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How do you get an advantage in Kenya, a country where quality is everywhere and on every table? It’s the same strategy we employ elsewhere at Crop to Cup, but with a Kenyan twist. Focus on relationships.
Relationships with the best-led cooperatives in the best growing regions, and the most promising cooperatives in emerging regions. Relationships with the most motivated small start-up estates, and the people who support them. Lastly, the auction can be your friend when you have relationships all the way down – being calibrated with cuppers, exporters, marketing agents, and millers gives one advance notice when something exceptional crosses their table.
Groups in the Central Highlands have traditionally dominated Kenyan coffee production. But with production on the decline, the future is in outer counties like Bungoma and Machakos. The Kenyan coffee industry has traditionally been defined by large cooperatives who can deliver volumes – under contract – to millers and marketing agents owned by a handful of exporters. But with the reduction of minimums needed for a pulping license (down to 1000 trees), larger farmers are splitting off from their cooperatives to start small estates.
Read on to hear about how Crop to Cup is positioned to get the best from every harvest and is investing in the future of Kenyan coffee.
This year is a bumper crop in Kenya, bringing production up from last year’s low of around 650,000 bags back to the previous plateau of ~750,000 bags. This is still lower than ten years ago when production was closer to 1,000 bags, and this decline is largely due to a reduction of volumes in the central highlands where coffee farms give way to urban development.
The 2019/2020 harvest saw big rains and delayed ripening. Normally quality outturns begin in week 13 (late-December) and continue through March. But this year qualities are expected to be more concentrated between week 16 and 21 (late Jan – late Feb) – a very short buying season.
With the volume of lots coming through the auction in such a short window, more stress is put on cuppers to identify the best lots, and to act quickly in securing them from being blended into general FAQ blends.
These rains have also led many producers to rush through drying; when the sun comes they take full advantage, reducing drying times from 14 days (average) to 7. This is not to say that 2020 will be a lower year for quality in Kenya, but rather that buyers must be more savvy, and work harder on their relationships, to get coffees above auction-level qualities.
A vast majority of Kenyan coffee still moves through the auction, which sells coffees by grade (AA, A and PB) with AAs getting a lion’s share of the premium – ~ 25% premiums over As (screen 16+).
Marketing agents are supposed to identify what lots are more competitive, and more likely to get higher prices by selling directly to international buyers, and which are more suited for sale through the auction. In theory, this should mean that it’s hard to find quality through the auction. But in practice, liquorers have a very limited way of defining quality – a simple 1-10 scale with most good stuff coming in a 2-3 point range. So there are incredible finds to be found on the auction – if you have the right cupping partner who can taste through all that there is to offer and act quickly on the purchasing.
Auctions happen weekly, with buyers getting samples only one week in advance. Calibrating with cuppers to target specific profiles, specific deliveries, from specific weeks, and specific suppliers is key to getting the best coffee out of Kenya.
Kenya’s 800,000 smallholders (organized across ~ 500 cooperative societies) deliver three times the volumes of Kenya’s 3,000 small estates. Smallholders average less than an acre of coffee, with each acre support 900 – 1000, producing a targeted 5KG cherry per tree. This means that, at best, each farmer contributes a maximum 10-20 bags of green per harvest. Up to 25% of this will be graded as P3s (P lights), with the remaining sorted by grade AA (Sc. 18-19), A (Sc. 16+), PB and C (Sc. 14-15+).
At this scale, it’s necessary to work as a group for pulping, washing, drying, and transport. Cooperative leadership is key; anti-corruption regulations in Kenya require that this leadership change every 3 years, with an oversight board of directions changing every 5 years, leading to a constant state of start and stop for groups without strong succession plans. Moreover, within cooperatives lot separation can get political – the emphasis is on equality, yet not every member prunes, attends meetings, practices selective picking, or produces the same quality coffees.
Due to this dynamic many larger farmers have begun considering going at it alone, without a cooperative. If they have 1000 trees or more, then they can get a pulping license and start a small estate – given that they have the capital needed to outfit their farm for pulping, washing, and drying. Still, small estates are becoming more and more common, and represent an alternative to buyers seeking quality and consistent relationships.
While we remain true to the cooperative model, supporting strong ones where we can, it’s also necessary to invest in small estates and to scour the auction to get the best from every harvest.
In 2020 we are focusing our purchasing to support the very best cooperatives we have found, both in the Central Highlands and in emerging areas. We are also partnering with those who are supporting small estates, which allows us greater flexibility in making requests (for special processing or lot separation, for example). And we are calibrating with cuppers from across marketing agents as well as those who buy solely from the auction so that we can put our qualities in context, stay relevant and keep tabs on rising stars.
