VICENTE PARTIDA sat down with development economist and SCA Board Member VERA ESPINDOLA RAFAEL to learn more about the preliminary results of a forthcoming research project challenging the industry to rethink the pervasive export-oriented approach to coffee growing.
Supported in part by the SCA, Vera set off to conduct interviews with coffee producers, buyers, roasters, and café owners in cities across Mexico, Brazil, Colombia, and Rwanda to capture a snapshot of specialty consumption in countries traditionally seen as producers, not consumers, and understand what value, if any, producers were getting from selling domestically. Here, in discussion with Vicente, Vera shares preliminary results of her work, which the SCA will publish in full later this year.
Vicente Partida: In your Re:co talk last April, you mentioned that the research you’re doing right now had been a long time coming. Tell us a little bit about your work, your professional interests.
Vera Espindola Rafael: I’ve always been very interested in agriculture in general – more through a lens of economic development and economic prosperity for countries – with a focus on rural development and how producers earn more for their product, because that’s been an ongoing issue. That’s exactly how I first came into contact with coffee: I was asked to do a value chain analysis on the coffee chain in Central America in 2005 by Anacafé in Guatemala. From there on, I started to learn more about the supply chain and how coffee ends up on consumers’ tables. It was clear to me that the majority of the work – and what I also see as risk – lies with producers at the organizational level, and that we were not creating enough value for producers. I wanted to see if intervention could do this, so after graduating as a development economist, I started to work for UTZ on the certification side of things. I started to learn about other economic environments, like the East African context or the Asia-Pacific context – and other Latin countries, of course.
VP: Most recently, you’ve been working on a research project looking at specialty coffee consumption in what we would traditionally think of as coffee-producing countries. What did you want to understand or explore when you began the study?
VER: When I started living in Mexico City (2016), I was seeing a lot of small cafés – a lot of specialty coffee cafés – where people are consuming really good quality coffee. I was already having conversations with Ric Rhinehart at this time about specialty coffee in general, but once I started noticing this, our conversations started to get further into, “What if these countries would focus more on this uptake in consumption with this group of people?” I had heard anecdotal stories of café owners or roasters in producing countries who were paying the producers very fairly but also of importers/ roasters who were finding it more difficult to source coffee because it was being valued higher by local competitors. I wanted to explore this more – is it really happening, and if so, how? The perception is that if you buy something locally, you pay less than the price fetched for exporting it elsewhere, where more value is created. These stories indicated that there was value – usually found at the end of the chain – being created within the country itself. So, one of the questions we wanted to answer is, “What price does the producer receive when they sell their specialty coffee on the national market compared to the price they receive for export?”
VP: I want to come back to this idea, because it’s an important one. There has been a working assumption the past few decades that the best way to create higher value, to get higher prices, for producers of commodities, is through export. Here, you wanted to challenge that assumption.
VER: Yes, I wanted to challenge that assumption. And I should add another assumption I wanted to challenge, too – because it’s especially true also for coffee, sadly – that the best coffee is exported because the local consumers don’t know what they have. And that’s something I understood to be mostly true maybe 10 years ago, but within the last 10 years, I have had excellent coffee in some of these cafés. So, when I heard some of these anecdotes – especially the one of local buyers outbidding European buyers – I wanted to know, what’s behind this? Why is a local buyer paying more? This guided the initial study, and then we decided to expand it to four countries: Brazil, Colombia, Mexico, and Rwanda.
VP: So, you wanted to look at two things: first, to challenge the assumption that consumers in specialty coffee producing countries don’t understand or care what specialty is (“What does specialty coffee consumption look like in these countries?”) but also to understand the difference in price – if any – between domestic and export sales (“What price does the producer receive when they sell their coffee on the national market compared to the price they receive for export?”). How do you answer these questions?
VER: We decided early on that these were case studies, because what we wanted to understand were the general trends – What are we finding? I focused the case studies on specialty coffee cafés and roasteries that are known for serving 80+ coffees and not by defining whether or not the biggest part of their revenue was coffee, as the SCA does. What quality of coffee was being served? Were they known for selling quality coffee? Were they valued by their peers as being such?
Sometimes, that’s quite difficult because there’s no certification behind it, no regulation, just merely that among the specialty coffee community, these businesses were seen as serving great coffee scoring above 80 points.
VP: How did you find these cafés in different countries?
VER: With Mexico, I was more familiar with the situation, so what we did there was also to go outside the capital city and include two other cities – Guadalajara and San Cristóbal de las Casas – and use some case studies from them. In any country, we expect the capital city to have the latest trends, but here they had [specialty] cafés outside the capital – That’s why I decided to include them in the sample.
In the case of Colombia, I relied on specialty coffee producers I knew that said, “These are the specialty coffee cafés in Bogota, these are the roasteries.” In Brazil, it was through a contact – in this case, Kelly Stein – who connected me with specialty cafés throughout Brazil. So, there is a bit of a network.
