Quality Equals Money in Indonesia

It has been said by many in the cof­fee indus­try that if we can just improve the qual­ity of the cof­fee, the farmer can get more money and improve their lot in life. The frus­trat­ing part is that so few in the indus­try have the abil­ity to fol­low the money and really feel the impact. It leads one to won­der if it really works at all.

This ques­tion was answered defin­i­tively this week at the sec­ond spe­cialty cof­fee auc­tion of Indonesia. The results were dra­matic. But some back­ground will help put the suc­cess in perspective.

The Specialty Coffee Association of Indonesia (SCAI) has been in for­ma­tion since 2009. Many orga­ni­za­tions of this age are still floun­der­ing and try­ing to find their way. SCAI is a great excep­tion as they have grown their mem­ber­ship to a self-sustaining level and receive AID money to help with qual­ity pro­grams in Indonesia as well as mar­ket­ing Indonesian cof­fees. They are a small but ener­getic and effi­cient team ded­i­cated to the improve­ment of cof­fee qual­ity and pro­ducer livelihood.

Indonesia is a pro­ducer of both Arabica and Robusta cof­fees. In fact, they are the 3^rd largest pro­duc­ing coun­try when count­ing both vari­eties. To look at the improve­ment of cof­fee in this coun­try you must exam­ine what is hap­pen­ing in both types of coffee.

Robusta cof­fee is being treated like a com­mod­ity where vol­ume is the goal and qual­ity of the cof­fee has a fairly low bar. This is how Robusta is treated pretty much any­where it is grown in the world. There are a few seg­mented lots and the result is out­stand­ing. As you will see in the auc­tion results below, if the qual­ity of Robusta rises, so will the prices that roast­ers are will­ing to pay for it. Specialty is spe­cialty regard­less of the varietal.

Arabica cof­fee is incred­i­bly diverse in Indonesia for a num­ber of rea­sons. To get a feel for the sit­u­a­tion let’s exam­ine the grow­ing and pro­cess­ing con­di­tions. Indonesia is a series of Islands that stretch as wide as the United States. Each Island has micro­cli­mates, vol­canic activ­ity, and soil con­di­tions that can be very dif­fer­ent from each other. The farm­ing tech­nol­ogy varies from extremely sophis­ti­cated at the state run mega plan­ta­tions to the koteka-wearing peo­ple of Papua try­ing to oper­ate their new pulp­ing machine. Often the time and dis­tance the cof­fee has to travel from the farm to the exporter is hun­dreds of Kilometers and sev­eral days. As a result, cof­fee is par­tially dried and wet hulled along the way so it will not be a lost cause when it gets to a major city. Also, it has to travel through as many as six dif­fer­ent trans­porters from the start of its jour­ney to the end.

The ques­tion for Indonesia becomes this, How in the heck can you improve qual­ity, edu­cate the sup­ply chain and make sure the farmer gets rewarded for their efforts? The answer has to be a com­pre­hen­sive strat­egy. This is what SCAI is pro­vid­ing for their coun­try. It comes down to Education, Marketing, and Reward.

SCAI knew that in order for the qual­ity to rise, qual­ity must be under­stood. It also needs to be com­mu­ni­cated to con­sum­ing coun­tries in a way that pro­vides both mar­ket­ing and feed­back for the asso­ci­a­tion and its mem­bers. So, step one was to engage Coffee Quality Institute (CQI) to pro­vide Q-Grader and R-Grader classes in coun­try. This has pro­duced a group of peo­ple that are able to com­mu­ni­cate flu­ently about the qual­ity of cof­fee both amongst them­selves and with the con­sum­ing world. In addi­tion an  ‘edu­ca­tion road­show’ was pro­vided to sev­eral very rural farm­ers to show how sim­ple improve­ments increases qual­ity and that they can be rewarded for it.

This effort has paid off for Indonesia. It paid off both in Arabica and Robusta. The auc­tion of spe­cialty lots brought record prices and val­i­dated the premise that Higher Quality = Higher Rewards. The fol­low­ing is an auc­tion recap.

Over 60 lots were sub­mit­ted to SCAI for con­sid­er­a­tion in the auc­tion. About half did not pass either the green grad­ing stan­dard and/or the cup­ping stan­dard of 82+ on the CQI grad­ing scale. A selec­tion of 24 sam­ples made it to the auc­tion in three cat­e­gories: Robusta, Arabica, and Luwak processed.

Before the auc­tion an inter­na­tional panel of judges from Indonesia, Australia, Korea, Taiwan, and The United States eval­u­ated the lots. Under the lead­er­ship of Ted Lingle as the head judge the cof­fees were scored, ranked and the top were selected to be in a final round of twelve cof­fees to be re-evaluated by the panel. The top-top cof­fees were picked and ranked. The cof­fee was now ready for auction.

SCAI did run into a prob­lem where the auc­tion­eer they were plan­ning on had to drop out at the last minute. Your hum­ble author was asked to step in. (Speaking only for myself, I thought I did a damn good job!)

On auc­tion day the C mar­ket for Arabica was $1.61/lb and the LIFFE price for Robusta was at $.94/lb.

