United Nations Conference on Trade and Development

International Workshop on

Fostering the Integration of Agricultural Value Chains of Commodity-Dependent Landlocked Developing Countries into
Regional and Global Value Chains
24-25 November 2021, Palais des Nations, Geneva, and online

Analysis of Key Export Markets for Ethiopian Coffee Roasters and Exporters

By

Gustavo Ferro, UNCTAD Consutant

The views expressed are those of the author and do not necessarily reflect the views of UNCTAD.
 Trading Food For Sustainable
Development

Fostering the Integration of Agricultural Value

Chains of Commodity-Dependent Landlocked
Developing Countries into Regional Value Chains

4th Session: Market Access and Trade Facilitation

Analysis of Key Export Markets for Ethiopian Coffee Roasters and Exporters
Speaker: Gustavo Ferro
Venue: Palais des Nations, Geneva
Date: 25-11-2021
 Agenda

Analysis of Key Export Markets for Ethiopian

Coffee Roasters and Exporters

› A. Market profile and trends

› B. Trade channels and market structure

› C. Legislative requirements and import tariffs

› D. A few lessons from Colombia

› E. Recommendations for Ethiopia

A. Market profile and trends
European Union Saudi Arabia China

- Increasing consumption of higher-quality - Dichotomy: traditional Arabic coffee - Traditionally tea-consuming country, but
Arabicas; driven by out-of-home consumption (using Arabic coffee pot dallah) among the fastest-growing coffee
consumption rates.
consumption (currently changed due to vs. influence of Western-style coffee
impact of COVID) consumption (lighter roasts, diverse brewing - Lower qualities, instant coffee. But:
- Wide interest in coffee origins and diversity methods, not masked by sugar + other consumption diversifying into different
of origins. Ethiopian coffees: ingredients). qualities and types of coffee.
ranging from fruity/winey with high acidity and
floral notes - Geographical proximity to East Africa >> consumer preference for clean, balanced and
birthplace of coffee familiar organoleptic profile. floral coffees with a solid aftertaste.

- “Beyond fair trade”: consumer interest in - Ethiopian coffee familiar to consumers; lighter roasts, preference for ground coffee
impact at origin; value addition and commonly used in the preparation of Arabic
rebalancing of producer country / consuming coffee as well as specialty roasters (single - Younger generations: wider spectrum of
country relationships: origins). coffees, including more acidic profiles.
Growth of third wave roasters + spill over
Trade not Aid - Growing trend: micro-lots, micro-roasting in effect from specialty markets in South
Added Value for All high-end market. Luxury consumption. Korea, Japan.
Direct Fair Trade
- Importance of brand exposure, in and out-
- Growing movement: Agency for the of-home consumption: online recognition
Valorisation of Agricultural Products (AVPA), plays a crucial role in purchasing decisions.
Fair Chain Foundation, Proudly Made in
Africa - Online marketing, online shopping!
A. Market profile and trends
Rep. of Korea South Africa

- South Korea: strong preference for Arabica - South Africa follows Western-style
coffees; 2/3 of green coffee imports. consumption patterns and preferences;
specialty coffee is becoming an important
- Shift from lower qualities / instant coffees to market segment (likely affected by COVID):
specialty coffee consumption in the last numerous small and medium-sized coffee
years. Proliferation of specialty coffee shops roasters that import, roast and distribute
(albeit currently affected by COVID). coffees in South Africa, regional and
international markets.
- Strong emphasis on artisanal quality and
aesthetics. Ethiopian coffees attractive due - Consumer preferences beyond the product’s
to both: organoleptic profile: increasing demand for
organic and ethically sourced / fairly-traded
Ethiopian coffee culture, craft coffees, as well as single origins.
+
Sophisticated organoleptic features - Appeal of African-sourced coffee beans and
direct trade with African producers; some
- South Koreans increasingly interested in companies source exclusively from African
sustainably-sourced coffee and single-origin origins. Ethiopia: common origin in South
high-quality coffee beans. Africa, alongside Uganda, Rwanda.
 B. Trade channels and market structure
Strategy already
implemented by Ethiopian
brands in Europe.
Establishment of
representative office in
destination market.
Custom-manufacturing / private
Optimization of logistics,
label roasting for other brands or
customer support, market
supermarket brands: growing
presence / marketing.
trend, especially in EU-15
Production according to
market. Potential for scale, lower
market demand and sales
marketing budget, existing
projections.
consumer base. High food safety
and compliance to buyer’s
requirements.

