Ethiopia’s favourite drink, Ethiopian coffee, is threatening to break the bank of households with the price of a kilogramme spiralling from 35 Br last year this time to a record high of 120 Br now. The problem is aggravated by speculation amid the absence of an efficient supply chain. Households who view coffee as a compulsory cultural engagement are grappling with what they can cut from their meagre resources to continue drinking coffee in their homes with some households consuming as much as four kilogrammes a month. Others have opted for using coffee blended with other cereals to compensate for rising prices.
Cafés are also joining the bandwagon with some resorting to using lower quality coffee, instead of increasing their prices for fear of losing customers. Others have increased the prices of Ethiopian coffee for their clients at the risk of losing patrons rather than compromising on quality.
The recent increment in coffee prices has forced some cafés to resort to using lower quality coffee, instead of increasing their prices. While coffee is not a necessity, it is such an integral part of Ethiopians’ culture that consumers seem willing to pay more for better quality, writes Eden Sahle, Fortune Staff Writer
The afternoon of Tuesday, May 3, 2011, was darker than usual and the cloudy skies suddenly produced a flood of rain at around 4:30pm.
Cafés around Bole Bridge off Cameroon Street were packed with people meeting up with friends or taking a short reprieve from the cold weather with a hot cup of coffee. Along with a variety of baked goods, the cafés offer coffee in many guises ranging from macchiato to black coffee.
Coffee in Ethiopia
Ethiopia has a long tradition of friends meeting up and making small talk over the nation’s most popular drink. Coffee is not only the country’s primary cash crop but also an integral part of people’s routines.
Few people know this better than Aynalem Asseged, 36, a married mother of two. She was drenched by the unexpected downpour on Tuesday while buying coffee beans from a small local shop.
Over recent months, the price of coffee has spiralled up. In September 2010, a kilogramme of coffee cost 50 Br and by February 2011 it reached 90 Br. It is now sold for 120 Br from retailers.
At home, a three-room condominium house, Aynalem had started brewing coffee but she needed more to make it stronger. Aynalem and her friends have a daily ritual of performing a coffee ceremony and Tuesday was her turn to host it.
Her house was filled with 10 of her neighbours clad in gabi (a traditional cotton garment). They sat on every seat available while their host brewed the coffee on a charcoal fire that simultaneously warmed the house.
A year ago, a kilogramme of coffee beans from wholesalers at Merkato cost 35 Br, the women’s recalled. They are not perturbed by the coffee price increasing from time to time, or a shortage on the market of its secondary input, sugar.
All of them are housewives and after their housework is finished, they have many free hours in the afternoon. They spend it together having coffee and competing with one another in making homemade bread to accompany the coffee.
This important social commitment makes coffee more than a drink for them, but a necessity.
For Worke Semachew, the wife of a daily labourer, coffee is also essential. She earns 300 Br every month from working as a maid.
Food is expensive for Worke and her husband a daily labourer earning 600 Br monthly. They live mainly on nifro, a boiled wheat dish. They have it with coffee prepared from ground beans they use for many days. As they cannot afford sugar anymore, they have it with salt.
The combination is filling and after a meal of nifro and coffee she does not feel hungry, Worke claimed.
While the couple drink it together, Aynalem’s husband is not happy that she spends money on coffee, she claimed.
He earns a monthly net salary of 3,000 Br from teaching at a private elementary school. Of this, he gives her 2,500 Br as a housekeeping allowance and keeps the balance. Most of their income goes towards buying food items, but she secretly sets some money aside for coffee with her friends.
“Unlike me, my husband does not mind going a whole day without having a cup of coffee,” she told Fortune.
Well-to-do people like Aynalem, who prepare coffee twice a day, consume an average of four kilogrammes of beans in a month.
An estimation made by Fortune, given the available data, puts the country’s per capita consumption at 0.2 Kg of its total production.
Coffee in the economy
With an annual production of 265,469tn, Ethiopia is the eighth largest coffee producer. Brazil and Vietnam are ranked first and second with production volumes of 2.7 million tonnes and 1.3 million tonnes, respectively, according to data from the International Coffee Organisation (ICA).
