Agriculture and Food Authority A)
FUTURE OF COFFEE
“Strategies to Promote Domestic Coffee
Consumption in Africa
Case Study: Kenya
Presentation during
AFCA SPECIALTY PROGRAMME
At
Sea Cliff Resort & Spa, Zanzibar
28-31 October 2019
By
BENSON APUOYO, MANAGER MARKET RESEARCH & PRODUCT DEVELOPMENT,
COFFEE DIRECTORATE
KENYA
1
OUTLINE Background
Trade in Africa
Kenya’s Case Study
The Kenya Government Big 4 Agenda
The Manufacturing Pillar
Key drivers of domestic coffee consumption in Kenya
Number of coffee houses & stakeholders in value addition in
Kenya
Marketing and promotion of domestic coffee consumption
Areas of support and partnerships
Conclusion2
BACKGROUND Africa consume very little coffee of what they produce with
most of it exported to the global market outside the
continent.
Countries in Africa which have registered increase in
domestic coffee consumption:
1. Ethiopia
- believed to be origin of coffee
- deeply rooted coffee drinking culture
2. South Africa
- multiracial facet
- increased middle level income
- entry of new coffee houses2
BACKGROUND3. Nigeria
Young middle class
Population size
Effect of international exposure- young graduates coming back from
studies abroad
Examples: Café Neo Coffee Shop in the lead have revolutionized coffee
drinking culture in Nigeria
4. Kenya- Government deliberate effort to promote domestic coffee consumption (youth in
Kenyan universities & tertiary institutions-target)
- Increased disposable income of the middle class
- Love for coffee
- Increased investment in coffee outlets
Consumption: 70 g per person per year
- 5% of national production2
BACKGROUND5. Cameroon
- Government deliberate effort to promote domestic
consumption of own coffee
- Festicoffee- a platform for the promotion and trade of
coffee from Cameroon
- coffee tasting day
6. Uganda
-With effort of UCDA – campaigns were launched for
domestic coffee consumption with some level of success
2
TRADE IN AFRICA Africa is one of the most resilient, innovative and creative business
people in the world.
Africa has more entrepreneurs with a strong private sector.
Coffee - A classic example of the primary commodity and mono-crop
dependency of many sub –Saharan African countries.
This makes coffee producing countries susceptible to a number of
exogenous factors like:
- unfair trade competition with the western world (Visa refusal is one
strong form on Non- Tariff Barrier),
- Global price fluctuations.
Over 90 % of coffee is produced in developing countries (Southern
hemisphere), yet most of the consumption takes place in the developed
countries (Northern hemisphere).
2
TRADE IN AFRICA
According to World Trade Organization (WTO), intra – African trade accounts for
less than 10% of total trade.
Trade Barriers
Kinds of NTBs that are seldom mentioned in policy meetings or documented in any
meaningful way and yet remain big barriers to trade for African exporters and
entrepreneurs:
(i) Visa refusal by the granting authority- violation on freedom of movement
(ii) Restriction on international movement of people through difficult entry visa
procedures.
(iii) Entrenched negative perception about the continent.
(iv) “Trust deficit”
(v) The cost of market entry
(vi) “Knowledge deficit” that many exporters face when seeking market entry
(vii) Attitude and perception-ripe in Africa: The effects of xenophobia. Negativity breeds
Xenophobia
(viii) The constant shifting of the technical goal post regarding- packaging, labelling,
certifications. 2
TRADE IN AFRICA
Undocumented Barriers
These are perseverance and adaptability barriers that undermine the efforts of many
African entrepreneurs to undertake international trade.
The build up to this market exposed Coffee Directorate to many challenges of a start-
up export business and the realities of trading on other continents.
Where as Trade between African countries stands at less than 10% of the region’s
total trade. In comparison, 40% of North America’s trade is with regional partner.
The rate soars to 63% in Western Europe.
Intra-Comesa trade stands at 7%.
Africa is viewed as:
Economy of underutilization
Economy of scarcity of consumer goods
Economy of low wages.
