Strategies to Increase the Consumption of Coffee in Kenya

Strategies to Increase the Consumption of Coffee In Kenya

Status of the Coffee industry in Kenya

Kenya is a producer of premium grade coffee producing 1% of the global production and is ranked 17th in terms of production. Production has stagnated at around 45,000tons annually for the last ten years. High cost of production and declining returns are some of the reasons given for the declining trends.

The coffee industry in Kenya is divided into two major sectors: Large scale coffee production and small scale production where more than 600,000 farmers depend on coffee for their livelihoods. Small scale depends on cooperative societies to organize process and market their coffee. Kenya has a well developed processing and marketing infrastructure to process and market coffee.

Implications

The current structure of the coffee industry has had tremendous social and economic implication as outlined below

Declining production in terms of aggregate output nationally over the last decade
Productivity per tree esp among small holder farmers has been going down, on average a coffee tree produces 2kg which cannot on average sustain an average coffee family
Declining in soil fertility on the coffee farms.
Increased age of the coffee farmer and a growing problem of intergenerational transfer of coffee farms creating despondence among the young farmers
Reduced incomes and fortunes from coffee both among the small and large scale farms.
The total coffee value chain is long leading to only a small percentage of the final coffee price reaching the farmer.

Trends affecting the Coffee Industry in Kenya

To increase the consumption of coffee in Kenya, the following trends taking place at the market place have to be noted and considered in the planning process.

Global Trend 1 Reduced coffee Consumption per capita

1.There has been a noted reduction of coffee consumption per capita in the major coffee consumption in the western world in the last decade. This reduced use of coffee per person is attributed to major two social and technological developments in the consumption countries

Demographic changes: Smaller family sizes means less coffee consumption in the average population.
Changing lifestyles and altitudes towards healthier lifestyles has affected coffee consumption among some segments of the population even though not as significantly as in other food sectors.
Technological innovation: The emergence and widespread use of coffee making machines both at the household levels and at the level of the hospitality industry has meant less wastage in the coffee brewing process. In recent years the use of more cheaper and more efficient single serving coffee brewing machines means individuals at any place can make only the coffee cup they want.

The implication to the coffee industry in Kenya:

Reduced consumption per person strategically means Kenya as production country has to develop strategies to cope with the reduced coffee consumption: Among the strategies proposed include widening the market reach and targeting the nontraditional coffee consumption markets like India, which is a major coffee consumption country but for lower quality grades, penetrating new coffee consumption countries like China and Japan. Value adding incentives before exports, improving the market positioning of Kenya coffee through branding are some of the avenues been explored in the country. One strategy been considered is to increase the current local coffee consumption from the estimated 2% of the total production to 10% within the next couple of years (the Coffee board of Kenya reports 2009).

Trend 2: Efficient production methods leading to reduced costs.

The use of better and more efficient coffee production methods in major production countries like Brazil, Vietiem, and Columbia etc has resulted in an oversupply situation of cheaper coffees in the global market.

The Implication to the coffee Industry in Kenya:

Despite the fact that Kenya produces some of the world’s best coffee due to its climate, geography and soil conditions, Kenya is out competed by these low cost countries on the basis of price as its sub optimal farming and processing facilities andcoupled with the poor market linkages limit the quality and quantity of the coffee that small holder can deliver to the market. For small holder farmers to benefit from coffee, improvements in cultivation, milling and marketing practices has to improved to increase the quality and quantity of coffee in order to command higher market prices

Trend 3.Growing local consumption

In the last ten years in Kenya, there has been a noted increase in the local consumption of coffee esp. among a specific young people segment. The coffee Board of Kenya estimates this to be at 2% of the total coffee production.

There have been an increased number of retail outlets serving coffee within the up market consumer population. Starting with Java Coffee house, currently we have more than five other coffee retailers like Sasini coffee house, Dorman Coffee house, Savanna Coffee house etc fighting for the small market segment.

Analysis of this consumer segment taking coffee indicates that they are highly educated and professionals in their respective fields, have been exposed to a coffee drinking culture in the western world where many have been and returned back home with that craving, have a high disposable income to afford coffee in such retail outlets where the price is high and lastly they aspire to live the western world lifestyles, Living in the high income neighborhoods. The average age of these consumer segment is 40 years both genders.