The proof that qual­ity pays is this: The top Robusta got $3.18 per pound! The top Arabica got $20.45 per pound! The Luwak got $45.45 per pound! The over­all Arabica aver­age was $5.11 per pound for the entire auc­tion. If that is not proof that qual­ity pays, it would be hard to say what is!

Perhaps even more impres­sive and impor­tant is that of the top 5 cof­fees, all were sub­mit­ted by coop­er­a­tives. This means that the money is flow­ing back to the peo­ple that pro­duce it. It is often frus­trat­ing as a con­sumer because you do not really know if the pro­ducer is being com­pen­sated for improved qual­ity. In this auc­tion they did! Also sig­nif­i­cant is that the top Arabica and the top Robusta were pur­chased by an Indonesian roaster and the cof­fee will be con­sumed in coun­try! Indonesians have not had cof­fee this good to drink in, well, ever!

The other beau­ti­ful thing that hap­pened at the auc­tion is that the buyer and seller got to meet, shake hands, and even hug at the con­clu­sion of bid­ding for each lot.

ONGOING QUALITY IMPROVEMENT:  It is now a week after the auc­tion and there is a Q-Grader train­ing in Jakarta. One of the stu­dents is a mem­ber of the coöper­a­tive that sub­mit­ted the Arabica that gar­nered the sec­ond high­est price at the auc­tion. Another is the roaster  – retailer ‘my Kopi O!’ owned by Darma Santoso that pur­chased both the high­est priced Arabica and the high­est priced Robusta. Both are com­mit­ted to under­stand­ing how to com­mu­ni­cate about qual­ity in the sup­ply chain. With their efforts and all of the work being done by SCAI, qual­ity in Indonesia will con­tinue to improve, and the pro­duc­ers are cer­tainly get­ting the benefit!

Coffee in the Outback

The land down under has recently been climb­ing to inter­na­tional atten­tion with its wine, tak­ing home medals for reds and whites alike, but the cof­fee scene (aside from Melbourne) has not made any such splash.

The city of Melbourne may be the “Seattle of the Southern Hemisphere” in terms of cof­fee cul­ture, but out­side the city lim­its the enthu­si­asm and savvy for the bean drops off steeply. This is not to say that one is unable to find a decent cup any­where else, in fact all along the east coast, the pri­mary con­cen­tra­tion of Australia’s pop­u­la­tion, bou­tique cafes abound. The third wave is still in the process of break­ing across the con­ti­nent and sin­gle ori­gin, spe­cialty roast­ing, and fair trade brews are just being tested in cafes and mar­kets across the seaboard.

You can almost taste the mar­ket research in each cup.

Travel any dis­tance inland how­ever, and the land­scape changes entirely. While the small, fam­ily owned cafes are still the only sig­nif­i­cant cof­fee shops around (Aussies hate chains, Starbucks can’t even get a hold there,) the pot runs dry in terms of qual­ity roasts almost imme­di­ately out­side the city limits.

Tea was orig­i­nally Australia’s hot drink of choice. As any self-respecting mem­ber of the British Commonwealth would do, a given Australian had morn­ing and after­noon tea as well as the meal “tea.” Originating from poor cock­ney English who joked about only being able afford the after­noon meal, “tea” came to mean the last meal of the day in Australia. The drink itself has since been over­thrown by cof­fee but iron­i­cally, the meals have kept their place in the lan­guage. One eats morn­ing tea, lunch, after­noon cuppa, and then “tea.” Most meals how­ever are taken with coffee.

The usurper of tea was espresso, first brought to Australia by migrat­ing Italians in the early 1900’s. Shots are pulled any­where there are peo­ple in Australia. Roadhouses in the mid­dle of the out­back with lit­tle more than dirt for floors have brand new espresso machines. Shipped out by con­trac­tors in exchange for sell­ing only their cof­fee, these machines look quite out of place amongst the flies and frozen meat pies. Training does not nec­es­sar­ily come with the machines though and the cheap burnt beans are often ground by the kilo and left in a jar to wait for the even­tual cus­tomer. Congenial inland Aussies are either accus­tomed to this hor­rific prac­tice, or are too busy enjoy­ing the fero­cious sun to say anything.

There is hope for the land­locked palate how­ever. Where the stan­dard of qual­ity is often McCafe, and the typ­i­cal brew is instant Nescafe, a small ray of hope shines from a scat­ter­ing of bou­tique roast­ers a few hun­dred kilo­me­ters from the coast. Driven inland for the dry­ness, cool­ness, and the alti­tude they have set about the busi­ness of pro­mot­ing micro batch­ing and sin­gle ori­gin beans. The suc­cess is slow but it is catch­ing on. More and more lit­tle cof­fee shops are sell­ing these roasts and peo­ple are buy­ing them. Stopping some­one just exit­ing one of these cafes and ask­ing them why they choose this shop will yield a myr­iad of answers. One can be sure that the rea­sons given will have noth­ing to do with the fla­vor though. Quality cof­fee is begin­ning to enter the lives of out­back Aussies, and they do not even know it.

