Who We Are?
The coffee industry in China and Uganda are two very different stories. Here in Beijing, coffee shops are springing up all the time. Indeed, from 2008 to 2018, China’s coffee consumption increased by a whopping 1032%! The younger Chinese generation is the driving force behind this new ‘coffee culture’ demand. With their higher disposable incomes and acute awareness about different coffee blends and quality, there is an opportunity here for African brands to gain a foothold in this growing market. Subsequently, this demand has the potential to increase coffee farmers profits, alongside generating more value-added production and creating employment opportunities throughout the supply chain.
This week, an Africa Reimagined coffee brand gives us a unique insight into how he transformed unprocessed coffee beans from the smallholder farms of the Sheema District of Uganda into a high-quality, branded coffee now operating in China and beyond.
Can Ugandan Coffee Be the Next “Coffee Success” Story in China?
Like many Ugandans, coffee has always been a huge part of my life. My earliest memories are of helping my parents tend their small coffee garden in the rural village of Kishabya, Sheema district in south-western Uganda. Hilly with rich fertile soils and a tropical rainy season, Sheema is ideal for growing coffee. Swathes of lush, green Robusta trees – a strong, nutty coffee, indigenous to Uganda – cover the hillsides and harvesting their beans is a key source of income for the district.
To get their coffee to market, my parents relied on middlemen, who travelled over 300 kilometres from the capital, Kampala, to buy coffee beans at cheap prices from smallholder farmers. These middlemen made their living by reselling the beans at much higher prices to companies in Kampala who then ship the beans to Europe and Asia. There are currently over 10,000 middlemen operating throughout Uganda with 1.8 million smallholder farms, which accounts for 99% of Ugandan coffee production, reaping minimal profits. My parent’s coffee was being sold and drunk at exuberant prices, whilst we saw little benefits.
It was after witnessing these inequalities of the coffee trade first-hand that I decided to find my own way to tap into the international market. I would build a company that would brand and sell different types of high-end speciality Ugandan coffee, such as blends of Ugandan Robusta and Arabica, as well as single-origin Robusta. Most importantly, this company would also be founded upon humanitarian values to help improve the lives of other Ugandan smallholder farmers.
Coffee exports are our country’s most valuable agricultural export commodity, generating around 20-30% of foreign exchange earnings over the past twenty years, with 95% of our coffee production exported. An estimated 12 million people in Uganda rely on the coffee industry in some form, with over 11.9 million of these being farmers.
Yet, our coffee industry has failed to flourish beyond low-value bean harvesting and drying, whilst over the past 15 years, our productivity has stagnated at around 3-4 million bags annually. Our smallholder farmers are therefore unable to lift themselves out of poverty, with the average farmer household income at USD 435 per year, well below the poverty line.
However, recently there has been an extra push by our government to develop our coffee exports, with an export goal of 20 million 60 kg bags annually by 2030 – 5 times the current amount! For this to be achievable, the industry requires investments in productivity, alongside tapping into growing demand in emerging consumer markets, like China.
China’s Consumer Market Is Huge, With a Growing Demand for Coffee, Presenting an Opportunity for Coffee Brands Like Mine.
Coffee consumption in China is growing rapidly at an average annual rate of 20%, significantly outpacing the world average of 2%. Although China grows its own coffee in Yunnan province, most consumers prefer to buy from foreign coffee brands. Currently, China imports most of its coffee from a few sources in Asia, with Vietnam accounting for over 49% of coffee imports followed by Indonesia (14%) and Malaysia (7%). However, this growing demand for foreign-origin coffee, especially for unique coffee blends only available outside of Asia, presents a market opening for African brands like mine.
One avenue African countries have tapped into is Chinese e-commerce platforms, which are increasingly used to purchase coffee products. In 2018, 18 million Chinese consumers bought RMB 2.5 billion (USD 384 million) worth of coffee products, an 18% increase from 2017. African governments have used this trend to secure partnerships. In 2018, the joint Rwandan government and Alibaba Group Electronic World Trade Platform (eWTP) launched a livestream event to promote and sell Rwanda’s unique coffee blends on Tmall. In under a minute, 3,000 bags of Rwandan coffee sold out and Rwanda’s online coffee sales increase by 400% in China! Local Rwandan coffee brands now have increased access to the growing coffee demand from the Chinese domestic market. Ethiopia is also following this path, having signed a cooperation deal with the eWTP in 2019.
