Can Vietnamese coffee draw Americans away from Starbucks?

Starbucks is crossing swords with Vietnam’s top coffee company, Trung Nguyen. Starbucks opened its first store in Ho Chi Minh City on Feb. 1 to capitalize on the rapidly expanding Asian coffee market. Meanwhile, its aggressive would-be competitor Trung Nguyen has an eye on Seattle, New York and Boston, according to Bloomberg.

Fueled by a rise in Vietnam’s coffee fortunes, Trung Nguyen wants to surpass the world’s largest coffeehouse brand. It’s a lofty goal, but don’t write them off just yet. Vietnamese coffee could be filling a new coffee niche in the U.S. before you know it.

Agence France-Presse (AFP) shared several interesting aspects of the Vietnamese coffee “takeover” in an April 17 article. Vietnam is the world’s second-largest coffee exporter, and its farmers grow the robusta variety of coffee rather than the arabica beans most U.S. coffee drinkers prefer. Vietnamese coffee is typically brewed slowly in individual cups and mixed with sugar, sweetened milk and ice, according to a Wall Street Journal article.

Vietnamese coffee farmers have leveraged technology — like irrigation methods or checking current coffee prices on their phones before bringing their beans to the market — and their production has skyrocketed, according to AFP:

Vietnamese coffee farmers have changed the global market: if you had a cup this morning, there is a high chance you consumed at least some Vietnamese beans with companies such as Nestle and Britain’s Costa Coffee among major buyers.

In 20 years, Vietnam went from contributing less than 0.1 percent of world production in 1980 to some 13 percent in 2000.

The article then turns to the owner of the coffee chain Trung Nguyen, a man named Le Nguyen Vu whose personality comes through in every quote. Trung Nguyen has 55 stores in Vietnam and exports its coffee to 60 countries. Vu strikes a confident tone in an article in Bloomberg:

“U.S. customers should be able to enjoy cups of authentic coffee,” said Vu, a farmer’s son who founded the company in 1996 and is its sole owner. “Their level of coffee appreciation is probably not high yet, but we’ll work on that.”

Actually, I know several people in the U.S. whose “coffee appreciation” is quite high. Maybe Vu means simply that American consumers haven’t yet developed a taste for robusta coffee? Or maybe he’s just sure of his own success:

“Starbucks no longer has the personality it had when it first started,” Vu said. “That regime will soon end. We are trying to be the one who replaces them.”

And is Vu worried about the U.S. coffee giant’s expansion into his country? Not really, based on this quote from an interview with Vietweek:

With their huge revenues and expansion plans, Starbucks could cause worry among many firms about the competition. This is a challenge, but we should have a strong spirit to compete. It could much be stronger than Vietnamese firms in terms of finance and experience, but it does not mean we don’t have any way to overcome it. We, with just two small workshops, competed well with famous coffee producer Nestle nine years ago.

Interesting fact: One variety of Trung Nguyen coffee is meant to imitate the flavor of beans taken from a kind of rodent (civet) feces, according to the Bloomberg article. That’s one area, at least, where they have an edge on Starbucks.

Video by AFP. 

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Coffee farms in Texas? And other perils of climate change

Experts are sounding the death knell for our beloved coffee bean, and they’re blaming climate change. You can read some of the predictions in a March 27 article called “Buzzkill? How Climate Change Could Eventually End Coffee,” by Jason Koebler at US News and World Report. Basically, Koebler’s article makes a case that coffee is in imminent danger for three reasons:

1. Arabica coffee plants can only grow in a certain temperature range. Countries that are major coffee exporters now might no longer be able to sustain the delicate crop because of higher temperatures. When that happens, coffee farms will be pushed north:

Within a couple decades, researchers fear, coffee might have to be grown in the Northern Hemisphere, putting countries that rely on the crop in an economically tight spot. “By 2050, Nicaragua will hardly be a coffee producer anymore,” says Tim Schilling, executive director of the World Coffee Research Center. “It’s possible that instead of sourcing coffee from Guatemala, you’ll be doing it from Texas or the south of France.”

A new boom in coffee farming might be great for Texas or France — but at what cost? The economic decimation of Guatemala and other coffee-producing nations?

2. High temperatures and high rainfall are perfect conditions for a deadly fungus that causes coffee leaf rust. This fungus has the potential to wipe out Arabica coffee trees. In February, Guatemala declared a state of emergency because the disease is decimating their top export, and other countries, including Mexico, are also feeling the pain. Koebler links the rise of coffee rust to climate change:

For decades, developing countries grew coffee and shipped it off to the developed world. The climate in coffee producing countries such as Costa Rica, Colombia, Ethiopia and Vietnam was relatively stable, and coffee hauls were generally predictable. That has changed recently as rust has spread and more variable temperatures have reduced coffee hauls.

In response to this assertion, one of the commenters at U.S. News and World Report posted the Internet-comment version of an eyeroll: “Frankly your assertion that this fungus spreads because of global warming without a shred of supporting evidence is unscientific,” he wrote. That might be a fair argument since the coffee rust fungus dates to Kenya in the 1860s, and other articles about coffee rust don’t even mention climate change as a mitigating factor. But it seems certain that coffee rust thrives in higher temperatures.

3. Coffee hasn’t been researched as much as other crops, and farmers don’t necessarily have access to strategies for protecting coffee plants. 

Coffee is an under-researched area of agriculture, according to Koebler’s article:

Gaitan concurs: “Unfortunately for other countries, there’s not a lot of research on coffee. … For those facing the future without good scientific support, it’s going to be hard.”

