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Kenya: Coffee exporters retreat from direct selling


Exporters are saying the Nairobi auction is offering quicker sales and better prices as the goal of direct sales proves difficult. Photo/REUTERS via Business Daily

By George Omondi
Business Daily

October 4, 2010

International commodity brokers have limited the direct sale of coffee introduced three years ago.

Many exporters have preferred to operate from the weekly auction, saying they had been met by an intricate web of intermediaries in the quest to penetrate the international markets.

The Nairobi Coffee Exchange (NCE) offers quicker sales, they said.

“Direct sales remains a great idea but players who have tried it realised that the auction’s transparent price discovery system often yields better value for their produce,” said the Sasini Ltd manager, Dr Ceaser Mwangi.

Under the central auction system, which operates on a willing-buyer-willing-seller terms, Dr Mwangi said the buyer who places bids has a ready market for the quantity demanded.

Local industry players, backed by the Coffee Board of Kenya, have been campaigning for branding to promote Kenyan coffee.

“The eight dominant buyers in the international coffee market are surrounded by numerous conniving brokers making it impossible for individual farmers to bargain for good value for their produce,” said an official of Thika Coffee Mills who requested not to be named.

Thika Coffee Mills is one of the firms that adopted the direct sales two years ago but its officials said they have retained the links with the NCE.

The direct sale, commonly referred to as “second window” was introduced in Kenya two years ago in the hope of handing farmers the control of sales and distribution.

Under the system, a marketing agent directly negotiates with a buyer outside the country under a contract that must be registered with the Coffee Board of Kenya.

Proponents of direct sales say unlike the NCE, which lumps Kenyan coffee with several produce from around the region, the system offers opportunity of promoting unique features of local coffee.

“Consumers in the international market do not appreciate the uniqueness of the Kenyan coffee because it is sold as a blend,” said the C Dorman’s MD Bridget Carrington.

C Dorman is one of the leading coffee roasters and exporters in the country.

Data from the Kenya National Bureau of Statistics indicates that quantity of coffee auctioned at the Nairobi Coffee Exchange has dropped by 39.2 per cent from 37,909 tonnes in the first half of 2009 compared to 23,062 tonnes in a similar period of 2010.

Officials said the drop was not a product of the shift.

“This drop had nothing to do with the introduction of the direct sales because even farmers who had embraced it are returning in large numbers,” said Mr Daniel Mbithi, an official of the Kenya Coffee Producers and Traders Association that runs the NCE.

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