The Implications to the coffee Industry in Kenya.

Based on the organic growth from these pioneer coffee retailers, it’s imperative to note that there is a latent demand for good coffee in Kenya that has not been exploited and needs to be rekindled to burn more strongly.

Strategies on how to increase coffee consumption in Kenya.

1. Development of business strategies to fight off competition.

Kenyans have a strong tea drinking culture among its adult population, strong cold drinks and juices taking culture among the youth esp. in urban areas and yoghurt taking among the young children.

Fighting for a significant market share of the “palates”or “throats” of the Kenyan population is the greatest task that any plan to increase coffee consumption will have tocontend with. In order to carry out such a market onslaught, a comprehensive business plan with clear targets, objectives and well thought out strategies will have to be put in place.

This plan should be based on a well undertaken market research on the current status of the beverages market (tea, cold drinks, sodas and yogurt and other drinks that go through the throat to satisfy thirst cravings of some sort).

Key areas to consider include market trends in consumption, analysis of the various competing products, identifying the basis of competition, profiling the various consumer groups, the distribution patterns and the pricing structures, understanding the benefits they derive from the products they consumer and their buying behaviors.

Applying the business and marketing practices undertaken by large corporation in the market place e.g. Coca Cola or Micro Soft will help the turn round as has been proved by the success of such companies in their respective fields of operations. The key thrust message here is the need to identify what makes consumers tickle in this thirsty business. (Identify their needs for coffee; identify the benefits they derive from the coffee and delivering a product that satisfy that need).

Who should be responsible?Market research is an expensive undertaking and not many private investors would be interested in funding this. I suggest that a government funded institution like Coffee Board of Kenya undertakes this activity and also handles the overall responsibility of undertaking the local coffee consumption promotion. To fund the activity I suggest that a small tax be charged on any sale of coffee undertaken in the country.

2. Redeem the Negative image of coffee.

The current image of coffee is that it’s a “sick” industry and efforts must be undertaken to develop a “positive” image of coffee within the general population esp. in the coffee producing areas in Kenya. The industry will need to respond to declining production, reduced returns, coffee farms neglect, splitting up of large coffee estates for residential purposes, mismanagement of the cooperatives societies and an industry that is not transparent in terms of information flow or its general management.

Another problem in the coffee industry is the reluctance of the old farmers handing over the button to the younger generation. Statistics show that the average age of the coffee farmer in Kenya is around 65 years. There is a general tendency of the fathers not handing over coffee to their sons. Young people in the coffee growing areas dislike coffee in general and don’t like been associated with it.

Young people must be made to love coffee and their associated activity by been made to own it and be responsible if there is going to be any sustainable development in the industry. The industry has to shed off its negative image if young people have to embrace it and be involved its consumption and promotion.

The author also suggests that stereo typing of coffee as a “cash crop for exports” only in school books, agricultural training programs, training institutes in agriculture and in other fora need to be addressed and be corrected to correct the impression of coffee gained at an early age. There is a need to impress students and the general publics that apart from exporting coffee, we can locally use the product in our daily lives.

3. Removal of stifling Government regulations in the industry.

Despite the attempts by the government to reduce its role in the coffee industry through various policy instruments and frameworks, it still retains a strong presence and interests through its statutory institution. There are over twelve licenses that govern almost all aspects coffee from production to marketing that actors have to respond to just to operate. To roast coffee at any level demands a license and for small scale farmers they cannot sell coffee outside a cooperative society framework, no matter how inefficient and loss making the producer organization is. The local coffee consumption in Ethiopia is significant despite having a history of coffee use for generation, farmers use their local indigenous knowledge to roast coffee berries and brew coffee at the farm level for family use at home. The fact that a Kenyan Coffee family cannot roast its own coffee, removes the coffee from its psyche and associate coffee with a foreign market, removing incentives to work, experiment and add value to coffee at the household level. There is a need to remove such regulatory obstacles from the industry, so as to increase the level of innovation, experimentation and value additions among small farmers.

Opportunities for value additions, innovations and experimentation at the household level with coffee will increase interest among the young people as it will provide gainful employment opportunities, increase coffee revenues from the value additions activities, increase coffee consumption and contribute to a positive altitude to coffee farming in the production areas. The long term benefit would be more young farmers joining the coffee industry as farmers, and assisting move coffee farming to the next generation.