Important Steps Have Been Taken to Enhance Our Cooperation With China
China is a key export market for my country and the Ugandan government and the Ugandan Coffee Development Authority (UCDA) have developed a five-year ‘coffee roadmap’, which aims to establish cooperative partnerships with China to drive demand, develop our value-added capacity and increase our coffee value by up to 15%.
The UCDA is striving to brand and promote our high-quality coffee across the world. Despite being the world’s eighth-largest coffee producer in 2019, our coffee is still relatively unknown, as most of our coffee exports are unbranded and become part of own-label supermarket blends, preventing end-consumer awareness of our country’s rich and unique blends.
Significant progress has been made on increasing awareness of Ugandan coffee in China. In partnership with the Ugandan consulate in Guangzhou, the UCDA has hosted promotional events, expos and partnerships with Chinese coffee stakeholders. As a result, single-origin Ugandan coffee is becoming more reputable and is being sold to wholesalers, cafes, and retailers across China.
Further, in September 2019, the Ugandan government and the coffee regulatory authority initiated a partnership with China’s Yunnan Coffee Exchange (YCE). The YCE aims to support Uganda in improving coffee export quality to meet international and Chinese export standards, alongside helping promote Uganda’s coffee in China through its distribution channels. The Ugandan consulate in Guangzhou has also pushed for our coffee brands to forge ties with Alibaba and WeChat to increase our coffees reach, as Rwanda and Ethiopia have experienced.
These initiatives have supported my brands own growth. Attending coffee expos in Shanghai and Guangzhou has allowed me to showcase the distinctive blends of Robusta and Arabica beans. Subsequently, I have managed to grow my client base internationally and now supply coffee shops from Shanghai to Seoul!
But despite these achievements, Uganda’s overall coffee exports to China are still low compared to our African counterparts. By 2020, Uganda was exporting between 3,000-4,000 tonnes of coffee per annum compared to Ethiopia’s 6,000. Java House, a Kenyan coffee shop chain is exporting 10-15 tonnes of its coffee per month through a large-scale distributorship agreement with Green Chain, a subsidiary company, CJ Smart Cargo.
Enhancing Coffee Exports Will Support Our Smallholder Farmers.
Clearly, there is still progress to be made.
As a development partner, China has often offered support across the continent in relatively unique and distinct ways. This should be extended to the coffee sector too.
For instance, one method to support the Ugandan coffee industry could be through providing finance to smallholder farmers since many do not have access to financial loans and are apprehensive to borrow from formal financial institutions due to fears of high repayment terms, whilst lenders are unwilling to provide capital as agricultural production is perceived as a risky venture.
So how can Chinese actors support access to financial loans? Recently, the Bank of China has offered microloans to smallholder farmers in Kenya, to provide relief from economic losses from COVID-19, due to the drop in agricultural exports. In Uganda, our smallholder farmers could use microloans to invest in agro-products and production methods to increase their value-added capacity and enhance their productivity. During this process, Chinese partners should work with initiatives such as the Agricultural Credit Facility (ACF) to strengthen the framework of our existing lending organisations.
A second area that China is already supporting is upgrading physical infrastructure, such as the extension of the Standard Gauge Railway (SGR) from Kenya to Uganda. Uganda is landlocked and our coffee must be transported hundreds of miles on poorly constructed roads from rural regions to Mombasa, Kenya, for export, which reduces value chain efficiency. Finalising the terms of the SGR deal and linking it to further transport infrastructure between coffee-producing regions and exports can play a key role in growing Uganda’s coffee industry and should be an area of focus.
As exports increase, so will profits. These profits will raise smallholders’ incomes and can be reinvested into the coffee industry to help develop its value-added capacity. Additionally, more employment opportunities will develop across the supply chain. Currently, we have a low unemployment rate at just 2.5%, however, our population is estimated to double between 2020 to 2060 to 104 million people. Developing our coffee industry now will therefore ensure more jobs for our future generations, whilst supporting small household farmers, like my parents.
My dream is to one day run coffee shops across China, where Chinese people will come to enjoy the uniqueness of Uganda’s coffee. I also hope that through cooperation with China, our farmers can earn more profits and produce more value-added coffee to help our coffee become known worldwide. But for this to be a reality requires further cooperation between both China and Uganda.
Frandan Tumukunde is a Kampala-based farmer and innovator who is also the Chief Marketing Officer of Doorstep Foods, a company co-founded.