[S4:E14] Articles Read: Increasing Local Consumption

Podcast feed

This episode kicks off a new series on local consumption of coffee and how that can be an important tool for improving the livelihoods of smallholder coffee producers.


Read the original article here: Increasing Local Consumption

Full interview with Adi Taroepratjeka: [S1:E3] Interview with Adi Taroepratjeka

Full interview with Wiliam Edison: [S2:E1] Interview with Wiliam Edison

World Coffee Producers Forum, 2017

Central Dogma of Coffee

This was the topic of the previous series of podcasts. The Central Dogma is a concept I use to help make sense of the coffee industry.

[S4:E8] Articles Read: The Central Dogma of Coffee

[S4:E10] Articles Read: Improving Farmgate Coffee Prices

My newest coffee is from Oaxaca, Mexico and it's a chocolate-bomb! Check it out: Shop.OilSlickCoffee.com/products/mexico-oaxaca



Michael: In previous episodes of the articles read series, I focused on a concept. I call the central dogma of coffee. I started with that concept because it gives us a good model to understand how the coffee industry works, how the money flows, how value is created, et cetera. I have provided links to those specific episodes in this episode’s show notes.

This episode kicks off the next series I’ll be covering, which is the idea of local consumption. Local consumption means that coffee is consumed in the same country or region in which it was produced.

There are several advantages to local consumption, but the primary advantage from my point of view is that it keeps the entire supply chain in the producing country. And that hopefully keeps all the money in the same country.

I first learned of the concept at the world coffee producers forum held in Columbia in 2017. The forum was important to me because it was an opportunity for me to see and hear from hundreds of producers. And hear what truly concerns them about coffee production. Bill Clinton was one of the keynote speakers and one of the themes he kept coming back to was using coffee as an anchor to improve a country’s economy.

He obviously operates on a much larger scale than I can, but what I hope to do is take his ideas and incorporate them into my small circle of influence. And to me, that means encouraging producers to think first, like business people. Then build a business that focuses on local consumption and only after that to take the leap into globalized coffee trade.

There are a lot of requirements and assumptions that go into that. And those details will be fleshed out over the next three episodes of this series, starting with this one.

The first article I wrote about local consumption is titled "Increasing Local Consumption" written in 2018. I wrote it after having compiled all of my notes, recordings, transcripts, tweets, Instagram posts, et cetera, from the forum.

I have provided a link in the show notes to all of that information. If you are interested. It’s a lot of material, all of which was quite formative to the way I look at and understand the coffee industry right now. So now here’s the first article in the series on local consumption titled "Increasing Local Consumption."

One of the things repeated at the World Coffee Producers’ Forum was the need to increase local consumption of coffee. After hearing everyone’s defense of the proposition. I certainly agree with it. I’ve also done a bit of research on my own, which is the basis for this article.

Before we can start to explore local consumption. We need a growing middle class. Coffee is a luxury item and even more so with specialty coffee. Before we try to increase the local consumption of higher quality coffee. We need a consumer who has the disposable income to afford a more expensive product. This increase in the size and relative wealth of the middle class is happening in a lot of producing countries.

The following is a quote from Brookings titled "The unprecedented expansion of the global middle class."

Henry: At a global level, we are witnessing the most rapid expansion of the middle class the world has ever seen.

In fact, the next decade could see a faster expansion of the middle class than at any other time in history. Within a few years, based on current forecasts, a majority of the world’s population could have middle-class or rich lifestyles for the first time ever.

Michael: As local economies improve and middle-classes grow and individuals gain more disposable income, they’re more able to afford and to explore more expensive, personal interests in coffee, which can be an expensive hobby. Consider this; your typical latte from say, Starbucks is around $3 and 50 cents. That’s a lot of money in a producing country where one could probably get an entire meal for around $5.

Therefore before promoting local consumption, there needs to be a solid middle-class in place with the disposable income necessary to afford to explore better quality coffee.

Part of my research led me to the concept of rural-urban connections. An example of a rural-urban connection would be producers and processors located in rural areas, adjacent to urban areas that contain roasters cafes, distributors, et cetera. Often rural residents send their kids to school in a neighboring urban areas.

They do some shopping there as well as business to business transactions. For coffee, producers and processors this could mean working with local roasters to provide green, un-roasted coffee. Or doing the same for a distributor who might further distribute the coffee to other regions. These links between the two regions promote the flow of wealth, capital, services, and products.

The following is a quote from "Harvesting Opportunity" from the Federal Reserve Bank of St. Louis.

Henry: The ability of urban consumers to purchase food, feed, fiber, energy and tourism/recreational opportunities from rural areas is a crucial factor in the development of rural areas.

Michael: Local consumption, meaning consumption within the producing country or country that grew the coffee is important for a number of reasons. One important reason is the decrease in the carbon footprint of the coffee. Coffee consumed locally doesn’t require as extensive of a supply chain as coffee consumed in a non-producing country. And that means fewer vehicles transporting it from point A to point B.

Local consumption also means more pride for the locals. Despite recent trends in political discourse. There’s a lot of good that comes from national pride. It’s much easier to support a local product than it is to support a global product. It’s easier to visit the producer. It’s easier to organize events that include the entire supply chain. Such events are great for educating consumers, something that is critical for specialty coffee.

It’s also easier to support a local product when you have familiarity with their culture and sympathy for their plight. Both of which are easier when the individual is physically close, i.e., In the same country. There are shared values to work with, existing social capital, networks that can be strengthened, and it encourages a sense of community.