The Arabica Coffee that Ethiopia produces plays an important role in the economy.
A large number of households depend (directly or indirectly) on coffee production or export for their livelihood, according to “Agriculture Commercialisation in Coffee Growing Areas of Ethiopia,” a study conducted in 2008 by Samuel Gebreselassie, a researcher.
Mecca Ahmed sells coffee from a thermos in Lideta District. She charges three Birr for a cup to earn a living for herself and her mother who depends on her. To save money, she uses the same ground coffee for a week.
Some suppliers mix coffee powder with chick peas, maize, and sorghum, to stretch it, traders claimed.
Mecca admitted to using this kind of coffee, which is half the price of regular coffee which cost as little as 80 Br or 90 Br from wholesalers.
Using this kind of coffee has caused Semigne Aseffa, the owner of Alem Café in Lideta District, to lose customers.
The ground coffee from suppliers is nothing like regular coffee as it is watery and weak and has a different taste, she confessed. Prior to the recent price increment, Semigne ground the beans herself, and her customers loved the coffee, she explained.
Semigne is considering bringing back the ground coffee to offer customers a choice between the two, but will have to increase the price of a cup from the five Birr she charges now to 10 Br, she told Fortune.
Judging by her losing customers over the quality, consumers are willing to pay more for quality coffee.
To.mo.ca Coffee is considered by many as one of the city’s best coffee suppliers. A cup at costs six Birr, an increase from the five Birr before.
The customers Fortune spoke with on Wednesday, May 4, believed that its coffee tastes different from that of other places.
Customers are attracted by the special roasting method the company uses on the beans it purchases from the Ethiopian Commodity Exchange (ECX), according to Wondosen Zewde, director of operations at To.mo.ca.
The average price of a kilogramme of coffee from ECX is 80 Br. The coffee sold by ECX is shipped from individual farmers to Addis Abeba through cooperatives to avoid brokers that used to escalate coffee prices.
The cooperatives from Oromia, Amhara, Tigray, and Southern regional states had more than 750,000 members, out of which 180,000 are small-scale farmers, in 2009, according to “Fair Trade Coffee & Development,” a field study conducted that year.
The small-scale farmers sell a kilogramme of coffee in Jimma for 30 Br, according to Mekonen Kinfe, a coffee developer from Jimma Town, Oromia Regional State.
This is a quarter of the price charged for a kilogramme in Addis Abeba. The original price increases with every link it passes along the supply chain
Mekonen earned eight dollars for each kilogramme he exported three months ago, he claimed.
The official international price for a kilogramme of coffee has seen a 3.8pc increment from 5.50 dollars in March 2011 to 5.80 dollars last month, according to the ICO.
Of the country’s total production, 50pc (172,000tn) is exported. The coffee exports, mainly to Germany, Saudi Arabia, and the United States (US) earned Ethiopia 528.3 million dollars in the 2009/10 fiscal year, according to data from the Ethiopian Revenues and Customs Authority (ERCA).
The total export earnings amounted to two billion dollars while the percentage share for coffee was 26.4pc in the same year.
By the 2014/15 fiscal year, the government plans to earn two billion dollars from an expected 600,970tn of coffee alone, according to data from Access Capital.
The local price of coffee is affected by the international market, according to Mickias Aklilu, a lecturer in marketing at a private college.
“Despite brokers having been eliminated from the supply chain, the bargaining power of the cooperatives also affects the price,” he told Fortune.
Eleni G. Madhin, CEO of ECX, agrees that international prices are affecting domestic prices.
“The coffee supply has decreased for reasons that have not yet been identified,” she told Fortune. “It might be due to the international price increment, which pushed most of the production to be exported. The number of producers selling locally has also decreased as they may had expected the price increment to be larger.”
Unlike the traders, people like Worke, for whom coffee forms part of a meagre diet, hope the price would decrease instead. Few consumers would object, but many can choose to pay increasing coffee prices for a commodity that is consumed more as a luxury item, despite Aynalem’s claim to the contrary.
Related: Ethiopian Coffee Trends for 2011