The real price of coffee

Ethiopian plantation workers are paid a daily rate that is a fraction of the price of one London espresso. Now growers are fighting for fairer trade.
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The Independent Online

"Coffee came first from Ethiopia," says Hailu Gebre Hiwot, president of the country's coffee exporters' association, as he sips on a cup of a deep, rich variety, "and so did mankind".

In a warehouse in Addis Ababa, where workers check the quality of tons of smooth, dark coffee beans, Mr Hiwot is musing on the unfairness of trade in a globalised world. While espresso, cappuccino and latte drinkers are bringing huge profits to some of the world's biggest multinationals, the place where coffee originated remains one of the poorest on Earth.

Around the world more than 2 billion cups of the stuff are consumed each day. In Starbucks in south London the cheapest shot of espresso costs £1.35. A coffee worker in Ethiopia earns less than half of that in a day.

Now the country where coffee was first consumed around 1,000 years ago is trying to get a fairer share of the proceeds. Growers are clubbing together to try to squeeze more money out of the export trade.

International donors such as the EU are providing cash to try to develop the industry and keep more of the processing inside Ethiopia. More attention is being focused on creating top quality, more expensive beans. And an international effort is under way to raise consciousness over the plight of Ethiopia's impoverished workforce.

A documentary film, Black Gold, released this month, captures the astonishment of workers in the hills of Ethiopia when they are told how much their produce earns for foreigners. Coffee is sold for the equivalent of 2,000 Ethiopian birr a kilo (£121); they are paid one thousandth of that.

In Ethiopia at least 15 million people depend on the trade yet on Western supermarket shelves the fruits of their labour are hard to see. "Illy, Lavazza, they all buy our coffee and they use it in their blends which are both African and Central American," says Mr Hiwot.

One of the most popular with Western firms is the high quality Yirgachefe which, as it happens, is what Mr Hiwot is drinking. "This coffee grows in a particular area," Mr Hiwot explains, "at a particular altitude. It has its own special climatic conditions. That's why we have the quality and flavour, why the aroma is so special." True though that may be, the fact that some of the world's best coffee comes from Ethiopia remains unknown to the millions around the world who drink it. "The brands are established by these big multinationals which spend money on brainwashing the consumer. Once they make you their customer you stick with them," Mr Hiwot says. It is a vicious circle that condemns millions of people to poverty.

Ethiopia's efforts to get a greater share of the wealth its coffee beans create faced a major setback this week when the country was stopped from trademarking its coffee by the US National Coffee Association (NCA). Yesterday the British charity Oxfam accused Starbucks of being behind the bid to deny Ethiopian farmers a potential income of up to £47m, according to reports in the Guardian. Oxfam is reported as saying that the US coffee giant, which had turnover of $7.8bn (£4.1bn) in the year to 1 October, prevented Ethiopia from securing trademark protection for two of its best known beans, Sidamo and Harar.

Had Ethiopia been successful, it would have allowed the country to control the use of the beans in the market, giving its farmers more of the retail price and securing an estimated extra £48m, the charity said. Nevertheless, Starbucks had in the past provided support for coffee farmers in Ethiopia.

The importance of coffee to Ethiopia is difficult to overstate. The country is the largest coffee producer in Africa and the sixth- biggest in the world. Coffee accounts for no less than 90 per cent of Ethiopia's exports, half of which go to EU countries. The trade generates some 54 per cent of Ethiopia's gross domestic product.

As Yackob Yalla, the State Minister for Agriculture, puts it: "Coffee is crucial, because of the trade aspect, the share of the gross domestic product and the proportion of jobs it creates." In recent years the price plummeted by almost 50 per cent and, though it has recovered somewhat, the consequences remain devastating.

Without its own port, landlocked Ethiopia must export its produce via Djibouti, adding to its costs. Moreover its economy and traditions hardly equip it for the modern, marketed world of designer drinks.

In Ethiopia every ounce of coffee exported must be bought at auction in the country's main exchange in Addis Ababa. Hi-tech it is not. Blocking the entrance to the building is a taxi resting on wooden blocks. Inside, the large, bare halls appear to have changed little over recent decades, with exporters seated along one side and local traders on the other. Above them sit the auctioneers on a wooden stage at the front and to the side is a blackboard and piles of paper. There is not a single computer in sight.

This being the off-season the coffee exchange is buying and selling the contents of 90 lorries a day. During the busiest part of the year that will rise to 200 lorries' worth. Looking around this hall it is hard to see how Ethiopia's coffee-growers can take on the multinationals.

One thing that can be done on the ground is to work through co-operatives which, as Black Gold illustrates, remove up to 60 per cent of the cost of transactions in the buying and selling chain. That helps put more cash in the pocket of the growers. Similarly, fair trade coffee can be an additional resource.

Ethiopian coffee exporters also want to raise the profile of their country internationally.

However Mr Hiwot says: "European and American brands are better marketed and financed. It requires a lot of financial input to develop a brand in the European market." Realistically the best prospect may be to maximise the amount of money that can be won from exports and that means going upmarket.

The EU, which has been supporting the Ethiopian coffee sector for about 20 years, has invested around €100m (£67m) in developing it. Export of higher value coffee has increased seven fold, from 5 per cent to 35 per cent of total exports, though officials say there is still considerable room for improvement in quality and agricultural practice.

Visiting Addis Ababa, Peter Mandelson, the European trade commissioner, said: "Improving production methods, meeting common standards, marketing and distribution are vital. This is precisely where European Union technical assistance has been making the difference for the past two decades."

Mr Hiwot says production of the highest quality coffee for export can be boosted by 10 to 20 per cent. "At the top level, where the competition is not so severe, the market is better for us."

One success story comes from Teklu Gabriel, chief of coffee quality at IPS, a company which works with 15 producers and which began to supply Starbucks this year. His firm is, says Mr Gabriel, "exceptional" but its secret is simple. Firstly, it has worked hard to become a reliable supplier to big multinationals. Just as important, he says, "the coffee is very high quality".

Nevertheless, only a fraction of the wealth of the global coffee trade is likely to cascade down anytime soon.

Black gold: the figures

2bn cups are consumed every day worldwide

50p a day is average Ethiopian coffee worker's wage

15m Ethiopians depend on the coffee trade

£14retail cost per pound for luxury coffee; 59 pence the maximum an Ethiopian producer would get

90% of Ethiopia's exports are coffee

54% of Ethiopia's GDP is coffee

2nd to petrol in terms of being a global commodity

15th century: this is when coffee first arrives in Europe but it only becomes popular in the 17th century

$11.2bn Ethiopia's GDP in 2005

5% of the total UK coffee market is fair trade

75% of the world's coffee comes from small producers

31bn cups of coffee are drunk in the United Kingdom every year

$7.8bn turnover was recorded last year

5p on average is given to the grower when a £1.75 cappuccino is sold

100m people worldwide depend on its production

$8.7bn exports worldwide in 2000

Debbie Gore