Fungicides cost a lot, and although scientists have begun to engineer hybrid coffee plants that resist the coffee rust fungus, it’s not a cure-all. Some farmers don’t trust these new fungus-resistant varieties, fearing that the coffee won’t taste as good. Plus, how do you convince a farmer to spend years replacing coffee plants that he or she depends on to make a living?

Koebler writes that a solution would also require a wide-reaching effort to bring solutions to each individual farmer:

Creating a rust-resistant plant is one thing; getting it to Colombia’s half million farmers—whose average farm is just 4 acres—and convincing them to use it is another.

An article in the Guardian poses a similar problem when discussing coffee rust in Mexico:

For three days in February, 150 experts from Mexico and Central America gathered in the town of Tapachula to exchange know-how and advice. But “how are we to train thousands of small coffee-growers who are widely dispersed, and can’t afford to buy fertilisers or replace their old bushes?” Trampe asks.

There are organizations working on these problems — Koebler cites the World Coffee Research Center, which is funded by coffee companies in the U.S. Among other examples, a French research organization called CIRAD is also researching coffee rust and training coffee producers about potential solutions.

Let’s take a step back. This U.S. News and World Report article is one of many to raise the alarm about one product to try to get sympathetic readers to care about the broader climate change issues at stake. That’s a decent strategy, and it might work.

But even if climate change were not a factor, coffee farmers would still be facing the scourges of coffee rust, lack of access to crop research, lack of access to fertilizers and fungicides, and a host of other issues. These are solvable problems. Maybe it’s time that a coffee-loving world began to focus on coffee research and development and better environmental practices — not to save the world from climate change, not even because we selfishly want to save our morning Starbucks, but because we ought to care about the very real challenges facing people on the coffee farms we so often ignore.

Leaf rust image from rooracer on Flickr Creative Commons, Attribution-Noncommercial-NoDerivs license.

Beyond Fair Trade: Can farmers make their own way?

Adam Baker / Flickr Creative Commons

When you see a coffee bag with a “Fair Trade” label, do you know what it actually means? Or does it mostly just make you feel good about your purchase? Do you know whether Fair Trade ensures that farmers are getting fair prices for their products — and who sets the rules, anyway?

The New York Times raised some of these questions on March 16 with a profile of a U.S.-born coffee grower, Kenneth Lander, who bought a coffee farm in semi-retirement, without needing it for profit. Then, after he lost his financial footing in the 2008 economic crisis, his livelihood suddenly began to depend on the farm:

Very quickly, he realized how difficult that was going to be.

He belonged to a “fair trade” co-op, which guarantees farmers a minimum price, but was making only $1.30 a pound on coffee that retailed in the United States for $12 a pound.

In a decision rooted in his Christian faith, Lander founded Thrive Farmers Coffee to create a better model that benefits farmers at every step of the production process. Instead of just selling their raw beans, Thrive farmers get a cut of the sales of the final product.

In the system that Thrive is trying to develop, farmers are paid only after their coffee has been exported, packaged and sold — at a much higher price — to retailers.

Thrive helps farmers by establishing relationships for the farmers with local coffee processing mills and co-ops. Then, once the beans are shipped to the United States, Thrive takes over, handling packaging, roasting and sales. In some cases, Thrive sells green coffee beans to roasters, in which case the farmer receives 75 percent of the proceeds.

[Read more in the Times story about Thrive Farmers Coffee.]

The group’s website says that in a typical coffee value chain, farmers receive only 2 percent of the final value of coffee — but farmers who use the Thrive model apparently gain about four times the earnings they would get even under Fair Trade.

This is the latest in a long struggle to make sure coffee farmers and laborers are able to live off their earnings. Fair Trade sets minimum guaranteed prices for green coffee beans, but it’s not a panacea. Some Fair Trade farmers pay their laborers below the minimum wage, according to this article by the Financial TimesPlus, most coffee farmers experience “three to eight months of extreme food scarcity” after the coffee harvest is over, according to a study by Green Mountain Coffee Roasters.

And, as Brian Clark Howard writes, all farmers struggle to weather the fluctuations of the global market:

By 2001, the New York trading price for unroasted arabica coffee had sunk below 40 cents per pound. In contrast… [the price] averaged $3.07 in 1977. … As Gastronomica put it in 2003, “In real terms, prices are probably at their lowest point since coffee first became an internationally traded commodity some thousand years ago.”

[Prices have improved since 2003 — arabica prices currently average around $1.53 per pound —  but this article is still worth a read. Read more here.]

In addition to Fair Trade and the Thrive Farmers Coffee initiative, a smattering of other organizations and models are trying to make sure that farmers receive more of the final coffee purchase price. The Salvation Army is doing something interesting: It buys coffee directly from farmers in Vietnam, roasts it near the thrift stores, and hands out free cups to customers. The organization’s own article about the program says that it helps increase coffee farmers’ net earnings from about $50 per acre to $820 per acre.

The Thrive Farmers Coffee story in the New York Times seems to show that farmers too often get left out of coffee profits. In the U.S., we love our $4-per-cup coffee, but we do not necessarily think about where it came from. We might know our barista’s name, but coffee farmers seem so distant. Revamping the coffee value chain starts with greater awareness on our end, in addition to giving farmers more opportunities to stay involved with their coffee after the harvest.

Fair Trade is a good starting point, but don’t assume that the Fair Trade logo on your coffee bag means we’ve arrived at a system that’s truly fair for farmers. Thrive Farmers Coffee might be a sustainable solution, and I’ll be interested to follow the company as it continues to grow.

Related:

Another New York Times story about controversy over the “Fair Trade” label.

A few college friends of mine made a short documentary in 2011 that followed coffee from crop to cup.

Frequently asked questions about Fair Trade.

Image by Adam Baker, Flickr Creative Commons.