3. Coffee Consumption promotion based on Market segmentation

To promote increasedlocal coffee consumption, I would categorize the total coffee market into three main segments. Each proposed market segment has its own peculiar features, consumer needs and the coffee delivery methods are different in each case. The promotional and coffee presentation methods are different in order to compete in each market segments’.

Market Segment 1: Mature adults

Characteristics

Features: Adults aged 45 years and above, have an average disposable income, own land or are working and have adult children who are school going or college.

Consumer Needs: Market Segment requires companionship, recognisation for achievements, have a strong attachment to the families and inclination to religion. They make decisions in whatever positions they are in. Interested in winning out on the career of choice. They are also stressed due to work, business and other family obligations. Have health concerns as well.

Market Position of coffee to the market segment. The health benefits of Coffee should be presented and stressed to this market segment. Coffee is good at relieving or coping with stressful situations either in business, workplace or within family.

Product Proposition to Consumers

The coffee Product

Provide high quality coffee (AA, AB grades) to the market segment. Coffee as a product is taken on the basis of its aroma, smell and taste. Anyone who has tasted good coffee either in high class restaurants or abroad knows how satisfying coffee can be. The current use of instant coffees and low grade coffee for the mass markets, either in restaurants or hotels does not provide such a consumer product experience which contributes to use of coffee as an alternative to coffee.

The coffee price

The pricing structures for high quality coffee are expensive for this market segment. A kilogram of premium quality coffee AA at Java Coffee house average 350ksh (4USD). A kilogram of tea costs on average 150ksh (1.8USD). Coffee therefore cannot compete on the same platform as tea or other close related competitors such as juice or cold drinks. There is a need to review the prices of coffee on the retail end of the market or the catering establishment if we want more people to experience good coffee drinking.

The Coffee distribution

There is a need to improve the distribution of good quality coffee product across the country. Low priced and low quality coffee and instant varieties are widely spread in all sort of retail outlets, but good quality coffees are only available in high end markets outlets like supermarkets and high class restaurants.
To encourage coffee brewing in offices and homes, the taxation on single serving coffee making machines should be removed to lower the overall price per unit of the machine.
The industry can borrow a leaf from the tea industry. To lower the overall costs of processing per each individual company, a certain percentage of high quality grades from each processor, miller or marketer can be aggregated at one point, where all the blending, packaging, distribution and promotion can be organized for the whole country. A single brand name and image can be used for this purpose. The central packaging point should a case of public private partnership between the government and all coffee interested parties. The tea industry has benefited from such an arrangement, with the tea flagship been KETEPA, with over 65% market share.
High quality coffee should be made available in the offices, seminars, professional meetings, church meetings and all other social gathering and the consumers encouraged to try it out on their own.
In rural areas, local coffee roasting and usage at the local level should be encouraged through the local cooperative societies. Lower priced coffee in sachets should be more visible in local retail outlets.

The coffee Promotion.

I suggest following main methods to promote the coffee consumption among this market segment:

Market positioning of coffee as a healthier product choice among its competitors. Coffee health benefits should a central point in the coffee communication package to consumers with a strong family inclination or team building in a working situation.
Education: Training on how to make a good cup of tea, either in the office, home or in other avenues needs to be undertaken. Consumer’s good experience with GOOD coffee remains very strong in one’s mind and would encourage repeat PURCHASE AND USAGAE. Using the media, social functions, professional meeting or breakfast meetings would connect well with this target market. In rural settings, the local cooperative society would be a good training ground for local farmers to experience good coffee making techniques using their traditional knowledge and tools.
Making use of the local vernacular radio stations, which are well distributed and with a considerable listenership in the country to promote coffee consumption, how to make good coffee, how to drink it, and its avaibility in the locality would encourage consumer experience with coffee. Talking to consumers on the health benefits of coffee in their own language would encourage more consumers to try out coffee as they trust the radio stations.
Making use of prominent personalities in the communities to promote coffee drinking would assist at fairly low costs.
The coastal areas have a long history of coffee consumption, this areas and consumers should be specially targeted to increase consumption per capita through the now popularized road shows and through their mosques.

Market Segment 2: The Youth and Young adults.