Agriculture and Food Authority A) FUTURE OF COFFEE “Strategies to Promote Domestic Coffee Consumption in Africa Case Study: Kenya Presentation during AFCA SPECIALTY PROGRAMME At Sea Cliff Resort & Spa, Zanzibar 28-31 October 2019 By BENSON APUOYO, MANAGER MARKET RESEARCH & PRODUCT DEVELOPMENT, 1 COFFEE DIRECTORATE KENYA
OUTLINE Background Trade in Africa Kenya’s Case Study The Kenya Government Big 4 Agenda The Manufacturing Pillar Key drivers of domestic coffee consumption in Kenya Number of coffee houses & stakeholders in value addition in Kenya Marketing and promotion of domestic coffee consumption Areas of support and partnerships Conclusion 2
BACKGROUND Africa consume very little coffee of what they produce with most of it exported to the global market outside the continent. Countries in Africa which have registered increase in domestic coffee consumption: 1. Ethiopia - believed to be origin of coffee - deeply rooted coffee drinking culture 2. South Africa - multiracial facet - increased middle level income - entry of new coffee houses 2
BACKGROUND 3. Nigeria Young middle class Population size Effect of international exposure- young graduates coming back from studies abroad Examples: Café Neo Coffee Shop in the lead have revolutionized coffee drinking culture in Nigeria 4. Kenya - Government deliberate effort to promote domestic coffee consumption (youth in Kenyan universities & tertiary institutions-target) - Increased disposable income of the middle class - Love for coffee - Increased investment in coffee outlets Consumption: 70 g per person per year - 5% of national production 2
BACKGROUND 5. Cameroon - Government deliberate effort to promote domestic consumption of own coffee - Festicoffee- a platform for the promotion and trade of coffee from Cameroon - coffee tasting day 6. Uganda -With effort of UCDA – campaigns were launched for domestic coffee consumption with some level of success 2
TRADE IN AFRICA Africa is one of the most resilient, innovative and creative business people in the world. Africa has more entrepreneurs with a strong private sector. Coffee - A classic example of the primary commodity and mono-crop dependency of many sub – Saharan African countries. This makes coffee producing countries susceptible to a number of exogenous factors like: - unfair trade competition with the western world (Visa refusal is one strong form on Non- Tariff Barrier), Global price fluctuations. - Over 90 % of coffee is produced in developing countries (Southern hemisphere), yet most of the consumption takes place in the developed countries (Northern hemisphere). 2
TRADE IN AFRICA According to World Trade Organization (WTO), intra – African trade accounts for less than 10% of total trade. Trade Barriers Kinds of NTBs that are seldom mentioned in policy meetings or documented in any meaningful way and yet remain big barriers to trade for African exporters and entrepreneurs: (i) Visa refusal by the granting authority- violation on freedom of movement (ii) Restriction on international movement of people through difficult entry visa procedures. (iii) Entrenched negative perception about the continent. (iv) “Trust deficit” (v) The cost of market entry (vi) “Knowledge deficit” that many exporters face when seeking market entry (vii) Attitude and perception-ripe in Africa: The effects of xenophobia. Negativity breeds Xenophobia (viii) The constant shifting of the technical goal post regarding- packaging, labelling, certifications. 2
TRADE IN AFRICA Undocumented Barriers These are perseverance and adaptability barriers that undermine the efforts of many African entrepreneurs to undertake international trade. The build up to this market exposed Coffee Directorate to many challenges of a start- up export business and the realities of trading on other continents. Where as Trade between African countries stands at less than 10% of the region’s total trade. In comparison, 40% of North America’s trade is with regional partner. The rate soars to 63% in Western Europe. Intra-Comesa trade stands at 7%. Africa is viewed as: Economy of underutilization Economy of scarcity of consumer goods Economy of low wages. 2
COFFEE CONSUMPTION IN KENYA CASE STUDY 2
Part I: Facts About Kenya
Kenya’s geo -strategic location offers it preferential access to regional and international markets The Nairobi Airport (JKIA) connects Africa to Europe, Asia and currently to the USA Kenya has secured Category 1 status, granting it direct flights to the US. The Port of Mombasa is gateway to East and Central Africa region Main transport hub to most of the African countries in the region with great developments in infrastructure; highways and SGR.