In all cases, we are looking for the very best cup possible. We tend to appreciate complex sugars with lingering sweetness, juicy bodies with tropical fruits, and effervesce. But we also look for variety; distinct as well as complex acidity, currant, and savory tomato. Oftentimes these cups can be found in PB and AB grades, which saves us a pretty penny over buying AAs.
In 2020 we drove from Uganda, over Mt. Elgon, through Bungoma County and into the central highlands. We continued south all the way to Kilimanjaro, and into Tanzania. This unconventional route allowed us to visit farms who are not used to receiving visitors – Bungoma is over 10 hours away from Nairobi, for example. Our message was ‘quality’. We strategized on ways to get the most out of their harvest – to separate lots by altitude, for example, or by SL varietals to reward those who maintain heirloom trees. It also allowed for a much-needed discussion on price transparency, allowing groups to be more effective advocates in their relationship with marketing agents and exporters.
More than anywhere else we work, timing is crucial in Kenya. As warehouses fill to truckloads (200 bags parchment, or 500 if they are using a tractor-trailer), they are moved to the mill. Whoever owns the mill has about 1-3 weeks to decide whether the coffee should be marketed through auction or to direct buyers. Once milled, coffee moves quickly so that farmers can get paid.
>Relationship Focus: By committing to specific relationships we get the ability to shop across an entire harvest, instead of just what’s available in a given week. This is mostly true for small estates, but also for cooperatives like Giakanaja where we’ve made year over year commitments.
>Early Harvest: We like to travel to Kenya before the rush; this year that will be mid-February, after the African Fine Coffee Association conference in Mombasa. This allows us to shop across all early collections and calibrate with suppliers as to what we want to see later on.
>Late Harvest: After the rush is another great time to buy – for many reasons. First, this is when higher altitude coffees come to market. Especially when working with cooperatives, this can allow you to cherry-pick the best collections without disturbing their politics. It’s also a time when many who come to Kenya to purchase have rejected perfectly good samples; maybe because they bite off more than they can chew, or perhaps because the coffee simply tastes different than it did in-country. By March traders have become very familiar with their coffees and can point you to their favorites. Lastly, it doesn’t hurt that auction prices often lower this late in the season, offering better value to those who wait.
Traditional SL varietals are being replaced by newer, resistant varietals such as Ruiru 11 and Batian. Batian, for example, can start producing within one year of planting, yields a disproportionate amount of AAs, and is quickly becoming the standard for any farmer looking to renew their farm.
The search for more traditional SL varietals leads buyers to towards higher altitude farms, which have not been as impacted by leaf rust and coffee berry disease. And it leads them to look outside of the Central Highlands, where the competitive environment leads to more investments in newer technologies (and inputs), largely subsidized by marketing agents. While there seems to be more SL in Uganda’s Mt. Elgon than in Kenya, the growth of small estates may make it more possible to separate out SL-only lots in the near future.
Kenyan coffee is rich in tradition, in terroir, and in reputation for producing some of the world’s highest scoring coffees. But it’s also a country where you need 63 pieces of paper to export a single container. These licenses, warrants, shipping authorizations, confirmed weights receipts add up, as do the many middle-men involved between farm-gate and export.
On the farm, nearly half of your costs are inputs; add another 20% for labor and transport to your local cooperative. There you’ll need to pay an annual membership fee, and 15-25% of the sales prices as a management fee, but at least they’ll take care of the coffee from cherry onwards.
Milling costs around 5c a pound going in. Roughly 25% of outturn is lost to P3 (TT and T grades). And Marketing agents take 15-20% for their services.
Exporters take about the same, only after adding 15-25c for converting the coffee from FOT Nairobi to FOB Mombasa.
In the end, without the premiums that come from direct trade channels, farmers may be getting less than half of the export value for their coffee. The downside of the auction is that customers also see the price of coffees, putting exporters in a position to make margins by blending in lower priced coffees that can match a profile. Since this is the business model for a vast majority of Kenya’s coffee, prices are kept just over costs, meaning that the only ones who win are those selling red tape.
From this 2020 harvest, we can expect containers to ship early February, and others to ship later in March / early April. In the cup we can expect improvements from names we know we will represent, in large part by entering into relationship agreements and strategizing on lot separation.
We will see higher qualities of unique profiles coming out of emerging regions. And we are getting behind a host of small estates who have banded together to export their own coffees.
All in all, it’s bringing our sourcing strategy in Kenya back to what we know best – continual improvement by building on loyal relationships. This has not always been easy in Kenya, where intense competition from buyers, and the constant shifting of groups between marketing agents, makes it difficult to build year over year.