2
COFFEE CONSUMPTION IN KENYA
CASE STUDY
2
Part I: Facts About Kenya
Kenya’s geo-strategic location offers it preferential access to regional
and international markets
The Nairobi Airport (JKIA) connects Africa to Europe, Asia and currently to the USA
Kenya has secured Category 1 status, granting it direct flights to the US.
The Port of Mombasa is gateway to East and Central Africa region
Main transport hub to most of the African countries in the region with great developments in infrastructure; highways and SGR.
Area 582,646 km2
Population 48 million
GDP at current US$ 77.9 billion
GDP per capita US$ 1,700
FDI Flows 2015 US$ 1.4 billion in 2015-UNCTAD
GDP Growth Rates 5.8% in 2016 and5.2% projection in 2017 (WB)
Credit rating Standard & Poor's; B+ (stable)Fitch: B+ (Stable)Moody’s: B2 (Stable)
FDI Growth Rate 98.0% in 2013;92.4% in 2014;45.3% in 2015
Inflation Rate 7.1% - 2017
Kenya: Country profile…
4.6% 4.7% 5.3% 5.7% 5.8%
2012 2013 2014 2015 2016
% GDP Growth
Structure of Kenya’s Economy
Mining share of GDP in Kenya is very low:
-Mining is an infant industry that is predominantly in the exploration stage
-Opportunity for early adopters and first movers
Kenya’s international trade is remarkably skewed
Leading destinations for exports are:• Africa 42%• Western Europe 23% • Asia 22%
Leading sources of imports into Kenya are :• Asia (mainly China) 62% • Western Europe 17%
Immense opportunities exist for increased trade between Kenya and Other African countries (below 10%)
Aligned to SDG 9 – Industry, Innovation and Infrastructure
PROBLEM STATEMENT
a) Over 95% of the Kenyan coffee production
is exported to various international markets
as green coffee
b) Domestic market absorption currently is at
5%
c) The country has a potential to consume
between 20-30% of the national production
2
OVER RELIANCE ON EXPORT OF GREEN COFFEE IN KENYA
LOW DOMESTIC COFFEE CONSUMPTION IN THE COUNTRY
COFFEE EXPORT BY DESTINATION
FOR 2017/2018
NO DESTINATIONNUMBER OF BAGS(60KG) NET WEIGHT-KG
1GERMANY 113,637 6,818,217.40
2UNITED STATES 113,422 6,805,306.80
3BELGIUM 101,235 6,074,113.00
4KOREA, REPUBLIC OF 87,111 5,226,660.00
5SWEDEN 58,824 3,529,429.80
6AUSTRALIA 25,278 1,516,682.00
7FINLAND 23,076 1,384,560.00
8NORWAY 18,344 1,100,630.00
9UNITED KINGDOM 17,223 1,033,379.00
10OTHERS 163,344 9,800,637.31
TOTAL 721,494 43,289,615.31
DOMESTIC COFFEE CONSUMPTION TREND
YEAR LOCAL CONSUMPTION
MT (GREEN BEAN)
NO. BAGS
2009/10 509.90 8,498
2010/11 566.60 9,443
2011/12 629.50 10,492
2012/13 716.00 11,931
2013/14 744.00 12,405
2014/15 756.00 12,591
2015/16 771.00 12,842
2016/17 1,050.20 17,520
2017/18 1,576.70 26,278
KENYA’S COFFEE SHOPS ATTRIBUTES
In the Kenyan specialty coffee industry, it is
imperative for specialty coffee
entrepreneurs to understand the important
attributes that motivate consumers to
patronize specialty coffee shops so as to
have a competitive advantage and sustain
their businesses.
Before, there was no existing published work
on domestic coffee consumption,
particularly in the Kenyan context based on
empirical evidence21
COFFEE SHOPS ATTRIBUTES
Coffee Directorate (Coffee Board of Kenya)
undertook a study in the year 2011/12 in
this area to understand the factors that
could help enhance domestic coffee
consumption in Kenya.
