Pu'er Coffee Capital: tea is Life Coffee is Business

In 2007, as an important post station on the "Ancient Tea-Horse Road" and one of the important producing areas of Pu'er tea, Simao City, Yunnan Province, was renamed Pu'er City, so that people can live up to its name. But according to this logic, in the near future, people are likely to call it the coffee market.

Like many places in Yunnan, Pu'er gives people the first impression of those ubiquitous mountains. When cars pass through them, the lackluster scenery always makes passengers tired and easy to fall asleep. However, for other people, the high mountains of Pu'er are the beginning of some excitement. When he met Liang Weixiong on the street of Simao, he said he had been in the mountains of Pu'er for almost a week. The young man, who runs a boutique coffee shop in Guangzhou Friendship Store, is looking for varieties comparable to foreign coffee. He said that there are indeed a lot of good beans here, and he may consider taking them back to Guangzhou to sell.

When the Economist reported on Pu'er in January this year, it said that in the future, there may be "a town called Starbucks" because most of the coffee produced by the well-known local Ai'er Group has been bought by Starbucks. Shortly after the report, Aiyang Group and Starbucks set up a joint venture in Pu'er. In mid-February, a week after the establishment of the joint venture, Liu Minghui, chairman of Aiyi Group, was still excited. "I have been in the coffee industry for 26 years, just to wait for this day, my dream has finally come true." for him, the cooperation with Starbucks has the meaning of "becoming famous all over the world". After signing the contract, he searched the Internet for news. "there are more than 30 million messages related to this." He believes that with the signing of Starbucks, Aishi and Pu'er are now in the global field of vision.

Going back to the 1980s, coffee was a strange presence in Pu'er-a crop introduced by missionaries that went unnoticed. Liu Minghui, a native of Pu'er Jingdong County, recalls, "there is coffee in front and behind the house, but no one knows what the use is. Only children eat it as fruit." It was not until 1982 when he was admitted to South China Tropical Agricultural University in Hainan that he "studied the cultivation of tropical crops, and only then did he know that the coffee at home was available to drink." At that time, this was the case throughout Yunnan. "few people know the value of coffee at all. There are several state-run coffee farms in Baoshan and other places, but those are produced for insiders."

In 1986, Liu Minghui graduated from university and was assigned to Yunnan's General Administration of Land Reclamation, which coincided with the first wave of commercial coffee cultivation-Pu'er and other mountainous areas in Yunnan were very poor, and the United Nations Development Program (UNDP) promoted coffee in all suitable places in Yunnan to help the poor. A large number of excellent foreign agronomic experts and cup experts came to Yunnan to provide technical guidance to farmers and farms-from then on, many people realized that coffee could be sold for money. At about the same time, Nestl é also launched a coffee project in Pu'er. This Fortune 500 company does not show a strong commercial position, but rather plays the role of a coffee evangelist, starting from seed introduction and land selection to enlighten Pu'er 's local coffee cultivation.

In 1993, when UNDP's project ended, a large group of Liu Minghui's colleagues went to work in Nestle's agricultural department. According to Liu Minghui, after the enlightenment of UNDP and Nestle, there has been a "large-scale" coffee cultivation in Pu'er. However, at this time, the dominant coffee growers in Pu'er are not farmers, but those state-owned coffee factories.

The situation facing Nestl é is the same at this time. Hute, the head of Nestl é in Pu'er, recalled the situation at that time. "Nestl é has acquisition stations in many places in Yunnan, but the office is in Kunming, which is far away from those farmers." We go to a lot of coffee bases every year to provide them with technical services. Nestl é's training method at this time is also different from later. "at that time, it was a very large training model, mainly to bring those people to the city and concentrate on technical guidance." Nestl é followed this model for a long time. Accordingly, most of the coffee Nestl é buys locally comes from big state-owned factories.

This model suddenly changed around 2000 because state-owned coffee enterprises were not satisfied with providing raw materials for Nestl é-more than a decade after the commercial cultivation of Pu'er coffee. Many state-owned coffee enterprises began to want to build their own brands, rather than just a raw material supplier, they are reluctant to supply Nestl é. This poses a challenge for Nestl é-it must find new coffee ingredients, and as a result of this shift, Nestl é has set its sights on a large but scattered number of small farmers. Around 2001, Nestl é moved its Kunming office to Pu'er, while its acquisition business was concentrated in Pu'er, a change that, according to Hute, wanted to be "closer to farmers."

Nestle's model was not the mainstream in Pu'er, but the base model was more popular at that time, which was adopted by Liu Minghui. When Liu Minghui started his own coffee business in 1995, he was just a trader-he registered a company in the United States and sold Yunnan coffee to the United States and Canada. It was only after 1998 that he began to get directly involved in the coffee planting industry. that year, he rented 9400 mu of land at the junction of Xishuangbanna and Pu'er, and began to operate in the base mode of "farmers + companies." teach farmers to plant, pick, and process, and then contract the land to farmers to do it in accordance with the company's requirements. In this process, the quality is stable.