582,646 km 2 Kenya: Country profile… Area Population 48 million GDP at current US$ 77.9 billion GDP per capita US$ 1,700 FDI Flows 2015 US$ 1.4 billion in 2015-UNCTAD GDP Growth Rates 5.8% in 2016 and 5.2% projection in 2017 (WB) Credit rating Standard & Poor's; B+ (stable) Fitch: B+ (Stable) Moody’s : B2 (Stable) FDI Growth Rate 98.0% in 2013; 92.4% in 2014; 45.3% in 2015 Inflation Rate 7.1% - 2017 % GDP Growth 5.8% 5.7% 5.3% 4.6% 4.7% 2012 2013 2014 2015 2016
Structure of Kenya’s Economy Mining share of GDP in Kenya is very low: -Mining is an infant industry that is predominantly in the exploration stage -Opportunity for early adopters and first movers
Kenya’s international trade is remarkably skewed Leading destinations for exports are: • Africa 42% • Western Europe 23% • Asia 22% Leading sources of imports into Kenya are : • Asia (mainly China) 62% • Western Europe 17% Immense opportunities exist for increased trade between Kenya and Other African countries (below 10%)
Aligned to SDG 9 – Industry, Innovation and Infrastructure
PROBLEM STATEMENT OVER RELIANCE ON EXPORT OF GREEN COFFEE IN KENYA LOW DOMESTIC COFFEE CONSUMPTION IN THE COUNTRY Over 95% of the Kenyan coffee production a) is exported to various international markets as green coffee Domestic market absorption currently is at b) 5% The country has a potential to consume c) between 20-30% of the national production 2
COFFEE EXPORT BY DESTINATION FOR 2017/2018 NUMBER OF NO DESTINATION BAGS(60KG) NET WEIGHT-KG 1GERMANY 113,637 6,818,217.40 2UNITED STATES 113,422 6,805,306.80 3BELGIUM 101,235 6,074,113.00 4KOREA, REPUBLIC OF 87,111 5,226,660.00 5SWEDEN 58,824 3,529,429.80 6AUSTRALIA 25,278 1,516,682.00 7FINLAND 23,076 1,384,560.00 8NORWAY 18,344 1,100,630.00 9UNITED KINGDOM 17,223 1,033,379.00 10OTHERS 163,344 9,800,637.31 TOTAL 721,494 43,289,615.31
DOMESTIC COFFEE CONSUMPTION TREND YEAR LOCAL CONSUMPTION NO. BAGS MT (GREEN BEAN) 2009/10 509.90 8,498 2010/11 566.60 9,443 2011/12 629.50 10,492 2012/13 716.00 11,931 2013/14 744.00 12,405 2014/15 756.00 12,591 2015/16 771.00 12,842 2016/17 1,050.20 17,520 2017/18 1,576.70 26,278
KENYA’S COFFEE SHOPS ATTRIBUTES In the Kenyan specialty coffee industry, it is imperative for specialty coffee entrepreneurs to understand the important attributes that motivate consumers to patronize specialty coffee shops so as to have a competitive advantage and sustain their businesses. Before, there was no existing published work on domestic coffee consumption, particularly in the Kenyan context based on empirical evidence 21
COFFEE SHOPS ATTRIBUTES Coffee Directorate (Coffee Board of Kenya) undertook a study in the year 2011/12 in this area to understand the factors that could help enhance domestic coffee consumption in Kenya. The study adopted both qualitative and quantitative approaches in an exploratory sequential mixed research design to explore and identify attributes used by Kenyan specialty coffee consumers when selecting specialty coffee shops. 22
COFFEE SHOPS ATTRIBUTES The findings from the qualitative approach were used to develop the survey questionnaire. Based on purposive sampling, responses from 450 respondents were analyzed using exploratory factor analysis. 23
COFFEE SHOPS ATTRIBUTES All the survey statements were measured using a 5- point Likert type scale ranging from 1- Very unimportant, 2- Unimportant, 3-Neutral, 4-Important, 5-Very Important. Exploratory Factor Analysis (EFA) using SPSS version 20 was used. Factors with eigenvalues greater than 1 are considered sufficient. Factors loading in the range of ±0.30 to ±0.40 are sufficient to meet the minimum level of interpretation (Hair et al.,2006). 24
COFFEE SHOPS ATTRIBUTES The Coffee Directorate study used a i. factor loading cut-off point of 0.40 for retaining items in the factor analysis From the initial list of 61, a total of 9 ii. items were factor again with the items loading onto nine factors iii. The nine factors were extracted using principal component analysis with promox rotation 25
COFFEE SHOPS ATTRIBUTES Nine factors were labelled: The youth leverage i. Tangibles ii. iii. Quality coffee iv. Service quality by staff Brand preference v. vi. Promotional activities vii. Social responsibility and recreation viii. Food & drinks selection ix. Other amenities 26
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