THE COFFEE BUSINESS IN AFRICA

THE COFFEE BUSINESS IN AFRICA

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Over 2 billion cups of coffee are consumed around the world every day. It’s no surprise that coffee is aptly described as ‘the favourite drink of the civilized world.’

Every year, roughly 140 million bags of coffee beans – worth over $16 billion – are traded globally. This makes coffee one of the most valuable legally-traded commodities in the world, after crude oil.

But man’s love affair with coffee started in Africa, and there’s an interesting legend at the heart of it.

According to legend, a goat herder named Kaldi stumbled upon his flock as they sampled berries from nearby bushes in the Ethiopian highlands. Ordinarily sluggish, he noticed his goats had an unusual amount of energy. He suspected the berries, tasted the seeds himself, and had the same reaction. It didn’t take long before coffee’s reputation, and its stimulating effect, spread across the world.

Even today, African coffee is still prized by connoisseurs around the world for its unique quality and flavor.

To give you a sense of the richness of African coffee, Ethiopia – Africa’s largest coffee producer – has 5,000 different strains of Arabica, the world’s most sought-after coffee variety. By contract, countries such as Brazil and Colombia only have about 20 strains.

Sadly, despite coffee’s origin on the continent, and Africa’s strong potential for coffee production, Africa’s contribution to global coffee supply has fallen from over 30 percent in the 1970s to just around 10 percent today.

Currently, the world’s biggest coffee producers are Brazil, Vietnam, Colombia and Indonesia.

Despite the current dominance of South America and South East Asia in the coffee production and supply business, there appears to be a huge, exciting and lucrative window of opportunity opening up for Africa in the coffee business.

In spite of Africa’s current poor ranking in global coffee production, there are three interesting reasons why now presents a golden opportunity for Africa in the coffee business.

1)  Rising global coffee consumption and dwindling supply

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According to estimates, the global consumption of coffee is expected to increase to 200 million bags by 2030. That’s a 30 percent growth from current consumption levels. This means that coffee producers have to increase their output by an extra 50 million bags over the next 10 years to meet growing demand.

While this projected growth is good news for coffee producers, the world’s current coffee production has already reached its limits.

There was a global shortage of 6.4 million bags of coffee in 2014. In the 2015/2016 season, the production deficit stands at about 3.5 million bags. Even Brazil, the world’s largest coffee producer isn’t planting any more coffee plantations.

Now is a great time for coffee producers. Our continent has a strong potential to close the coffee supply gap in the international market.

At the moment, Africa’s leading coffee producers are Ethiopia, Cote D’Ivoire, Kenya, Tanzania, Uganda, Rwanda, Madagascar and a handful of others. Ethiopia and Uganda alone are responsible for nearly 60 percent of Africa’s output.

As most parts of sub-Saharan Africa are biophysically suitable for coffee production, Africa currently has a huge and unused capacity to increase coffee supply to the international market.

2) A large and untapped domestic coffee market

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Africa has some of the lowest levels of coffee consumption in the world. There must be a reason for that.

Historically in Africa, coffee has been a cash crop grown for export, and even leading coffee producers like Kenya and Uganda have a strong tea drinking culture.

In Europe, the average per capita coffee consumption is about 9kg. In emerging economies like Brazil, it’s just about 6kg. In most parts of Africa, per capita coffee consumption is less than 1kg, except Ethiopia which consumes about 2.2kg of coffee per capita.

Given Africa’s large, youthful population, and the continent’s strong emerging middle class, there’s a lot of room for growth when it comes to coffee consumption, especially in big markets like Nigeria, South Africa, Angola and several others.

In fact, in July last year, Starbucks – the world’s largest and most popular coffee retail giant – announced a deal with a local franchise to run Starbucks cafés across South Africa for the next 25 years.

There’s also a growing presence of local coffee shop chains across the continent

3) A growing demand for specialty coffee

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Coffee is really a goldmine for Africa.

Specialty coffee refers to coffee beans that have special characteristics and a unique flavor and taste due to the microclimates and soils they’re grown in.

Around the world, the demand for specialty coffee is overtaking ‘normal’ types of coffee. It’s no surprise that top retailers in North America and Europe are stocking up on specialty coffee, which now accounts for one of every two cups of coffee consumed in America, and makes up 40 percent of coffee supply in Europe.

Africa is famous for its specialty coffee beans. And this is why key specialty coffee producers like Ethiopia, Kenya, Rwanda, South Sudan, Tanzania, Cameroon, Zambia, Burundi and Congo will benefit a lot from the growing demand for specialty coffee around the world.

There’s an interesting revolution going on in the coffee business across Africa.

While Africa has been exporting coffee for decades, most of it has been raw coffee beans. And that’s why Africa only earns a small percentage of global coffee earnings.

Historically, it’s been the processors and big retailers in the West who take the largest slices of coffee profits.

But all of that is changing. And that’s because a few smart entrepreneurs across Africa are building some interesting businesses and brands that are making the continent proud.

up for Africa in the global coffee industry.

source: www.smallstarter.com