Ethiopian Fine Coffee

It is believed that a young goat herder named Kaldi discovered the bean in the Ethiopian highlands after he noticed his goats kicking wildly from eating the red cherries. For centuries, coffee quality has been closely tied with Ethiopian culture, with coffee ceremonies being a daily practice amongst Ethiopians. An estimated fifteen million people are involved in the coffee industry in Ethiopia. Of this, roughly six million participate in the production and trade of the most famous and distinctive fine coffees – Sidamo, Yirgacheffe, and Harar/Harrar, brands that are Ethiopia’s own Intellectual Property.

In recent years, the demand in the United States for gourmet and fine coffee has grown at an annual rate of over 10%, and new markets have opened in India and China. Coffee connoisseurs know that some of the finest coffee in the world originates in Ethiopia; the country has a strong reputation for these heritage coffees. Yet for years Ethiopian fine coffee was earning about the same export price as non-distinct commodity Arabica, which is subject to substantial price fluctuations. The Ethiopian farmers of fine coffee were not gaining the benefits of their superior product.

Prior to the trademarking and licensing initiative, Ethiopia was receiving as low as 6% of the final retail price for its fine coffees. Farmers were receiving about $1 per kilo, with the exporting sector receiving about $2 per kilo. Wholesalers receive about $6-11 per kilo, with the final retail price about $20-28 per kilo. In one promotion in the United States in 2005, the retail price for Sidamo reached an astounding $57.20 per kilogram. The retail prices reflect the value of the hard-earned reputation and willingness of consumers to pay premium prices for distinctive, high quality coffee.

In 2004, with assistance from Light Years IP, the Ethiopian Intellectual Property Office began the initiative in conjunction with the Ethiopian Fine Coffee Stakeholder Committee, which is made up of unions of coffee farmer cooperatives, private coffee exporters, and other bodies responsible for the development of the coffee sector. The three famous brands were secured with trademark registrations in around 30 countries and distributors were required to obtain licenses to sell them. In this way, Ethiopia took a degree of control in the foreign distribution of its fine coffees through licensing its distributors. The first year of licensing saw improved negotiating positions, resulting in short term increases in export prices. The Oromia Union of Coffee Cooperatives reported that in 2007 Yirgacheffe farmer incomes doubled over 2006.

The initiative is a ground-breaking partnership between Ethiopia and coffee distributors, roasters and retailers. The initiative is unique in that Ethiopia intervened in the foreign markets to achieve its goals, but also offered benefits to the distributors of its distinctive product. The distributors gain by contributing their views and energy to joint promotions and by jointly securing access to an increased supply of the unique coffees.

Ethiopia now has over 80 licensees in 8 countries with a target of 150-200, at which point higher prices can be permanently secured. An umbrella brand has been developed which covers the three fine coffees and creates market awareness of Ethiopia’s unique capability to deliver more fine coffees to market, due to having by far the largest range and types of unexposed fine coffees.

With this strategy in place and the constant development going into the initiative, it is projected that, in the long term, all of Ethiopia’s export of coffees will be sold as branded fine coffees. It is estimated that producers could raise and secure their income at around the $6-8 per kilogram level. Total coffee export income of $400 million before the initiative would then be raised to around $1.2-1.6bn p.a.

Value chain analysis will be available here shortly.

Reference materials will be available here shortly.