More lucrative than
growing tea, coffee enjoys a new popularity among China's younger generation
with a thirst for Starbucks and Nestle.
By David Pierson
December 29, 2012
 |
Fu Xiafeng harvests red
coffee berries at a plantation. Farmers
are finding that growing coffee is more
lucrative than tea.
(David Pierson, Los Angeles Times / December 29,
2012
|
PU'ER, China — This remote southwestern city near
the borders of Laos and Myanmar is named after one of China's most famous
teas, grown on mountain terraces painstakingly carved out of the region's rich
red soil.
But in recent years, pu'er tea has surrendered prime real
estate for a more lucrative brew: coffee. Chinese farmers have taken to the new crop, which thrives in high-altitude
areas of Yunnan province and commands up to three times as much money as tea.
"My sole income depends on coffee
now," said Ma Jiaying, a farmer from a dab-sized hamlet in Pu'er called
Tea Tree Village.
Behind the change are major foreign producers,
including Seattle's Starbucks Corp. and Switzerland's Nestle.
Those multinationals are training farmers and buying beans from the region to
meet the world's growing thirst for coffee.
More important, Yunnan has the potential to thrive as a
production base in a country that is becoming increasingly hooked on the
caffeine-loaded beverage. Long dismissed by many Chinese as being too bitter,
coffee has enjoyed a surge in popularity among the country's young, urban
elite.
Few pairings denote upward mobility more than an iPhone in
one hand and a white-and-green Starbucks cup in the other. In central Beijing,
the company's smallest cappuccino costs about $4.33, making a Chinese Starbucks
habit one of the most expensive in the world.
"Starbucks in China for the young generation is almost
like religion," said Liu Minghui, head of Pu'er-based Ai Ni Coffee,
China's largest coffee production and exporting company. "They want to be
seen drinking their coffee. A lot of these Chinese kids have come back from
studying overseas where they've been introduced to this new lifestyle."
At 120,000 tons last year, China's coffee consumption was
only 6% that of the U.S., the world's top consumer of hot joe. Meanwhile, about
1 million tons of tea was consumed in China last year.
Still, analysts for Barclays expect Chinese coffee demand to
grow nearly 40% each year until about 2015.
More stores and shops are stocking instant coffee. Nestle's
Nescafe brand has captured more than two-thirds of the Chinese market, thanks
in part to blends mixed with powdered milk and sugar to make it more appealing
to local palates.
Coffeehouses are percolating too; sales are projected to
expand 23.5% annually on average to about $1.6 billion by 2016, according to
Euromonitor, a global research group. Much of that growth is expected to come
from Starbucks, which plans to more than double its Chinese stores to 1,500 by
2015. That would make China its second-biggest market, following the U.S.
"This is a long-term commitment," said John
Culver, president of Starbucks Coffee China and Asia Pacific.
Part of that effort will be raising the profile of Yunnan
coffee. Starbucks released a special blend in 2009 for Chinese consumers called
South of the Clouds, which includes beans from Baoshan, a city northeast of
Pu'er in Yunnan. A year later, the company partnered with Ai Ni Coffee to grow
and test four coffee varietals on a plantation in Pu'er. Those beans could
reach domestic and global markets in a few years.
Yunnan, considered one of the most bio-diverse regions in
the world, is responsible for almost all of the roughly 60,000 tons of coffee
grown in China. The provincial government has plans to increase coffee
production to 200,000 tons by 2020.
But growers will have to invest heavily to guarantee
consistent quality, experts said.
"It's still very messy," said Safi Malik,
co-founder of Shangrila Farms, a boutique coffee brand that carries beans from
Yunnan. "A lot of farmers don't have training. There's great coffee there,
it just needs to be found and worked on."
A big test is whether Chinese farmers will remain committed
to the crop through price fluctuations. This year, growers are being offered
about $1.20 a pound, half of what they earned two years ago.
"The best I can do this year is break even," said
Ma Xinwen, 40, who grows five acres of coffee on a hillside in Tea Tree Village
about 4,000 feet above sea level.
Neighbor Ma Jiaying also worries about the lower prices, but
he's confident they will bounce back.
The 48-year-old father of two has grown coffee beans for
nine years, primarily for Nestle. Every Monday and Tuesday, the company sends
Ma and other farmers a text message alerting them of prices. They are free to
decide whether to sell their beans.
When coffee prices surged in 2010, Ma made nearly $15,000
for the year, more money than he had ever seen in his life. He used his extra
cash to build a new home.
"This year, tea may be more profitable than
coffee," said Ma, wearing flip-flops and rolled-up gray slacks. "But
I don't want to switch back. You can't predict where prices are going to
go."
Few have profited more from Yunnan coffee than Liu, the
founder of Ai Ni Coffee.
The son of subsistence farmers, Liu grew up 300 miles from
Pu'er in a remote mountain village with no electricity or running water. Two of
his siblings died of malnutrition. No one thought to brew the coffee that grew
nearby. Instead, they ate the berries as a sweet snack.
After earning a university degree in agricultural studies in
1986, Liu joined a United Nations program in Yunnan aimed at developing
coffee farming. The crop had helped Vietnamese farmers earn a living after the Vietnam
War. Organizers hoped it would have a similar effect in Yunnan, which remains
the second-poorest province in China.
The experience helped launch Liu's export business, which he
briefly headquartered in Bay Shore, N.Y. Now a millionaire, Liu speaks halting
English in a city largely isolated from the outside world, except for a small,
single-runway airport.
That's where Starbucks CEO Howard Schultz landed in 2010 to negotiate a deal with Liu to produce coffee in Pu'er. Liu likes to show off a photo of the American executive visiting his processing plant.
"My parents were growing rice,
corn and sweet potato to survive," said Liu, a stout, highly energetic
man. "They never would have believed that I would one day grow luxury
coffee."
---
Nicole Liu in The Times'
Beijing bureau contributed to this report.