The coffee economy

Mm! how sweet the coffee tastes,
more delicious than a thousand kisses,
mellower than muscatel wine.
Coffee, coffee I must have,
and if someone wishes to give me a treat,
ah, then pour me out some coffee!

(Johann Sebastian Bach - "Coffee Cantata," 1735 )

Coffee has been called the most universally used legal drug ion the planet. It is unquestionably the world's largest agricultural commodity.

Ethiopia is probably the place where coffee originated. So why would Starbucks resist Ethiopian coffee producers from trademarking their product to ensure that they get their fair share of the profits when it is sold in the global marketplace? Back in 2002 the editors at the Whole Earth Review had similar questions:

"So what is it about Starbucks? Megathreat to community diversity, our groundbreaker for specialty coffees? Symbol for everything wrong about globalization, or company with a conscience? King of greenwash, or pioneer in wedding commercial success and good works?" (GW)

In trademarking its coffee, Ethiopia seeks fair trade

The move could help the country's coffee growers to earn some $88 million more per year.

By Matthew Clark

The Christian Science Monitor
November 09, 2007

Yirgacheffe, Ethiopia - Nestled in the hills of southern Ethiopia lies a resource that could catapult this nation forward: coffee.

Connoisseurs worldwide savor the beans from Yirgacheffe for their distinctive flavor. And at a time when more consumers are targeting specialty brews, Ethiopia is poised to reap the rewards of a product that commands $10 per pound in the United States.

But while upscale consumers are willing to pay top dollar for the beans, farmers in Ethiopia sell their product for a pittance – less than $1 per pound. "It's like growers of Dom Perignon Champagne getting the same price as growers of bulk wine," says Ron Layton, founder and chief executive of Light Years, IP, a Washington-based group that helps producers in poor countries get better prices.

But Ethiopia recently shook up the industry with a new tactic: trademarking its specialty coffees. Overcoming resistance to the idea from distributors – notably Starbucks – the country is hoping to empower its coffee industry to earn an estimated $88 million more per year, according to Oxfam America. The move could inspire producers of other commodities throughout Africa to harness branding and capture more value from the goods they sell to consumers in rich countries.

"It's quite innovative for a branding initiative to come out of the developing world," says Seth Petchers, the director of Oxfam America's coffee program. "It's about getting [farmers] to realize the value of what they have.

"It's a big deal," adds Mr. Petchers, noting that producers from other developing countries are already asking: " 'If Ethiopia can do it, why can't we?' "

Obtaining trademarks for coffee grown in Harar, Yirgacheffe, and Sidamo allows Ethiopia – the birthplace of coffee – to decide which distributors it will grant licenses to sell those specialty coffees, and under what terms. More control over distribution will boost Ethiopia's economy, which relies on coffee for more than 40 percent of its export earnings, according to Mr. Layton and others who specialize in intellectual property rights.

"I'm very certain that five to 10 years down the line, specialty coffee farmers will make much more than they make now," says Getachew Mengistie, the head of the Ethiopian Intellectual Property Office, the governmental group that spearheaded the trademarking initiative. "They could make 75 percent to 100 percent more."

Mr. Mengistie's office is organizing a move to educate farmers, small traders, and exporters of Ethiopia's specialty coffees about the licensing deals with international distributors so that they understand the potential to earn more and have a greater incentive to increase production and quality.

"With this initiative, a network of licensed distributors will sit down with producers and exporters and discuss common interests," Mengistie says. "This will benefit everyone in the coffee chain, from the farmer to the end distributors."

Expensive product, poor farmers

In lush hills of Yirgacheffe – one of the areas that stands to benefit the most from the licensing deals – farmers barely make enough to pay for essentials.

Children run barefoot along the steep mud roads, clothed in tattered rags. People's jaws drop when they learn that a single cup of coffee in the US costs between $1.50 and $2, more than 10 times the going rate for a pound of coffee here: 17 cents.

"Everything here is green, but people's lives aren't like that," says Dessalegn Jena, assistant general manager of the Oromia Coffee Farmers Cooperative Union, one of the country's largest coffee producers. "They are suffering. The can barely buy the things they need to survive."

Still, coffee farmers here are hopeful about the government's moves to trademark Yirgacheffe coffee.

"We hope it will solve the coffee price problem," says Genene Gelegelo, chairman of a coffee cooperative of more than 900 farms in Yirgacheffe. "We expect a better life than today. We expect the price to improve and living standards to improve."

The community has already benefited from "fair trade" initiatives, whereby profits from specially labeled coffee purchased in Europe and the US went directly toward building a health clinic, two schools, and a clean water well over the past few years.

But Mr. Gelegelo says he would rather people pay good money for his coffee because they prefer it to other options, not because they want to help poor farmers. "Fair trade is a kind of humanitarian concept," he says. "This doesn't have longevity. Rather than charity, we want to sell the best quality coffee at a decent price."

Better roads mean better business

If the trademarking and licensing initiatives do improve prices, Gelegelo says that the cooperative would first seek to improve the rutted, muddy roads that prevent faster trade and often render the farms inaccessible for days at a time. The cooperative would also seek to upgrade the basic health clinic to a hospital and add four grades to the local school, which now goes only through 8th grade.

To be sure, trademarking is no panacea.

"It's important for the country as a whole, but that's not enough," says Mr. Jena. "The government needs to give special emphasis to ensuring the quality of coffee to maintain the reputation for specialty coffees," he says, adding that the government must crack down on false labeling of beans and mixing inferior beans into bags of premium beans.

Above all, says Jena, Ethiopia's specialty coffees must be skillfully marketed in the US and Europe.

He considers that task an uphill battle, lamenting that Ethiopia is still seen first in the West as the place where thousands of children died in the famines of the 1980s.

"No one expects good products to come from Ethiopia, which is a huge problem," he says.

"[The trademarking initiative] is all about potential," says Dean Cycon, owner of Dean's Beans, an organic coffee roasting company in Orange, Mass.

Mr. Cycon worked as an intellectual property lawyer for decades and advised the Ethiopian government on the trademarking initiative. "[Trademarking] has the capacity to bring in more money [to farmers] than fair trade or organic coffee," says "The next step is a major marketing campaign to teach people about Yirgacheffe."