The study adopted both qualitative and
quantitative approaches in an exploratory
sequential mixed research design to explore
and identify attributes used by Kenyan
specialty coffee consumers when selecting
specialty coffee shops.22
COFFEE SHOPS ATTRIBUTESThe findings from the qualitative approach
were used to develop the survey
questionnaire.
Based on purposive sampling, responses from
450 respondents were analyzed using
exploratory factor analysis.
23
COFFEE SHOPS ATTRIBUTES
All the survey statements were measured
using a 5- point Likert type scale ranging
from 1- Very unimportant, 2- Unimportant,
3-Neutral, 4-Important, 5-Very Important.
Exploratory Factor Analysis (EFA) using SPSS
version 20 was used.
Factors with eigenvalues greater than 1 are
considered sufficient.
Factors loading in the range of ±0.30 to ±0.40
are sufficient to meet the minimum level of
interpretation (Hair et al.,2006).24
COFFEE SHOPS ATTRIBUTES
i. The Coffee Directorate study used a
factor loading cut-off point of 0.40 for
retaining items in the factor analysis
ii. From the initial list of 61, a total of 9
items were factor again with the items
loading onto nine factors
iii. The nine factors were extracted using
principal component analysis with promox
rotation
25
COFFEE SHOPS ATTRIBUTES
Nine factors were labelled:
i. The youth leverage
ii. Tangibles
iii. Quality coffee
iv. Service quality by staff
v. Brand preference
vi. Promotional activities
vii. Social responsibility and recreation
viii. Food & drinks selection
ix. Other amenities26
The first factor. The value of youth leverage had 12 items:
Factor loading: From 0.532 to 0.857
The Value of Youth
Fresh perspective
Adaptable
Enthusiastic
Fast learners of
new technologies
More aware of new tools
Transfer of ICT Skills
More Computer Literate
Able to build
partnerships
At ease with
changes
Future Managers /
Leaders
Open and Frank
27
The second factor: Tangibles: Had 11 items: FL ranging from 0.422 to
0.810
Tangibles
Friendly staff
Helpful
staff
Reasonable price with
quality service
Reasonable price with
quality coffee
Reasonable price with
portion sizeClean restrooms
Easy to read menus
Adequate spacing
between tables
Courteous staff
Quiet atmosphere
28
The third factor. Coffee Quality had 10 items: FL from
0.508 to 0.886
Coffee quality
Coffee with quality beans Coffee with
freshly roasted beans
Coffee brewed
using right skills
Freshly brewed coffee all the time
Coffee with preferred
taste
Coffee with preferred
aroma
Coffee with the right
temperature
Customized coffee
Coffee with consistent
quality
29
The fourth factor. Service Quality Staff had 6 items: FL
from 0.516 to 0.729
Service quality staff
Staff performs service right the first time
Staff offers individual attention
Staff knowledgeable
about the product
Staff gives prompt service
Staff attentive to specific
needs
Staff attentive to order
30
The fifth factor. Brand preference had 4 items: FL from
0.621 to 0.852
Brand preference
Frequently visit a particular coffeehouse familiar with
Frequently visit a trusted a particular
coffeehouse
Frequently visit a particular
coffee house for its ambience
Frequently visit a particular
coffeehouse for the quality of its
products it serves
31
The sixth factor. Promotional activities had 4 items
FL from 0,503 to 0.737
Promotional Activities
Free testing of coffee and food items
Availability of merchandised
items
Availability of private rooms
Availability of wall screen Tvs
for news & entertainment
32
The seventh factor. Social responsibility and recreation
had 4 items. FL from 0.422 to 0.726
Social responsibilities & recreation
Environmentally friendly coffee
house
Place to relax during leisure
times
Place to meet potential clients
Place with warm lighting
33
The Eighth factor. Food and drinks
had 2 items. FL of 0.710
Food & Drinks
Variety of drinks
(Other than coffee)
Variety of food
34
The Ninth factor. Other Amenities had I item:
FL 0.834
Other amenities
Smoking area
35
The exploratory factor analysisFactors with eigenvalues greater than 1 are considered
significant (Hair et al.,2006).
