An innovative ITC project established in 1999 continues to benefit a growing number of small coffee farmers each year. Through an Internet auction and rigorous selection process, a global competition is rewarding farmers committed to producing high-quality coffee.
In October 1999, 315 coffee growers in Brazil participated in a ‘Best of Brazil’ coffee contest. Experienced coffee tasters from several countries, called ‘cuppers’, selected the 10 best coffees in a rigorous quality competition. Two months later the ten coffees (5,400 kg in total) were offered for sale to 23 bidders at an Internet auction. In the meantime the bidders had received samples of all coffees and information about the farms. Thus began a new era in the coffee sector in relation to both e-trade and the criteria for top-quality coffees.
The auction was one of several experiments in the US$ 1.4 million Gourmet Coffee Project (GCP) initiated by the International Coffee Organization and ITC, and financed by the Common Fund for Commodities. ITC was the executing partner in the project, which supported the development of gourmet coffees from Brazil, Burundi, Ethiopia, Papua New Guinea and Uganda. The cupping competition and the Internet auction were conducted in cooperation with the Specialty Coffee Association of America and the Brazil Specialty Coffee Association. The rationale behind the GCP was to take advantage of the preparedness of consumers to pay more for ‘exclusive’ coffees combining high quality and limited availability. The GCP developed new approaches, identifying ways in which coffee producers and exporters could benefit.
The Cup of Excellence
The two-tier experiment, with a quality competition followed by an Internet auction, was a success, achieving prices well above expectations proving that ‘quality pays’. The project partners developed the concept further and created the Cup of Excellence (COE) programme, now run by the non-profit Alliance for Coffee Excellence with assistance from CommoditiesOne, a software firm in Australia. ITC is no longer a partner in the programme but is recognized as co-founder.
The prelude to the global Internet auction involves qualified cuppers in blind ’cupping’ of hundreds of samples submitted by farmers in a staged and audited process. The cupping typically leads to the identification of 20 – 30 coffees reaching an internationally agreed quality level. Bidders from around the world submit their bids at the Internet auction, which is usually held about two months after the high-profile announcement of the winning coffees. The identity of the bidders is concealed by the employment of codes until after the auction, and there is an implicit, commercially valuable cachet in being the successful bidder for the top coffees. Japan is the biggest buyer of COE coffee and likes to grab number One.
Farmers typically receive about 80 – 85% of the proceeds and although most are not able to follow the auction, those with access to a computer have an opportunity to share in the excitement in real time.
The winning coffees are the very best of the best – sometimes called exemplary coffees. They are sold at very high prices, typically US$ 20 to 40 per pound for the number One winner and may reach US$ 100 at the ultimate marketplace. The auction prices should be compared to US$ 1.00 – 1.50 per pound over the last several years for good mainstream coffees (although prices rose briefly above US$ 2.50 in the first quarter of 2011 – the highest price in over 10 years).
The Cup of Excellence programme operates in nine countries. Rwanda joined in 2008 as the first country outside Latin America. The annual competitions draw a lot of attention to host countries sometimes with the president presenting the prizes to the winners.
What’s in it for the coffee farmer?
Winning farmers are acknowledged for their dedication to quality. Apart from sharing in the bulk of the proceeds, the farmer is given a prestigious award during a national ceremony, leading to recognition in the industry as a quality producer. Winning farms, and often the whole region, tend to receive more visits from international buyers looking for quality coffee. Farmers in remote areas are 'discovered' and recognized for their efforts, lifting them out of the ranks of anonymous coffee producers. Woman farmers, who tend to pay particular attention to quality control at all stages of
production, have been beneficiaries.
The Cup of Excellence builds a bridge between the high-quality farmer, the trader in high-quality coffee and the demanding consumer who appreciates that the farmer has been well compensated.
Global coffee production
Facts
• Brazil and Viet Nam produce half of all coffee in the world (around 36% and 14% respectively) followed by Colombia and Indonesia. Countries in Africa produce around 12% of the world’s coffee.
• More than half of all coffee in the world is traded from Switzerland, but only a small portion passes through or ends up in the country.
• Annual world production of coffee is around
125 million 60 kg bags or 7.5 million tons. It takes around 440,000 20-foot containers to carry that much coffee.
• The Nordic countries consume on average almost
10 kg per person, per year. Other countries in Europe typically consume around 6-7 kg per capita. The US consumes only 4 kg per capita. Coffee consumption is very low in coffee producing countries, with Brazil an exception at almost 6 kg per capita.
ITC’s Coffee Guide website reaches a diverse audience
ITC’s extensive Coffee Guide is designed for coffee growers, processors, traders, exporters and associations, as well as those involved in coffee transport, finance, quality control, certification and related sectors in producing countries. The website offers over 500 pages with information on all aspects of the trade, including mainstream and niche coffee markets, contracts, logistics, supply chain management and risks, quality, climate change, certification and legal matters.
The website includes a Q&A service where a panel of experts provides answers. More than 200 detailed answers are stored in an archive for use by visitors.