Local distributors (knowledge of

local market, retail network),
possibly through sales agent: most
common distribution model in all
markets. Distributors are
specialized in coffee or generally in
food products.
C. Legislative requirements and import tariffs

5 market profiles: European Union (benchmark), Saudi Arabia, South Africa, Republic of Korea, China

› Main requirements per market, specific legislative documents and standards. Reference to
general food law structure in each country, and to provisions related to subjects such as
contaminants and residues, labelling and packaging. It also addresses the import tariffs for
roasted coffee in each of the selected markets.

› Complying with a market’s legislative requirements is the baseline for successful market access,
thus this section can be used by Ethiopian exporters as a compliance guideline per target market.

Source: Official food safety agencies, legislative documents.

C. Legislative requirements and import tariffs
First step: Legislation. Basis: green coffee legislation + extra for roasted coffee
Contaminant Main causes Regulations and limits

Pesticide residues Contamination during production and harvesting. Not defined specifically for roasted coffee; default
Cross-contamination during handling and transport. Maximum Residue Level (MRL) of 0.01 mg/kg is
usually observed for foodstuffs in all countries.

Mycotoxins / mould Improper drying (high % moisture), improper Harmonized in 4 countries

storage and transportation (no ventilation, high (no specific mention South Africa)
temperature). Roasted / ground coffee: Ochratoxin A maximum
5 μg/kg

Polycyclic Aromatic Hydrocarbons (PAHs) Smoke contamination from artificial driers or PAHs are monitored. Emerging subject; no specific
surrounding traffic, machinery. limits yet.

Acrylamide Carcinogenic substance that forms naturally when Applicable in the European Union: Commission
coffee is roasted at temperatures above 120°C Regulation (EU) 2017/2158 establishes that the
benchmark level for roasted coffee is 400 μg/kg
maximum.
C. Legislative requirements and import tariffs
Other legislative requirements Content Regulation

Food contact materials Material that is authorized for use in packaging that All countries have specific legislation with a list of
comes into contact with food; specific materials are forbidden food contact materials.
forbidden due to potential cross-contamination

Labelling Labelling regulations enable consumers to get The legislation of individual countries present slight
comprehensive information about the content and differences in font sizes and mandatory information
composition of food products and to make an on labels. But they all follow the General Standard
informed purchasing decision. for the Labelling of Prepackaged Foods (CODEX
STAN 1-1985), adapted locally.

The official language of each country should also be

presented on the label, but there’s some flexibility
regarding the use of stick-on labels for each market.

Saudi Arabia has specific directives regarding

content which may be considered offensive or
prohibited on labels.
Organic certification Imports and marketing of organic-certified (roasted) The use of “organic”, “bio” and other expressions
coffee are regulate. suggesting organic certification is regulated
for roasted coffee and other pre-packaged foods. In
South Africa, specifically, a national organic
legislation is under construction, but the use of
organic-certified claims is as regulated as in other
markets.
C. Legislative requirements and import tariffs
Import tariffs Content Country-specific customs duty

Customs duty on roasted coffee. Import duties are levied on imported goods in European Union
specific countries, including roasted coffee. Third country duty: 7.5%
However, the 5 selected markets have preferential Ethiopia: 0% (tariff preference: R0978/12)
tariffs that comprise Ethiopia.
Saudi Arabia
Import duty: 0%

China
Import duty: 15%
LDCs Preferential Tariff: 0% (applies to Ethiopia)

South Korea
Import duty: 8%
LDCs Preferential Tariff: 0% (applies to Ethiopia)

South Africa
Import duty: 0% + 6c/kg
African Continental FTA (AfCFTA): 0%
D. Colombia Case Study: Institutional Framework

Institutional framework: Regulated use of Café de Colombia logo by Colombian roasters

› Colombia’s National Federation of Coffee Growers (FNC) has set out specific rules for the licensing
and use of the federation’s Café de Colombia logo by Colombian coffee roasters and brands. This is
an important step for both the federation and roasters in terms of marketing, recognition of
Colombia’s coffee brand and authenticity of its origin.

› Only roasted coffees which use Excelso coffee beans as raw material are allowed to carry the quality
certificate Café de Colombia. Other qualities are only allowed to carry the label Producto de
Colombia.