The Eigenvalues for the nine variables were greater than 1.
Youth leverage = 12.27
Tangibles = 3.08
Coffee quality = 2.69
Service quality by staff =1.82
Brand preference = 1.53
Promotional activities =1.34
Social responsibility & recreation =1.22
Food & drinks selection = 1.15
Other amenities = 1.08
36
The nine factor solutions
Nine factors explained 59.1% of the total variance
Youth leverage = 18.07%
Tangibles = 13.10%
Coffee quality =6.85%
Service quality by staff =5.99%
Brand preference = 4.05%
Promotional activities =3.41%
Social responsibility & recreation =2.98%
Food & drinks selection = 2.71%
Other amenities = 1.94
37
COFFEE HOUSES OWNERSHIPJava House 53 outlets
Art Café 14 outlets
Avant Group 8 outlets
Big Square 7 outlets
Others 149 outlets
3
8
NUMBER OF COFFEE HOUSESNo County City/Town No of Coffee Houses %
1 Nairobi Nairobi 128 40%
2 Mombasa Mombasa 21 8%
3 Kilifi Kilif (12), Malindi(5), Watamu (1) 18 7%
4 Nakuru Nakuru (12), Naivasha (6) 18 7%
5 Kisumu Ksumu 16 6%
6 Kwale Ukunda/Diani 10 4%
7 Uasin Gishu Eldoret 9 4%
8 Narok Narok 7 3%
9 Kiambu Kiambu (2), Thika (4) 6 2%
10 Meru Meru 6 2%
11 Nyeri Nyeri (4), Karatina (1), Othaya (1) 6 2%
12 Embu Embu 5 2%
13 Liakipia Nanyuki 5 2%
14 Machakos Machakos (4), Mua Hills (1) 4 2%
15 Taita Taveta Taveta (3), Voi (1) 4 2%
16 Trans Nzoia Kitale 4 2%
17 Kisii Kisii 2 2%
18 Busia Busia 2 1%
19 Homa- Bay Homa- Bay 2 1%
20 Kakamega Kakamega 2 1%
21 Kirinyaga Kerugoya 1 0%
Total 278 100%
COFFEE PRICESCity/Town Serving Cup Size in ml Price in Ksh
Diani/ Ukunda Café Latte 200 250
Cappuccino 220 220
Espresso 100 150
House coffee 120 180
Macchiato 220 200
Kisumu Café Latte 200 400
Cappuccino 220 220
Espresso 100 150
House coffee 120 180
Macchiato 220 200
Nairobi Café Latte 200 250
Cappuccino 220 200
Espresso 100 100
House coffee 120 200
Macchiato 220 25040
POPULAR COFFEE DRINKS
4
1
No Type Percentage
1 Cappuccino 49%
2 House coffee 29%
3 Café Latte 10%
4 Black coffee 5%
5 Espresso 4%
6 Americano 2%
7 Medicinal coffee 0%
8 Mocha 0%
Total 100%
DOMESTIC COFFEE CONSUMPTION TREND
YEAR LOCAL
CONSUMPTION
MT (GREEN BEAN)
NO. BAGS
2009/10 509.90 8,498
2010/11 566.60 9,443
2011/12 629.50 10,492
2012/13 716.00 11,931
2013/14 744.00 12,405
2014/15 756.00 12,591
2015/16 771.00 12,842
2016/17 1,050.20 17,520
2017/18 1,576.70 26,278
COFFEE PRODUCTION, VALUE ADDITION
AND CONSUMPTION IN KENYA
2
Year 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/1
7
2017/18
National
coffee
production
in MT
42,000 46,629 49,960 39,865 49,475 42,038 46,121 38,620 41,375
Domestic
consumpti
on of
coffee in
MT
510 566 629 716 744 756 771 1,050 1,577
Percentage 1.21% 1.21% 1.26% 1.79% 1.50% 1.8% 1.67% 2.75% 3.81%
DOMESTIC CONSUMPTION TRENDS IN KENYA
44
509.9 566.6 629.5716 744 756 771
1051.2
1576.7
0
200
400
600
800
1000
1200
1400
1600
1800
QUANTITY(GBE) MT
NUMBER OF COFFEE HOUSE IN KENYA IN 2017/18
4
5
6 9 1630
44
101
187
219
249
0
50
100
150
200
250
300
> 40 YRS 30 TO 40 YRS 20 TO 25 YRS 15 TO 20 YRS 10 TO 15 YRS 5 TO 10 YRS 3 TO 5 YRS 1 TO 2 YRS 0 TO 1 YRS