Retailer Profile: From Thailand with Love

We have done café pro­files all over the U.S., and sev­eral in Peru and Russia. This month we are con­tin­u­ing our inter­na­tional explo­ration with the best in Thailand – get ready for Doichaang Coffee Shops to blow your mind away fel­low cof­fee freaks!

“I had restau­rants and hotels, but I sold them all to go up to the moun­tains and work with cof­fee farm­ers 12 years ago,” – replied Wicha Promyong, the Doi Chaang Coffee Co.’s pres­i­dent, when I asked him how he got into the cof­fee business.

It seems like suc­cess inevitably fol­lows the foot­steps of a tal­ented busi­ness­man: Wicha sold every­thing to seek a quiet refuge in the Thai moun­tains, but 12 years later found him­self run­ning one the best cof­fee com­pa­nies in the coun­try. Wicha’s Doi Chaang now owns 20 cof­fee shops in Thailand, sup­plies cof­fee to 300 oth­ers, and his cof­fee con­sis­tently ranks among the top in the world.

Let’s talk to the man:

V. Many cafes in U.S. like to announce them­selves as being green and organic as soon as they receive the first deliv­ery of biodegrad­able cof­fee cups, but you guys are really tak­ing it all the way. Look at this jun­gle that you have built here: water­fall, gar­den with plants all over, and lots of organic prod­ucts for sale. This is a beau­ti­ful shop! What is its his­tory?
W. Thank you (smiles). Well, this is our very first shop that got opened 9 years ago. I opened it so that peo­ple could try our cof­fee and know how it tastes; how­ever, I have never pre­dicted such rapid growth and pop­u­lar­ity. A per­son would come in, try our cof­fee and tell 5 oth­ers – it is magic what word of mouth can do. As far as the design in this par­tic­u­lar shop I have used a tra­di­tional Thai style of build­ing that brings the nature inside and makes the atmos­phere really peaceful.

V. Could you tell our read­ers a bit about cof­fee cul­ture in Thailand – how did it progress over time?
W. In the old days in Thailand, peo­ple mostly drank instant cof­fee with con­densed milk. Then Starbucks came along and intro­duced the cul­ture of drink­ing fresh cof­fee, so now the major­ity of con­sumers turned to fresh brew. They know how to drink cof­fee, and instant cof­fee con­sump­tion has got­ten lower and lower espe­cially in the last 3 years.

V. How did you man­age to acquire enough exper­tise and knowl­edge to open up and oper­ate one of the best cof­fee shop chains in Thailand?
W. Simple. I just went around the world, looked at the way good shops were oper­ated, and drank cof­fee here and there slowly learn­ing day by day.

V. You have trav­eled the world exten­sively, what makes Doi Chaang cof­fee shops unique among oth­ers?
W. I think the biggest “unique” fac­tor for us is that 100% of the cof­fee in our cof­fee shops comes from our own plan­ta­tion in Doi Chang province. We sell only what we grow and process at the plan­ta­tion. However, because of that we have a lit­tle prob­lem now: our cof­fees are being sold really well, but the demand has got­ten too high. From Malaysia to Australia peo­ple are com­ing to us, but we don’t have cof­fee to sell because we sell only what we produce.

V. How is your com­pany plan­ning on resolv­ing this sit­u­a­tion?
W. We have expanded by 8000 acres in the Doi Chaang area, but we have to wait for another 3 years for the plants to suf­fi­ciently grow. In the future, we will be able to pro­duce about 2000 tons a year, so it’s just a mat­ter of time.

V. You have men­tioned that Starbucks con­tributed to cof­fee cul­ture progress in Thailand, but do you see more and more peo­ple choos­ing Doi Chaang cof­fee shops over Starbucks in Thailand?
W. You know yes, inde­pen­dent cof­fee shops are becom­ing much more pop­u­lar in Thailand, espe­cially with locals. They try our cof­fee once and always come back again. Maybe around 8 per­cent of our cus­tomers are for­eign­ers: the major­ity is still walk­ing the floors of Starbucks.

V. Wicha I think what you have man­aged to cre­ate with Doi Chaang Coffee Company is absolutely genius! What is the secret behind it?
W. I think the secret behind it all is – happy farm­ers. We pay them $1 per kilo of cher­ries! It used to be 12 to 15 cents per kilo before, and now it is $1. Plus our farm­ers col­lec­tively own 50% of the com­pany, so they receive part of the company’s prof­its in addi­tion to their sales. This is the way cof­fee busi­ness should be – not just one man mak­ing all the money – farm­ers should make good money too because they are the ones who produce.

V. Having done so much for the com­pany and the farm­ers, what is the biggest reward for you to be part of all this?
W. Maybe I am get­ting old, but I don’t need money any­more. The money that I make I use to build schools and hos­pi­tals. In this stage of my life, I am con­cerned about help­ing oth­ers to achieve their goals, and trav­el­ing the world to demon­strate that our model can be applied to any place around the world.

Doi Chaang Coffee Company

www.doichaangcoffee.com
Wicha Promyong
t: (+66) 86 071‑7403
miga@doichaangcoffee.com