|
 In 2006, Brazil consolidated its position as the world's largest producer and exporter of coffee, contributing to the country's agribusiness Gross Domestic Product (GDP), which was US$ 250.8 billion. According to the CNA (National Confederation of Agriculture and Livestock), the gross value of coffee production last year was US$ 4.8 billion, 1.9% more than in 2005, when revenues amounted to US$ 4.7 billion.
Last year, coffee was fifth among the agricultural product most exported by Brazil. Of a total 44 million bags of coffee produced, 27.2 million were exported, generating revenues of US$ 3.3 billion. "It was the sector's highest exchange revenue in recent years. Coffee accounted for 8% of gross revenues obtained with agribusiness exports," said Guilherme Braga Abreu Pires Filho, general director at the Brazilian Coffee Exporter Council (CeCafé). Presently, coffee represents 2.5% of the total Brazilian export basket. But the commodity once amounted to 70% of the country's foreign sales, during the 1920s. Brazilian coffee exports began in 1816. Between 1830 and 1840, coffee led exports from the country, answering to more than 40% of total exports. In 1840, Brazil became the world's largest coffee producer. "The golden age of coffee lasted until 1930, when the commodity represented, on average, 65% of Brazilian exports," says Maurício Miarelli, president of the National Coffee Council (CNC). In 1932, there was a stock sell-out, due to a worldwide super-crop. The share of coffee in the country's exports decreased during the 1970s, when the value of manufactured goods exports surpassed that of coffee. During the 1980s, coffee answered to approximately 10% of total exports. In the 1990s, with greater diversification of the export basket, that percentage decreased even further, with coffee amounting to approximately 3% of Brazilian exports. Added Value The main market segment for coffee in Brazil is still the export of green grains. But the country already has a reputation in the soluble coffee market and has recently begun entering the roasted-and-ground coffee market. The country has exported the variety for only four years now, and it yielded US$ 26 million in 2006. "That is not much if compared with grain sales, but it is a lot if we consider that we got started a little while ago. On the other hand, roasted and ground coffee has added value. We can charge up to US$ 4.5 per kilogram, whereas grains are sold for US$ 1.7 per kilogram," says Nathan Herszkowicz, executive director at the Brazilian Coffee Industry Association (ABIC). Roberto Rodrigues, former minister of Agriculture and currently the manager of the Agribusiness Center at Getúlio Vargas Foundation (FGV), a renowned Brazilian university, also claims that the scenario has improved a lot over the last few years, but he gives a warning. According to Rodrigues, should Brazil intend to remain the world's largest coffee producer and to cater to the global demand, it will have to invest in three basic aspects: reducing producer debts, increasing sales of roasted and ground coffee and allowing producers, via cooperatives, to deal directly with buyers and, preferably, to process their own coffee. "The most important thing, though, is to invest in roasted and ground coffee, because Brazilian coffee needs more added value. As long as such investment is not made, Germany and Italy will continue exporting coffee without planting a single grain - which is simply unacceptable," says Rodrigues. Coffee Instead of Tea From the 1950s onwards, Brazil began facing competition from other coffee producers, which drove Brazilian participation down to an average 25% of worldwide production. Currently, Brazil accounts for 30% of the global production. In order to maintain its share in the global market, in addition to selling coffee to traditional markets such as Germany, the United States, Italy and France, Brazil entered new markets, such as Japan and China, which are not, or were not, traditionally large consumers of the product. Japan is already the world's fifth largest consumer. "These are countries with similar features, which led to an increase in coffee consumption. One such feature is the Westernization of habits," claims Guilherme Braga of CeCafé. "What we see in China, for instance, is that the bulk of coffee consumption does not take place at home, different from most other countries, in which 60% of coffee is habitually consumed at home," he explains. "The Japanese and Chinese youths want to be different from the elderly, who drink tea. They like to go to 'coffee houses,' where they can talk, socialize. At the tea houses, people must remain silent," Nathan explains. According to the director general at CeCafé, one of the strategies used consists of entering the Chinese market via cafés, apparently the market segment that will develop the most. But there is also the possibility of establishing partnerships with local milling industries. In Arab Countries The Arab countries are regarded as potential new markets. Twelve of the 22 countries in the League of Arab States already import Brazilian coffee. In 2006, these countries imported 811,600 bags of coffee, mostly of the Arabica type. Also last year, Lebanon became the largest market for coffee in the Middle East. The Lebanese imported 292,400 bags of coffee, surpassing Syria, which imported 250,700 bags in 2006 and used to be the largest Arab importer of Brazilian coffee. Despite the fact that exports to