Farmers to sell coffee directly to Starbucks in US-backed deal

 

 Coffee farmers sort out coffee berries at Dedan Kimathi University of Science and Technology in Nyeri on October 3, 2023. [Kibata Kihu, Standard]

Kenya's coffee farmers could soon sell directly to the world's largest coffee chain in a landmark deal that would more than double their incomes, the government has announced.

Deputy President Rigathi Gachagua says the government was in talks with US coffee chain Starbucks Corporation for the US government-backed deal midwifed by American Ambassador to Kenya Meg Whitman.

"We are soon meeting with Starbucks officials to fine-tune details of this deal," Mr Gachagua told Inooro FM radio station in an interview. 

"From the very promising talks I recently had with the US ambassador Meg Whitman, the deal will be groundbreaking for our farmers as it will eliminate the middlemen and allow them to sell directly to the largest coffee chain in the world."

The Standard could not immediately reach Starbucks, which says it purchases about three per cent of all the world’s coffee, for comment. We also did not immediately reach Whitman for this article by press time.

Whitman, an American billionaire who cut her teeth in California’s Silicon Valley - amassing a Sh575 billion fortune - told Gachagua there was a huge opportunity for American firms like Starbucks in the coffee sector in Kenya, the DP said in the interview.

The US envoy has been keen on a plan to see American firms overturn the dominance of other rival global firms in Kenya by linking American companies like Facebook, Apple and Alphabet’s Google to local deals.

More than 800,000 farmers and another five million Kenyans are employed by the industry but they continue to suffer low incomes due to a dysfunctional system that appears to favour middlemen and other “cartel” members, according to the government.

The government and industry analysts contend that it is no longer acceptable that Kenyan coffee continues to fetch premium prices globally with coffee consumers paying top dollar, yet the farmer receives abysmal proceeds that cannot even cover production costs.

Successive regimes, including the current Kenya Kwanza administration, have blamed unnamed cartels for running down and profiteering from the once lucrative coffee sector, which was once a leading foreign exchange earner.

The result has been low earnings, which have seen thousands of farmers abandon the crop.

The Ruto administration has embarked on a coffee sector reform journey, hoping that it can take on the challenges crippling the once-vibrant industry.

Starbucks operates as a roaster, marketer, and retailer of speciality coffee. Its total revenues for the fiscal year ending October 2022 hit $32.2 billion (Sh4.79 trillion), underlining its massive global customer base.

The Seattle headquartered Company offers packaged and single-serve coffees and teas, beverage-related ingredients, and ready-to-drink beverages, as well as produces and sells bottled coffee drinks and a line of ice creams.

Starbucks, says it has nearly 36,000 locations across the globe serving customers worldwide in company-operated stores as well as franchise-owner-operated outlets.

China is its largest international market after the US. Starbucks plans to expand from 6,100 stores to 9,000 locations by the end of 2025 in China, which is expected to overtake the coffee chain’s home market of the US.

Starbucks plans to open 100 new stores across the UK this year, where it has over 1,000 outlets.

The firm also plans to open 300 new stores in the rest of Europe, the Middle East and Africa (EMEA) underlining its huge market.

The US chain is heavily reliant on farmers buying from about 400,000 farmers across 30 countries.

"We own most of our roasting facilities and lease the majority of our warehousing and distribution locations. As of October 2, 2022, Starbucks had 18,253 company-operated stores, almost all of which are leased," says Starbucks in its latest annual report.

"We also lease space in various locations worldwide for regional, district and other administrative offices, training facilities and storage. In addition to the locations listed above, we hold inventory at various locations managed by third-party warehouses."

Beans from small Kenyan farms end up in speciality coffees from Berlin to San Francisco. But low prices, rising temperatures, and erratic rainfall are pushing farmers to the brink.