HOW COFFEE WORKS: KENYA
Welcome to the first in a new series of Blog Posts called ‘How Coffee Works’. These posts will aim to explain the different ways coffee is produced and sold in the different origins we work in.
One of the most common points we make when defining our sourcing philosophy is that no two origins work the same way. What works best in Colombia is not necessarily applicable in Rwanda and so on. By examining the differences in coffee production in different countries we can hopefully demonstrate why we work we where we do and how we think we can source and buy coffee in the most sustainable way for all stakeholders in the value chain.
With the recent launch of our first Kenyan coffees of 2018 there seems no better place to start than Kenya, producer of some of the undeniably finest and most delicious coffees in the world.
A BRIEF HISTORY OF COFFEE IN KENYA
It is thought the first coffee was brought to Kenya by French Missionaries around the end of the nineteenth century. They brought coffee from Reunion Island, in those days known as Isle d’Bourbon and it is widely assumed those first trees were of the famous Bourbon variety. Today the most prominent varieties of coffee in Kenya; SL 28, SL 34, Batian and Ruiru are all bourbon derivatives.
Due to Kenya’s status as a British colony at the time, all coffee was grown on large colonial estates and sold in London until the Kenyan Coffee Act was passed in 1933. The act, coupled with the creation of a coffee auction system in Nairobi the following year, brought the sale of all Kenyan coffees back to the country. Subsequent land reforms after the Mau Mau rebellion in the 1950’s led to the creation of a substantial amount of smallholdings; family run farms that combined subsistence farming with the production of a cash crop like tea or coffee.
These reforms gradually transferred the majority of Kenyan coffee production back to the Kenyan people, around the same time as the country gained independence from Great Britain in 1963. Nowadays approximately 70% of the national coffee crop is produced by smallholder farmers alongside a few remaining larger estates and a growing amount of smaller estates. It is estimated that there are around 150,000 coffee farms in Kenya and around 6 million Kenyans (from a population of 44 million) rely on coffee for some part of their income.
SMALLHOLDER COFFEE FARMING
This smallholder system is very common in African coffee production and is widely used in Ethiopia, Rwanda and Burundi, the other African countries we work in. The typical smallholder farm is around 1-5 hectares in size and features a mix of subsistence crops, livestock and seasonal cash crops. These farmers are not exclusively coffee farmers unlike many of their counterparts in Latin America and Asia: coffee makes up only one part of their annual income and workload.
This is key to understanding coffee production in much of Kenya and East Africa. Such small farms with a small annual crop size, coupled with the split responsibilities of subsistence farming mean it does not make economic or practical sense for smallholder farmers to invest money and labour into processing, drying or selling their own coffee.
Therefore, most smallholder farmers in Kenya are members of large Farmer’s Co-operative Societies. These co-ops buy freshly harvested coffee cherries from the farmers and then handle the processing, drying and selling of the communal lots of coffee for all of the members.
COMMUNAL OR PRIVATE WASHING STATIONS
Co-ops in Kenya are typically large, with several thousand farmer members. The co-ops own and operate one or several washing stations, or ‘Coffee Factories’ as they are known in Kenya, depending on the size of the co-op.
While a producer in say, Latin America, who can process and dry their own coffee, can sell it for a much higher price than a smallholder who sells it as cherry, they also carry a greater risk of the coffee being spoilt and losing value, or of it being stolen (a surprisingly common problem). That producer must also carry much higher production and labour costs to ensure the higher selling price.
They must also wait longer to sell their crop and see a return on their investment. This can be manageable for larger farmers with more access to finance and possibly other sources of income, but for smallholder farmers, a quick return in cash can be vital.
Most co-ops will initially pay farmers a set price for the weight of coffee cherry they deliver. Once the coffee has been sold, and the final price set the co-op then makes a second, deferred payment to each farmer depending on how much coffee they delivered and how much the coffee sold for (minus the co-ops production costs).
This way the smallholder farmer receives some of the final value of their crop without incurring the extra costs or delay on initial return. This is far from a perfect system, but then neither is the typical Latin American scenario outlined above. The point is there are fundamentally different production models even in these initial stages of the process, that can aid or hinder the producer depending on how well suited they are to the local situation.
Because of the size of the co-operatives in Kenya there is a significant management structure in place. Each coffee factory will have a management board or committee that is elected by its farmer members from the local area. This group is responsible for the daily running and management of the coffee factory as well representing the factory at the wider co-operative level.
If the co-op has say three coffee factories, then the three management committees will elect a central management committee for the whole co-operative. It is essential that the co-op can gain a good price for their coffee as there is a lot of competition for coffee cherries so the co-op must be appealing to the farmers.
Therefore, one of the key decisions for the Co-operative management every year is selecting who will be responsible for marketing their coffee.
Coffee Marketers are somewhat unique to the Kenyan system but play a key role in liaising between co-operative and exporter. Their role spans many fields from providing farmer training and micro finance to liaising with international coffee buyers, logging samples, providing QC analysis, grading and milling the coffee, facilitating buyer visits and crucially, securing a great price for the co-operatives coffee. The marketers never take ownership of the coffee, but rather help the co-op bring their coffee to market and find the best buyer at the best price.
If a co-operative is not happy with the service it received from its marketer, or with the price they got, then they will work with a different agency the following year. Also, a newly elected board may decide to change things up. Sadly corruption can also come into play here and motivate changes of marketer from time to time.
