold-ups will make growing coffee a more profitable enterprise for villagers who depend upon this crop for cash.
In the most unlikely event that a massive amount of coffee is prepared and sold as a single-origin coffee manufactured and packed in PNG, and not as a blend of a number of coffees, this coffee will be an inflexible product. That is to say it will not be able to be altered from time to time, as and when necessary by introducing other coffees as blend-components or compatible ingredients substituted in the established “recipe”.
Thus, in a bad year for quality, the quality will be bad. In a bad year for quantity, the quantity will be down. These effects are impossible to deal with where only your own coffee is available, and will result in the vanishing of whatever level of interest there is in the product.
Most major consumer products, be they cooking-oil, flour, chocolate, tea or coffee, are unless otherwise stated, blends made of various types of the base product. This is done so as to achieve and maintain a standard flavour, a standard quality, and a standard price to the consumer regardless of events and price fluctuations in various parts of the world.
With a blend you can have several “backup ingredients” in your recipe, so that, for example if there are floods in Indonesia you can substitute an Indian coffee in your blend because you know it closely resembles the Indonesian product which is not now available. And so on.
In reality, and considering the facts portrayed in these two articles, PNG’s coffee growers are relatively well off within the global coffee market as it stands. The highly competitive nature of PNG’s internal market sees to it that the grower who is alive to tricks played by itinerant buyers and who brings his coffee to a place where competition between a number of buyers is the rule may be assured of somewhere between 60% and 70% of the ruling FOB or export price at the time of sale.
At certain times and for short periods only, generally due to seasonal variances in supply and consequent shortages, up to 85% has been achieved. This means that around 30% of FOB value is shared by coffee-buyers, factories, transport companies and exporters in the process of drying, hulling, insuring, transporting, preparing for export and actually loading coffee aboard ships. CIC’s small industry levy comes out of this also.
These figures compare well with others from around the world where open, competitive coffee industries exist, and where government involvement or centralised marketing is non-existent. Where the latter conditions do exist, growers typically realise less for their coffee because of the cost of large and often inefficient and partisan bureaucracy which is the middle-man in these markets. A case close to home was the late –  now reconstructed and re-named – PNG Copra Marketing Board which was a byword in PNG for its deplorable record in dealings with small growers.