VP: And then you conducted interviews? What kind of information did they share with you?
VER: Yes, interviews and site visits. Visiting the roasters themselves, visiting some producers – not all of them, but some producers are visited, especially in Colombia and Mexico.
They were all very interested – or surprised? – that the SCA was interested in knowing more about what was going on in producing countries, not from a producing perspective, but from a consuming perspective. Traditionally, the “science” of consumption has only been tracked in “traditional” markets, being the US, the EU, Asia. The defining market for consumption is the US, and they understand the interest in South Korea and Japan, but they found it very interesting to see that we were asking questions about what they were consuming. This meant that they were very open to sharing their numbers, confidential numbers – when it comes to price, it’s sensitive. But they were happy to answer the questions we asked: How do you source? From what producers do you buy? Where are they located? What price do you pay at farmgate?
VP: And what have you learned from the answers so far?
VER: One of the things, while gathering information on the history of coffee consumption in each place, was trying to identify when things started. When did these specialty cafés start in certain cities? I don’t want to extrapolate trends across an entire country – these are case studies in these cities – but you would hear about small entrepreneurs that decided to set up one café, and then it splintered off, becoming more, “and then there was this, and then there was that.” In each case, there was a sequence of events and activities happening.
When it came to the question of what the producers were receiving – what I showed at Re:co – it was surprising, even for me. For Brazil and Colombia, it was not that they were receiving more, but that farmgate prices were competitive in comparison to the “Free on Board” (FOB) price. In the case of Mexico, the prices that producers received at farmgate were actually higher than FOB at that moment. Everyone was shocked and looked at me and was like, “it’s not happening.” Case studies are not specifically representative, but they can indicate trends. And these are, again, it’s a niche market – specialty cafés, specialty coffee roasters. They are focused on one particular part of a product. A producer does not produce 100 percent of their coffee as specialty; it’s only a part of what they produce. So, in addition to understanding the basic question of, “What prices are producers receiving?”, what we’re working on now, in the reports, is, “What potential is there?”, and now a very important question, “Should there be a greater investment made in this?” Should, for example, Colombia – and we’ve seen great consumer campaigns from them in consumption markets – invest more in specialty coffee consumption in their national market for the benefit of the producer?
Producing countries have always been focused on the other side of the pond, or the neighbor up north – what are they consuming and how can I sell my coffee to them? It’s a tremendous pressure; you’re depending on a consumer that’s not from your culture, and you need to work hard to understand what they want or need or will buy and then change what you do to fit. What if here we have a window of opportunity for countries to start focusing on what they want to consume? What demographic trends are going on here? Why is a student in Mexico, 20 years old, spending a large part of their income on specialty coffee?
VP: You’re saying that you believe there may be a greater opportunity for producing countries, especially organizations that represent or promote interest, to influence the market or increase/promote consumption in their own market because, of course, they will know consumers in that market better than in a foreign market.
VER: Yes, their circle of influence is much higher on the consumers in their country than consumers outside their country. When you say “greater opportunity,” I would rephrase that as “a really good opportunity, ” and in the case of Mexico, I would say “a very interesting opportunity” if you see that specialty coffee roasters are price competitive with roasters outside Mexico. What is the value of this opportunity? And that’s just based on what they’re consuming now, so then we should also be asking, “What is the trend here?” That’s based on demographics, on income, on social relevance in a certain community. We can study that even more in our countries; we should invest in understanding and wanting to know more about consumption. The majority of “producing” countries don’t have this, a decent study on what they’re consuming. At most, they can usually say, “We produce this much, we import this much, we export this much, hence this is our consumption.” It’s a good number. That’s good homework. But what are you consuming?
They focus on obtaining studies about other countries – what is the age of consumption and which market should be my focus; is it Japan or Taiwan? And that’s also good; you should not lose that. But you should not forget about your own country, about your own habits, and where are we going with those habits?
At the end of the day – for me – it’s an important point: you can see these producers having better circumstances or having the opportunity to sell really good coffee for a really good price compared to others who aren’t. The other one is also seeing small and medium entrepreneurs finding “investments under their mattress,” so to say, and being the ones to explain what good quality, what specialty coffee is to their consumers, influencing where specialty coffee is heading in each of these countries and being ambassadors. There is a significantly different way of looking at specialty coffee here, of saying, and I quote one of my case studies, “I want to serve the best quality coffee of my country to my consumers here.”
VERA ESPINDOLA RAFAEL is a Development Economist and Founder of CHIHUA Consulting focused on sustainable and inclusive interventions that benefit all actors within the coffee and cocoa chain.
 FOB, alternatively “Freight on Board,” is the total cost of producing and delivering the green coffee to the nearest port. Beyond this point, buyers are responsible for the additional cost of shipping and any other fees associated with getting the goods to their address.
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