china

Starbucks China Boosts Beans, But Home Brewing Could Save Local Coffee Growers

Posted by Abe Sauer on December 13, 2012 11:19 AM

China is devouring wine, and in turn China-based vineyards are popping up. Chinese consuemrs are also glugging down coffee, so it should follow that China's coffee bean business would be booming. And it was, until a few weeks ago when coffee prices cratered to a five-year low that might see farmers change crops. Starbucks to the rescue! Kind of. 

"We see our work in Yunnan as a tremendous opportunity to continue to elevate the high quality arabica coffee of Yunnan and invest in the local communities," a Starbucks spokesperson told brandchannel. A few days later, Starbucks announced the opening of the brand's first Asia-based Starbucks Farmer Support Center in China's southern coffee-growing Yunnan Province. Can the mermaid from Seattle lift the profile of China beans enough so that "Yunnan" could someday be found alongside Sumatra, Kenya, and Kona beans on its shelves? 

Yunnan is China's coffee bread bean basket. Somewhere around 90 percent of the nation's coffee production comes from the lush, Vietnam-bordering province. In a January report on the outlook for Yunnan coffee, The Economist stated, "Nestle, along with the Chinese government and the United Nations Development Programme, helped jump-start coffee production in the area in the late 1980s." Now, almost a year later, a report from China's National Business Daily noted that "Nestle offered to buy local coffee beans at a price of 17.90 yuan (US$2.89) per kilogram, a record low in five years since Nestle started buying coffee beans from the region." Experts worry this new low, near break-even price may lead Yunnan's coffee growers abandon the crop. That would leave Yunnan far from realizing the 2015 goal of 1 million coffee-growing acres.

"We signed our first MoU (memo of understanding) with Yunnan Academy of Agricultural Science and the Yunnan government in 2010 and since then have worked closely with the local farming community to elevate Yunnan’s high-quality arabica coffee," Starbucks told brandchannel. Part of that commitment is the new farmer support center in Yunnan's Pu'er city. Starbucks has committed some of its agronomists and coffee experts to work directly with Yunnan farmers. Starbucks said its local adaption test currently covers over 650 hectares in eight different locations in the province. Starbucks said the project's mill will eventually process up to 20,000 tons of green coffee beans annually.

In a statement about the new project, Starbucks China President Belinda Wong said, “Starbucks Yunnan Coffee Project is about creating a positive change for local China farming communities. We are pleased with the progress of the local adaption tests as it signifies that we are taking one more step forward to completing the Starbucks China value-chain; delivering premium arabica coffee from bean to cup."

More than ever, localization is a keyword for Starbucks in China, where the brand has become the nation's favorite affordable luxury. And by localization, Starbucks means more than expanding its menu to include red bean frappuccinos. Starbucks is also molding its labor policies to the Chinese workforce. But can Starbucks localize its beans?

Starbucks China stores currently offer a South of the Clouds blend, released in early 2009 and re-released for 2012's Chinese New Year. The Chinese label on the packages focuses largely on Yunnan, though Starbucks defines the blend as "mix of Arabica beans sourced from Latin America, Asia Pacific and the western Baoshan region of Yunnan." South of the Clouds Blend is not sold regularly outside China. Starbucks told brandchannel that it looks forward "to bringing the distinctive Yunnan coffee profile to more of our customers around the world."

"The biggest issue is probably the lack of consistent quality. Most green beans from Yunnan in the market today are mediocre at best, and it's very difficult to find lots that stand out from the masses," said Nils Weisensee,  the general manager at Café del Volcán, a premium boutique and coffee roaster in Shanghai. But, there are advantages. Weisensee added that, currently, advantages of green beans from Yunnan "are primarily the lack of import duties and far lower shipping costs to roasters based in China." Café del Volcán does offer Yunnan beans, but only from select premium estates.

Starbucks has no current plans to offer a Yunnan-sourced beverage, but said, "Through the work we are doing with local coffee farmers we are promoting responsible coffee-growing practices that will improve quality and enhance yields, which will in turn, elevate the overall Yunnan coffee industry."

That elevated coffee industry could have a strong market if Starbucks and farmers can get the quality right. Weisensee sees a place in China for Yunnan beans: "Consumers in China who like coffee appreciate the different origins and the stories and history that comes with it."

Before Yunnan beans land on the Starbucks daily blend chalkboard, they may find a home at home.

Coffee bean sales in China in 2011 hit $100 million, a sliver of the $7.2 billion in the US. But, that $100 million represented a 20 percent jump from the year before. Enough 20 percent year over year jumps and China drinkers will be making a coffee market dent. It happened with wine. Wine consumpotion doubled in a half decade; consumption of Bordeaux alone increased about 3,500 percent in the decade between 2001 and 2011. More important is how much of that growth came as Chinese became comfortable popping a cork at home without a special occasion.

"Making coffee at home is becoming more popular as Chinese consumers discover the wide range of flavors and qualities in coffee," said Weisensee. "Our team at Café del Volcán in Shanghai is seeing huge curiosity in how premium coffee can be prepared at home, and we are trying to provide our customers with information and advice on how to do this." Currently, instant coffee like that offered by Nestle accounds for almost all home "brewing" in China.

Starbucks customers in the US and beyond can grab a home espresso machine off the shelf — but not in China.  At popular big box stores such as Carrefour and Walmart, home coffee machines aren't even offered. At appliance stores such as Yolo, only one or two coffee machine options exist. Specialty stores are still the source of most home-brew products. For most Chinese these higher-end machines are prohibitively expensive. Even the simple, plastic, filter drip machine one can get for $17 at Walgreens in the US carries a price tag in China of 650 to 850 RMB ($110 to $135). That said, online retail clearing houses like Taobao are now selling a selection of US-style drip coffee makers for uder 100 RMB ($15.50).

When it comes to home brewing, Starbucks has launched a series of coffee education programs featuring its "black apron coffee masters" as well as reaching out through social media. In the future, it hopes to do more. The spokesperson told brandchannel that it is looking into opening to the public some of the coffee classes at its new Starbucks China University that trains its baristas and staff. She added, "Over the past 14 years, we have taken it upon ourselves to help our customers better understand and appreciate the coffee they drink every day, from bean to cup, and to share this knowledge in a visual and relevant way." (The "black apron" designation is applied to Starbucks' premium coffee line.)

Weisensee also sees education as the key. He said, "The main challenge is not to convince the Chinese to drink more coffee. The main challenge is that there is still very little freshly roasted specialty-grade coffee available in China, and experienced baristas to prepare it."

In the end, the best thing for Yunnan's coffee future would be to see a coffee machine in every Chinese home, dripping away every morning.

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