As our exporters work with selected marketers this can mean a coffee we have bought for three years may no longer be available to us to buy. This can be frustrating especially if the decision to change has not been made for the right reasons, but mostly a healthy and longstanding relationship between co-op and marketer is emblematic of a healthy and sustainable supply chain.
KENYAN COFFEE GRADING
One key technical role of the marketer is to physically grade the coffee. Kenyan coffee is normally sold by grade as well as provenance- AA or AB for example. These grades are based around the size of the green coffee once it has been hulled and there are 8 primary grades though the three we are most concerned with in specialty coffee are
AA - The most highly sought and highest priced lots, comprised of coffee beans above screen size 18. Typically very high in acidity with the most refined flavours.
AB - The ‘second’ grade behind AA, comprised of screen 15 and 16 and a mix of ‘A’ and ‘B’ grades. These beans are smaller but often quality and complexity can be just as good if not better than AA with better balance and sweetness.
PB - or Peaberry, these occur when the coffee bean does not divide into two separate seeds in the cherry but develops as one single small, round bean. These are routinely separated in Kenya and highly sought after for their intense acidity.
AUCTION VS DIRECT
Once a lot of coffee has been physically graded by the Marketer it is ready to be sold. There are two ways this can be done in Kenya, either via the national coffee auction which takes place every week in Nairobi or directly sold to an exporter often acting on behalf of a roaster.
Exporters such as C. Dormans who we work with in Kenya receive thousands of samples of coffee lots throughout the harvest season from the marketers that they work with. Each coffee is cupped and tasted to assess the quality and then the Exporter will decide whether to make a direct offer to buy the coffee. If the co-operative likes the price offered they can agree to sell the coffee directly to the Exporter there and then.
However, if they feel the coffee could gain a better price, they have the option to put it into the auction. The same exporter may still end up buying the coffee from the auction but the producer has the chance to put it out on the open market.
This system allows roasters and exporters to develop consistent relationships by offering good direct prices, it also means the co-ops can get a quicker return for their farmers by selling directly. If they’re not happy with the price, or no direct deal is offered the auction still remains as a path to market.
The quality of Kenyan coffees and international demand for them means that most of the top lots are highly sought after and will receive good direct price offers. The co-ops may well still use the auction system to try and gain a higher price but ideally most of the best coffees will be bought by the same exporter (possibly representing the same roaster) each year at a good enough price to generate profit back down the chain, ensure the Co-op are happy with their marketers and the farmers happy with their Co-op.
This is where a good exporter becomes important. By consistently securing the best coffees at good, sustainable prices, an exporter like Dormans can create stability for the producers ensuring a consistent buying model year in year out. For roasters like us who want to work with the same producers each year this is also very appealing and affords us the opportunity to build relationships and consistency in an origin where this can be tricky to do.
As well as physically buying the coffee on behalf of roaster, Exporters must handle the physical export of the goods as well. Because of the exceptional quality of Kenyan coffee and the relatively high prices specialty grade coffees are usually shipped out in 30kg vac packed boxes rather than the traditional 60kg jute sacks.
The coffee is then exported from the port of Mombasa on Kenya’s Indian Ocean coast. Interestingly the coffee actually clears customs in Nairobi where shipping containers are sealed and signed off before being taken by train to Mombasa and then shipped to Europe.
It is possible for roasters to work directly with exporters like Dormans and purchase the coffee ‘free on board’ from them- meaning they will handle the import costs and logistics themselves. For smaller roasters like ourselves, even though we have been directly involved in the purchase of the coffee by travelling to Kenyan to taste and select the coffees we’d like, and agreeing on the price to offer, we still need to use a specialist importer to handle the import logistics and finance the coffee.
In this case, we work with Falcon Coffees who will agree to buy the coffee from Dormans on our behalf, import it into the UK and finance it for us. Kenyan coffees will usually ship in March or April and land in the UK in mid to late May after sailing from Mombasa, through the Gulf of Aden and the Mediterranean and up to the port at Felixstowe.
THE FUTURE OF SPECIALTY IN KENYA
The future for coffee in Kenya, like all producing countries is uncertain. Climate change is leading to hotter and dryer climates. When I visited Nyeri region this past February the area was going through one of the toughest droughts in recent years and the harvest was very small. Joseph, the factory manager at Giakanja showed us production figures that were steadily decreasing over the last decade.
Pests and diseases like Coffee Leaf Rust and Coffee Borer Beetles are more common in hotter climates and as such many producers are having to replace their traditional Kenyan varieties SL28 and SL34 (which have outstanding cup profiles but are not rust resistant) with newer, rust resistant varieties like Ruiru and Batian.
It’s not all doom and gloom however, new and interesting varieties are also being trialled, alongside some small natural and honey processes. There is also a concerted rise in the amount of small estates producing coffee, a development that is very interesting for us.
These small estate farmers can produce anywhere from 20 to 100+ bags of coffee. Unlike the smallholder farmers, these small estates have enough volume to make it worthwhile to process, dry and sell their own coffee outside of a co-operative.
This provides a very interesting model for roasters like ourselves who like to work with the same producers year in year out, to develop consistency and quality. It is possible to work with the same co-operative every year, but the co-ops produce a huge amount of coffee and the personnel change so frequently that a genuine relationship is tough to build.
This year we bought 40 bags of coffee from Kenya. Compared with the full container loads we buy from Guatemala, Rwanda, El Salvador and Colombia this is a relatively small amount of coffee to justify the travel costs and time we put into these coffees. However, the quality of the coffees, the competitiveness to purchase the best lots and the ability to directly affect the price in a positive way for the producers and to forge sustainable relationships makes the extra cost and effort worth it.