This is something I’ve been talking about with others in the industry. Here’s a brief discussion I had with Adi, co-owner of a coffee lab in Bandung, Indonesia.

Adi: I love Bandung. Uh, I grew up in Bandung. I was born in Bandung. But I’ve, I spent some, some of my life in Jakarta, the capital city. When I moved back to Bandung, I feel like, oh, this is the area which I want my family to grow. Uh, I love the way that the barista community here, the manual brew community, we able to do competitions without having to have.

Big sponsorships. We can have a bunch of coffee shops spending a little amount of money sharing stuff, staring, sharing equipments to, to build a competition for young baristas. Um, we love that spirits, we love the spirit of working together and. It’s one of those weird situations where people actually want to volunteer as a crew and not as a competitors.

During the competition days, there’s a lot of coffee shop closing down because either the equipment is being used by the competitions or the crew is there helping out the competitions, and it’s something that I. Miss a lot nowadays.

Michael: Yeah, it’s very, it’s, it’s very, um, soothing is a bad word. Comforting is a bad word, but it’s, it’s very pleasant experience.

Mm-hmm. And the only other place I’ve seen it like that is Padang.

Yep. Indonesia. Yep. Um, and both, both communities are very near to production. Mm-hmm. And I, I wonder how much of that plays a, plays a part in it. You know, the, the whole notion of this is our coffee because it was, you know, it was grown just, you know, an hour or so from here mm-hmm.

By our people. Mm-hmm. You know, that’s maybe bad to say "our people," but it is still communal and it is still family oriented. Mm-hmm. I think that’s very good. Yep.

Adi: Well, uh, For the competitions, usually for the, uh, first round, uh, we, we gonna, the, the community is gonna be supplying the coffee and we usually use the coffee from farmers around our city.

Mm-hmm. So that’s, I think that’s the luxury of doing a competition in origin. Because you have a lot of, You have a lot of coffee you can showcase. Yeah.

Michael: The following audio is a section of an interview I did with Wiliam Edison, another coffee professional in Indonesia discussing what local consumption means to him and how the local market benefits and is currently expanding.

So you’re doing an awful lot for Indonesian coffee market.

Wiliam: Uh, of course. We, since we are here and we found, uh, uh, Indonesia have a very good quality of coffee, so we only explore the Indonesian based coffee. Awesome. Yeah.

Michael: Yeah. Tanamera does that as well. All of their retail sales, I believe are local Indonesian coffee.

Yeah. It’s one of the things I really like about it. Yes. Um, ‘cause you get that focus. I think it’s important to develop a local consuming market for the coffee so that Indonesians can enjoy. Yeah. The best of best the coffee that they produce.

Wiliam: Yeah. Basic, yeah. Uh, definitely there, there’s, uh, what happened in Indonesia, now everybody is talking about coffee, about the specialty, about the taste.

But, uh, yeah, as, as you know, the, uh, coffee price in, in, uh, specialty market in Indonesia, It’s now quite high there. There is a, yeah, the domino effect of the price because when the price is too high, there is, there will be a lot of chance to import the coffee bean from outside. Yeah. Yeah. So, yeah.

Michael: So you have to be careful. You have to balance.

Wiliam: Yeah. We have to be careful with the price. Yeah.

Michael: Because you don’t want to necessarily have to compete with like Brazil. Or Colombia where they have, um, strong backing from their governments. Yeah, from NGOs. It’s, uh, a lot of central and South America. Um, the coffee industries are very organized and, and very well supported.

Um, and unfortunately, uh, Indonesia has some, some work to do there, I think. Do you think that that would happen? Do you think that…

Wiliam: I think, yeah, we are going to that way, but still have a lot of. Uh, work in here, basic, uh, the, the, the, the firstly is from the government. So yeah, we have to see what can the government do with the coffee industry.

A thriving local market also facilitates things like family-run ventures, where part of the family may run the farm while another part owns and operates a cafe, et cetera.

The following is from Barista Magazine Online and it’s part of a Master Q & A with Emilio Lopez Diaz speaking about his companies in El Salvador.

Henry: [I]n El Salvador we run a company called Cuatro M Cafes, and here we currently own and produce coffee at four farms, Finca Ayutepeque, Finca San Gabriel, Finca El Manzano, and Finca La Cumbre; these are located from 1,000 to 1,550 masl, and roughly cover an area of about 280 hectares. We also run a mill at Finca El Manzano that processes coffees from our farms but also from other neighboring farmers as well. It is through that company also that we export coffee from El Salvador to the U.S., most of Europe, Australia, Korea, and Japan.

Michael: All of those interconnected enterprises, employ people and increase the flow of money in their given area. Not only that when one is involved in producing a quality product that is known to many locally, it can be a source of pride and that pride increases the quality of work. Which increases the quality of the product. Which is a virtuous cycle.

It’s also important to note that coffee professionals in producing countries have been exposed to the specialty industry or third wave coffee for quite a while now. And they learn very fast. In areas where tourism is a major industry, the exposure is even greater. With the growing local middle class, local boutique shops are booming and this will reinforce the entire chain within the country.

Case and point; I’m finishing this article in a coffee shop in indonesia called Tanamera, which sources all their beans locally from Indonesia. They have some great coffees on offer and roast everything fresh and local. Their supply chain is incredibly small because the beans never leave the country. And even better; Indonesians are able to experience some of the best coffee that country produces. And this is a win-win if i’ve ever heard one.

This is Michael with Oil Slick Coffee and that was me reading my article titled "Increasing Local Consumption."

Thank you for listening