ECX needs to restructure strategy to handle specialty coffee trade

The Ethiopian Reporter

October 31, 2009

Since April, the representatives of the Ethiopian Commodity Exchange (ECX) and the Specialty Coffee Association of America (SCAA) have been holding talks on how ECX will launch and handle specialty coffee trading. Following these talks, the Exchange held the "first ever" specialty coffee event in the country last week where key players in the global specialty coffee industry including the Executive Director and Incoming President of SCAA, Ric Rhinehart, attended the event. Rhinehart briefly spoke with The Reporter's Hayal Alemayehu about U.S. buyers' and consumers' interest in Ethiopia's specialty coffees and the need for ECX to restructure its strategy in order to handle the transaction of Ethiopia's specialty coffees. Excerpts:

Ethiopia is the birth place of coffee while the United States is one of the big consumers of the beverage. How much do U.S. buyers and consumers know about Ethiopian coffee and that the country is actually the birth place of the beans?

U.S. buyers are very well aware of Ethiopian coffees. They are very well aware of the differences and flavor profiles and characteristics of the variety of coffees that grow in the different regions across the country. But the consumers are less aware than the traders. However, in the U.S. specialty market the traders are sort of leading the consumers. So the consumers are more likely to buy what the coffee marketing companies put out as best quality coffees.

But reports show that the growing trend, especially in the U.S., indicates that consumers are more interested in companies that pursue ethical practices in relation to their workers and the environment and the knowledge of consumers about a given company is one of the determinant factors for the company's success or failure. Consumers in the U.S. are starting to pressure big companies like Starbucks and Cadbury not to solely focus on their profit. Therefore the knowledge of consumers about companies' products is becoming very important and crucial in the U.S. market and if consumers out there have no knowledge of Ethiopian coffee...

Well, the way the consumers gain awareness though is through the efforts of coffee roasters in the case of the specialty coffee market in the U.S. And roasters in the U.S. and elsewhere have a special focus on Ethiopia because the country grows great coffees.

Is the volume of coffee Ethiopia exports to the U.S. that significant?

I think the U.S. currently buys about seven percent of Ethiopia's coffee destined for the export market.

How about the specialty coffee, is the export that considerable?

There is more and more coffee market than the specialty coffee in the U.S., particularly in the certified, organic and fair trade coffees and Ethiopia's coffees have a great potential in the U.S. market than what is currently exported.

So what is a specialty coffee?

It is the term commonly used to refer to "gourmet" or "premium" coffee. Specialty coffees are coffees with a special cup quality and unique characteristics that take you back to the origin where they are produced from.

According to the SCAA, a coffee which scores eight points or above on a 100-point scale is graded "specialty". Specialty coffees are grown in special and ideal climates, and are distinctive because of their full-cup taste and little to none defects. The unique flavors and tastes are a result of the special characteristics and composition of the soils in which they are produced and it could be further augmented by certification programs in organic or fair trade coffee.

When are you supposed to start buying Ethiopia's specialty coffee via the Ethiopian commodity Exchange (ECX)?

We hope that the ECX will start transacting specialty coffee in the coming coffee season. But prior to that we will have to put the challenges of trading the specialty coffee on the table with the ECX and sort them out before the specialty coffee move to the ECX.

Major buyers like Starbucks are complaining that trading coffee through the ECX will actually prevent them from tracing the origins of coffee they buy from Ethiopia than streamline the transaction. What do you have to say about that?

Well, it is very true that the Exchange, in its current form, stops traceability at the point of entry to the Exchange and that is by design. For specialty market, traceability is very important and part of the purpose of the meeting we had with Exchange authorities is to find a way to re-establish traceability for that coffee that is designed to enter the specialty market.

Why is traceability so critical in the specialty coffee market?

Traceability is very important for specialty coffee consumers because it will connect the cup in their hands to a farmer who produced it. Traceability is also critical because when specialty coffee buyers buy a certified coffee, they want have faith that that is what they are truly buying and, depending on the certifying agency, they will have access to trace the coffee back to its origin.