the Arabs are still low, percentage-wise, Braga says the region is a good market. According to him, the Arabs consume even more Brazilian coffee than the figures show. That is because many sales are not made directly from Brazil, but rather through intermediaries in Europe. Challenges Despite the increase in coffee exports, Brazil and other producers worldwide must be careful when it comes to taking advantage of increased demand, so as not to repeat previous episodes. One precaution is to avoid getting carried away when prices are high. "Between 1994 and 1998 there was an extraordinary cycle of foreign prices, something like US$ 250 to US$ 300 per bag, which drove production sky-high, especially here in Brazil. Then there came a cycle of low prices, and now we are entering a cycle of even higher prices," says Guilherme Braga, of the CeCafé. It is very difficult to organize this process, because coffee has various degrees of importance to each economy. Brazil, for instance, once relied almost entirely on coffee. Nowadays, other countries are highly dependant on it, either for capital revenue or job generation. Vietnam is one such country. In 25 years, it became the world's second largest producer, and should grow even further. According to Braga, one alternative is to seek support from the International Coffee Organization (ICO), comprised of 72 countries, including producers and consumers. "Presently, the ICO does not carry out market actions as it used to in the past, but it is a forum for debate that seeks to harmonize policies, in order to prevent imbalances between production and consumption from happening, as was common in the past," he says. Another effort is the promotion of Brazilian coffee abroad. The Coffee Policy Deliberative Council (CDPC) sets apart some of funding from Funcafé (a special fund for coffee policies) for marketing. Actions such as tastings at points of sale and at sector trade shows are increasingly common - especially in the special coffee segment. "We have participated in trade shows for the segment, mostly in France, Russia, Japan and the United States," says Braga. We Grow, They Profit Considered the second greatest world generator of revenues, losing only to petroleum, coffee currently brings around US$ 91 billion per year all around the world. But a large share of these funds do not benefit the 60 countries that produce coffee, in which 25 million people survive from the activity. To have an idea of what coffee represents to the economy of the largest part of the producer countries, all that is necessary is to give some examples. According to the World Bank, in Uganda coffee is the main source of income for over 25% of the population. In Ethiopia, the commodity contributes with 54% of export revenues; in Rwanda, the commodity generates 31% of foreign trade revenues; in India, three million people are employed to work with the product; in Mexico, 280,000 poor families work with the product in the state of Puebla. Even so, the cruel game imposed by multinationals - which dictate prices to the producer market, making use of the dependence of the economies of these nations on coffee farming - brings to them the lion's share of the revenues generated by coffee every year. That is, of the US$ 91 billion annual turnover of the coffee market, producers have a share of just US$ 9 billion. Figures supplied by the Ministry of Agriculture, Livestock and Supply show that nowadays the main importers of green coffee, normally developed countries, pay US$ 100 per bag. After the product is processed and industrialized, its price goes up to US$ 10,000. "This shows the dimension of the price difference received by producers and paid by consumers of the end product," stated the then minister of Agriculture, Roberto Rodrigues, on participating, in September 2005, in the 2nd World Coffee Conference, in Salvador. Figures in the United Nations Development Program (UNDP) report, disclosed in 2006, show that countries like Germany, Italy, Belgium, the United States, France, Spain, Holland, Canada, England and Switzerland receive, through coffee exports, more funds than a large part of the countries that produce coffee, like El Salvador, Nicaragua, Kenya, Cameroon, Peru, Ecuador, Honduras, Ivory Coast and others that are in the list of the International Coffee Organization. For this reason, specialists in the coffee market understand that the great challenge is reordering the international market that, in the understanding of these sources, is the main chapter of the fight for fairer world trade. To the mentors of the Brazilian coffee policy, the global coffee policy should have as its objective stability in the long term, eliminating the distortion of those who grow coffee earning little, and those who process it, earning very much. Today, the five greatest roasting industries (Nestlé, Kraft Foods, Procter & Gamble, Sara Lee and Tchibo) purchase 70% of the global offer of green coffee. "This means that you have to really fight to dispute the market against giants," explained Guilherme Braga Abreu Pires Filho, director general of the Brazilian Coffee Exporter Council (CeCafé). According to the executive, the great industries invest millions of dollars each year to promote the image of their respective brands. Using different brands and products, the roasters differentiate their products through images and specific flavors, avoiding competition through pricing. Another factor pointed out by Braga