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Marketing imperative in coffee reforms
Coffee beans on display for auction at the Nairobi Coffee Exchange (NCE) located at the Kenya Planters Cooperative Union (KPCU) along Haile Sellassie Avenue on October 2, 2018.
Coffee prices this year have been good and most of the farmers are ecstatic.
While this could be one of those random episodic global trends, it has everything to do with ongoing farmer-centric coffee reforms embodied on a cost reduction strategy.
However, pursuing cost reduction strategy to increase coffee production is not sufficient to revive the subsector. It is not enough to encourage the farmer to increase productivity.
Therefore, the cost reduction strategy must be pursued in tandem with an innovative marketing strategy on the demand side of green coffee, which has been conspicously missing.
However, above all a policy shift to promote entry to the lucrative market of coffee consumption globally, regionally and locally.
Since late 1980s coffee production in Kenya has been in whirlwind of sustainability crisis stemming from unstainable aspects of economic and social with emerging environmental externalities in the name of climate change.
In 2015, coffee farmer’s public outcry over low prices triggered presidential gazettement of the National Task Force on Coffee Subsector Reforms to analyse the coffee problem.
The terms of reference of the task force involved following the coffee from seed to the settlement of green coffee in the Nairobi Coffee Exchange and retracking the coffee money upon the settlement.
Facing the reality that Kenya is a price taker in the market of green coffee, the task force could only recommend a pursuance of supply side response policy to internally reduce transaction costs along the value chain. Specifically, the task force prescribed a farmer-centric regulatory framework that vested counties with a broad regulatory role on coffee matters granted that agriculture is a devolved function.
Admittedly, incorporating demand side in the coffee reforms agenda is rudimentary because of dearth of credible data.
The data on the vitality of Kenya coffee in the secondary market of value addition and consumption is jeasously guarded by international roasters and their affliates who have no obligation to disclose.
They continue to enjoy monopsonistic dominance given that most of value addition and consumption takes place outside the realm of Kenya’s legal jurisdiction. To stir the demand in market for green coffee and consumpton, Kenya must pursue a marketing diversification strategy.
First, to increase its market share through segmentation of the traditional markets based on consumption pattern of each countries.
Moreover, engage in an aggressive marketing campaign through direct sales to penetrate into the emerging coffee consumption markets in Asian like the China and South Korea.
Secondly, Kenya must take advantage of the framework of G25 Africa Coffee Summit inaugurated in Nairobi in 2020 to foster colloboration and trade with Africa coffee consuming countries like North Africa countries and South Africa.
In addition, having ratified the Africa Continental Free Trade Area (AfCFTA) Kenya must take a lead to implement the Africa Continental Free Trade Area (AfCFTA) framework. It must mount an aggressive campaign to prioritise coffee as an anchor commodity in the implementation process.
In so doing, it will not only diversify its export destinations options but more important it will for the first time attempt to deal with the abuse of monopsonistic dominance by the international roasters.
Thirdly, in addition to address the prevalence of intergenerational inequities in the coffee subsector the Kenya must of ride on youth dividend to promote domestic consumption from the current 5 percent of total production to 30 percent.
Such promotion will stir value addition with significant implication of curing Kenya’s perpetual susceptability to price volatilities attributable to the inherent price inelasticities associated with coffee as a commodity.
We can borrow a leaf from our neighbor and biggest competitor, Ethiopia who consume half of the total production. This we must do.
Prof Joseph Kieyah is a policy analyst at the Kenya Institute for Public Policy Research and Analysis. Email: [email protected]