› Sharing information with the FNC, Compliance with guidelines (details on application on packages)
subjected to approval of the FNC, Willingness to associate and develop joint programs with
Colombian coffee producers.
D. Colombia Case Study: Institutional Framework

Institutional framework: Exports of small quantities as a diversification strategy

› In 2016, Colombia’s National Federation of Coffee Growers developed a procedure for natural or
juridical persons to export small quantities of coffee. This is applicable to green, roasted and
instant coffees, as well as to coffee extracts. Exporters of roasted coffee are allowed to export
quantities up to 50.4 kg per consignment, amounting to a maximum value of USD 5,000.
› The following processes are facilitated:
 Registration procedures

 Quality control processes

 The payment of the coffee export tax

 The direct delivery of the consignment to the end client

 Registration of mail service providers before the National Federation of Coffee Growers

2021 update: 740 companies in Colombia registered as coffee exporters:

http://www.cafedecolombia.com/static/integrador/TOSTADO.pdf
D. Colombia Case Study: Commercial Practices

Commercial practices: Reaching consumers through different channels

› One of the practices implemented by Colombian exporters has been to diversify their distribution
through various retail and service channels internationally. This success is closely related to
the activity, market knowledge and distribution network of local partners at the destination market,
as well as to the size and capacities of the exporter.
Example Juan Valdez:

 Own shops (in Colombia 300+ coffee shops, 130+ in other 13

countries)
 Mass retail: partnerships with large-scale retailers in USA,
Chile, Brazil.
 Online: In China, Juan Valdez is listed on the main online
shops, such as Taobao, Tmall and Yihaodian; online shops in
Europe (Germany, UK).
 Service channels and airlines

Source: STIR Tea and Coffee

D. Colombia Case Study: Commercial Practices

Commercial practices: Private-label manufacturing / roasting as alternative market entry

› In roasted coffee, private-label manufacturing can be interpreted as roasting and packaging

coffees for another coffee brand or under a store brand, notably for supermarkets. Store brands
have become increasingly popular among consumers in recent years, as they have moved from low-
quality alternatives to more sophisticated products. Supermarkets, especially in the United States
and Europe, have introduced premium coffee qualities. and certified coffees into their assortments.

Example Colcafé:

 Wide product range; certification

options (important retail channel
requirement); food safety and quality
management.
 Large-scale customers, example:
Walmart.
 Mass market and large consumer pool.
 Lower price range; sea freight.
Source: Colcafé
E. Recommendations
› The recommendations in the study were organized according to:

• 1. Institutional recommendations: activities that will require sector-wide efforts and sector re-structuring.

• 2. Commercial recommendations: activities that can be implemented directly by the private sector, with the
support of Ethiopian institutions.

In this workshop, we will focus on the institutional recommendations related to trade facilitation and logistics.
E. Recommendations – Institutional
› Market information system and capacity development

• Consolidate partnerships with Ethiopian export promotion agencies, chambers of commerce and business
networks to collaborate in the compilation of market information products for Ethiopian roasted coffee
roasters.

• Collaborate with international specialty coffee organizations such as the Coffee Quality Institute (CQI) and the
Specialty Coffee Association (SCA) in developing and implementing training modules for Ethiopian roasters in
regard to cupping, barista and roasting skills. Promote these capacity-building activities among roasters,
aiming to increase the share of certified Q-graders, master roasters and other technical skills in the Ethiopian
coffee sector.
>> Promote the trainings among sector associations in Ethiopia, in a “train-the-trainer” format >>
multiplier effect.
E. Recommendations – Institutional
› Investigate logistical and packaging solutions

• Develop a collaboration platform for Ethiopian exporters to negotiate air freight options and pricing with
logistics agents and transportation companies, and to better organize themselves when shipping to similar
destinations using ship consolidation means.

• Support a pilot project on sea freight for roasted coffees from Ethiopia. Experiment with different transit
times, temperatures, air ventilation rates and packaging types to establish define tolerance margins in relation
to quality deterioration.

• Provide Ethiopian roasters with up-to-date information on freight options to different export markets, prices,
transit times and available shipping companies.
E. Recommendations – Institutional
› Compliance with legislative requirements

• Implementation of HACCP systems: trainings, workshops and on-site capacity-building, involving personnel
from different departments, and not only quality-control technicians.

• Implementation of other food safety guidelines and standards: Reduce Contamination of Food with
Chemicals, Prevention and Reduction of Ochratoxin A Contamination in Coffee, Establishment and Application
of Microbiological Criteria Related to Foods, Reduction of Acrylamide, Compliance with Organic Standards.

• Advise on product labelling and packaging materials.

E. Recommendations – Institutional
› Communication and promotion

• Create a common brand for Ethiopian roasted coffees which can be used by all Ethiopian coffee roasters upon
compliance with registration, authorization and quality criteria >> connect with Protected Geographic
Indication (PGI).

• Explore possibilities to institutionalize sub-categories of Ethiopian coffees in niche markets, and create
harmonized and registered standards, for example: “Ethiopian hand-roasted coffee”.

• Educate buyers and consumers; use websites, social media and other marketing channels to reach larger
audiences, possibly involving specialized marketing professionals.
 THANK YOU!

More questions?

www.linkedin.com/in/gustavoferro