is that the greatest coffee distribution channel is supermarkets, which requires from companies a capacity of storage and logistics. "For example, supermarkets do not store products, suppliers must replace them, therefore requiring warehouses. Apart from that, the businessman needs to have a good distribution method, with various points of sale," he explained. All of this is added to the fact that the promotion of the product costs large amounts of money. "Nobody enters a consolidated market without the support of a professional campaign. This creates a great degree of difficulty for those who want to become exporters of roasted and ground soluble coffee," stated Guilherme Braga. According to him, a possible route is starting through specific market niches. "For example, supermarkets that have space for their own brands. Therefore, you produce the coffee here and send it in its end package, which has the brand of the buyer. Another possibility is to operate through regional distributors, who do not operate in great supermarkets but in auxiliary chains, like bakeries, for example," he explains. Instant Coffee As Solution As the coffee sector as a whole celebrates the advances made in recent years, one segment is worried. For instant coffee producers, 2006 was a particularly bad year. Whereas foreign sales of green grain rose 7.5%, exports of instant coffee saw a 16.6% decrease, leaving behind the good performance achieved in 2005. According to Mauro Malta, president of the Brazilian Instant Coffee Association (Abics), in 2005 the sector attained one of its all-time export highs, selling 81,900 tons. Last year, sales decreased to 67,800 tons. Revenues for the segment went down from US$ 387.289 million in 2005 to US$ 385.148 in the following year. There are many different reasons for such a reduction: depreciation of the dollar against the Brazilian real, appreciation of raw material (the price of green grain is higher) and a bothersome 9% tax rate imposed by the European Union upon Brazilian coffee since January 2006. Furthermore, instant coffee producers are forced to buy raw materials on the domestic market, so they cannot do the so-called "draw back," which consists of importing raw material from other countries, processing and then selling it - as Germany, the United States and Italy do with Brazilian coffee. "Unable to do so, unable to buy the cheapest coffee at the moment, we simply cannot compete," complains Mauro Malta. But the segment is not all complaints. The history of instant coffee is one of great achievements. It was the first Brazilian product to arrive in countries such as Russia and China. "The fact is we are great at opening doors," says Malta. Russia is currently the largest market for the sector. The Café Pelé brand, for instance, which belongs to the Cacique company, is exclusively turned to the instant coffee segment; it holds permanent marketing actions in the country, and launches its new products there. "The Russians have already been familiar with our product for quite a while. We therefore always have to present novelties," stated the joint international marketing director at Café Pelé, Haroldo Bonfá. Cacique has also been present on the Arab market since the 1970's. The history of Café Pelé, or of Cacique, is closely tied to the history of instant coffee in Brazil. Established in 1959, the Cacique factory planned to make use of the excess coffee that the Brazilian government made available to those interested in establishing an instant coffee factory - up to that moment there was only Nestlé. Other companies also arose for the same reason, among them Iguaçu and Real. During the Brazilian dictatorship, the companies noticed that the awaited subsidies promised by the Juscelino Kubitschek government were not going to materialize. Still, those who had started, progressed. Cacique, for example, exported for the first time in 1966. And the export went to the United States, which worked hard on avoiding the Brazilian chance of having its own processing factories. In 1971, they purchased the Pelé brand, which became internationally renowned. Nowadays, of the 18,500 tons sold abroad, 40% are Café Pelé, sold to 52 countries. Most of it, 60%, is sold in bulk for companies in 80 countries to put their own brands on it. And of the total produced by the company, 98% is for export. Instant coffee was, over the last four decades, mainly responsible for the appreciation of Brazilian coffee as an end product. Roasted and ground coffee has also started winning the world, but its history is much more recent. According to Malta, from Abics, instant coffee is mainly responsible for the increase in consumption of Brazilian coffee on the foreign market. "Figures presented last year by Nestlé show that between 1994 and 2004 the household consumption of instant coffee grew 26%, whereas consumption of roasted and ground coffee grew 5%. Out of the home, in the same period, the increase in consumption of soluble coffee was 51% and that of roasted and ground coffee was 22%," he compares. Débora Rubin and Geovana Pagel also contributed to this article. Anba - www.anba.com.br
 |
Subscribe to this comment's feed
There is no difference with your steel or grains productions : you export only the raw production...unable to transform
and add value to the products. Funny that you export iron ore, cotton to China which then re-export elsewhere including in Brazil the textiles and alloys made from your commodities.