NO OF COFFEE HOUSES 1977-2017
25- SOME STAKEHOLDERS CURRENTLY IN VALUE
ADDITION IN KENYA
Dormans coffee
Sasini coffee
Cafe’ Dela Duka
SuperGibs
Africa Tea & Coffee
Goldrock International
Kenya Nut Company ltd
Bekas Systems Ltd
Muramuki FCS
Mutira FCS
Othaya FCS
Dedan Kimathi University
Kenya Co-operative Coffee
Dealers
International Beverages Ltd
Java House
Najasha Coffee
Meru farmers union
M.A Pandit & Co. Ltd
African Coffee Roasters
Fair To Good
Rockbern Co. Ltd
Kensam Estate
Vava Coffee
Kenya Planters Co-operative
Union (KPCU)
Gusii Farmers Union
4
6
25- THE NUMBER OF STAKEHOLDERS CURRENTLY IN
VALUE ADDITION
47
S/No Category Number of players
1 Farmers’ based organizations 6
2 Coffee dealers 19
3 Coffee houses 249
4 Universities 4
Total 278
CONSUMPTION DRIVE THROUGH UNIVERSITIES
i. Tyranny of numbers (Student population)-
Market is about numbers
ii. Younger affluent consumers
iii. Hope, dream & image
iv. View coffee consumption as an experience
v. Dating culture
vi. The dons culture
vii. Health benefits
viii. Revenue generation
48
Critical success factors with universities
PROMOTION OF KENYAN COFFEE IN
UNIVERSITIES
University students sampling Kenyan coffee during one of the campaigns
KEY DRIVERS OF DOMESTIC CONSUMPTION IN KENYA
1) Youths in universities and institutions of higher learning
(Versatile customers)
2) Growth of supermarket chains and retail outlets in major
towns within Kenya for shelves space
3) Growth of coffee shops chains in urban centres in Kenya-
“café culture”
4) Budgetary allocation for generic promotion and marketing
value added coffee
5) Availability of different brands of coffee in the local market
targeting different economic classes
6) Vibrant informal coffee vending outlets-hawkers
7) User friendly policies, rules and regulations governing the
coffee industry in the country
8) International organizations (ICO, IACO, SCA, AFCA, etc)
support
5
0
UNIVERSITIES WITH FULLY FLEDGED COFFEE HOUSES
No Name of
University
Status County
1 Dedan Kimathi
University of
Technology
Public Nyeri
2 United States
International
University- Africa
Private Nairobi
3 Strathmore
University
Private Nairobi
51
COFFEE HOUSES AT UNIVERSITIES –
AWAITING LUANCH
No Name of
University
Status County
1 Egerton University Public Nakuru
2 University of
Eldoret
Public Eldoret
52
Coffee Directorate has purchased coffee
brewing equipment for the following
CONCLUSION
1) Coffee for consumption in Africa, Kenya included, isgrowing and will be more than the production byAfrican coffee producing countries in the year 2040.It needs to be harnessed.
2) Intra Africa trade is only 10% compared to thepotential of 80%. The potential needs to be tapped.
3) There is need for sustainable support programme toderive the course of coffee consumption in Africa.
4) Domestic coffee consumption is less susceptible tonon trade barriers now common in the competitiveglobal coffee trade.
DRINK COFFEE KENYA
Thank you
54