State-owned, foreign-funded and private enterprises are all trying to expand their sphere of influence in Pu'er. At this time, it is difficult to say the advantages and disadvantages of various models, but the fact that coffee is more profitable than other crops has been recognized by everyone. Since the late 1990s, the planting area of Pu'er coffee began to expand on a large scale. In 2010, the planting area of Pu'er coffee reached about 270000 mu, and by 2011, the figure had become 440000-equivalent to half of the total coffee planting area in the country.

For Pu'er government, coffee has become the most available business card at this time. Pu'er, which has long been famous for its tea, has become the "coffee capital of China".

In terms of coffee purchases, Nestl é is the largest player in Pu'er. In 2011, Nestl é bought 8000 tons of coffee beans in Pu'er, equivalent to 1% of the annual output of Pu'er coffee. In terms of data, the transformation of Nestl é's acquisition model after 2001 has undoubtedly been a success. Behind this, Pu'er has also formed a relatively perfect coffee purchase chain.

At one end of the chain are acquirers like Nestl é, and on the other are scattered coffee growers. After 2001, the former went to the countryside on a large scale. Luo Yancheng, Hute's assistant, said: "since then, Nestl é's agronomists have gone to the countryside with computers and cars."

The most important link between Nestl é and growers is the price of coffee. Compared with the frequent occurrence of "cheap grain hurts farmers" and "cheap vegetables hurt farmers" in other places, the price of coffee in Pu'er rarely makes farmers dissatisfied. The price of Pu'er coffee is largely related to the purchase price-Nestl é sets the purchase price in Pu'er based on the coffee price of the New York Futures Exchange. In Pu'er, Nestl é announces prices twice a week, from Monday to Wednesday, and again over the next two days. Dong Zhihua, vice president of Yunnan Coffee Industry Association, told reporters: "compared with other crops, the price of coffee is more transparent."

The soaring market of the coffee industry in recent years has aroused the enthusiasm of farmers. Dong Zhihua said: "the price of coffee in recent years has risen relatively high in 35 years. Last year it reached 40 yuan per kilogram, and this year it has dropped by almost 10 yuan per kilogram." What does this price mean? Based on the yield of 150 Mu and 200 kg of coffee beans per mu, farmers can earn 4500MUR 6000 yuan per mu of land. In the past, according to Liu Biao, deputy director of the Pu'er Coffee Industry Development Office, "the income of one mu of corn field is only 600 yuan."

On February 14, when the reporter was ready to visit the Nestle purchase site, a grower told the reporter: "Today, the price is a little more than 27 yuan, and everyone is still waiting for the price to go up. There should be no one there." contact Nestle, and sure enough. But the next day, things changed. By the time we arrived at the purchase point of Simao National Grain Reserve Depot at more than 9 a.m. in the morning, many large trucks were already parked on the side, workers were unloading goods to the warehouse, and technicians were taking coffee from bags with proprietary tools to prepare for testing samples.

Luo Yicheng said: "it was the rush hour at this time last year. There were a lot of people waiting in line to deliver the goods." I came later this year, mainly because everyone was watching. Last year's price rushed to 40 yuan / kg, this year we are not in a hurry to sell, all sell some, and then wait and see. But the night before last, especially last night, it fell so badly that the growers stopped waiting. " Dong Zhihua said: "all coffee growers in Yunnan know how much the price is on the Internet to check the exchange." People with low education should also find this web page, put it in their favorites, and open it every day. "

As far as coffee growers are concerned, this price mechanism ensures that they are more flexible in the market, and Nestl é 's years of technical services have enabled the coffee grown by these small farmers to meet the standard in quality-Nestl é will be rewarded for coffee above the standard. For both sides, this mechanism is beneficial. Since 2004, Nestl é has bought more and more coffee from farmers. "Farmers are willing to sell us coffee, and now 75% of the suppliers come from small farmers who own less than 50 mu of land," Hute told reporters. " A local person from Aishi Group in Pu'er told me that the coffee produced in its own base accounts for only 20% of the total output. At this point, the smallholder model that benefits farmers has completely occupied the mainstream in the Pu'er coffee industry-which means that coffee is no longer the industry of several factories, but has become the national industry of Pu'er.

Opportunity in three years' time

Besides Nestle, what other famous coffee brands are there in Pu'er? Throw this question out, and few people can answer it. Although the model of using small farmers to grow coffee to provide raw materials for multinational enterprises can expand the area of coffee cultivation and benefit small farmers, it is clear that the ambitions of the government and other enterprises are not limited to this. Dong Zhihua said: "since the 1990s, several companies have gradually been making brands, but they are also mainly sold abroad. 80% to 90% of Chengdu is exported, all in the form of raw coffee, all primary products."

To some extent, the coffee growing industry of Pu'er can be compared with the factories in the Pearl River Delta. They all follow the path of contract manufacturing, development and establishment of their own brands, but what is special about Pu'er is that there are not many places in China to compete with it. Pu'er coffee is basically in a state of "selling as much as it produces". Ka farmers and those enterprises that make a living by contract manufacturing only need to make efforts in terms of quantity. It's basically safe to survive. To be a brand, on the contrary, the pressure is even greater. "Chinese people don't drink coffee much, but others don't agree with it when they go to foreign countries to do brands."

In this context, the joint venture between Liu Minghui's Aishi Group and Starbucks has been given more meaning by Pu'er and even Yunnan officials than people can imagine. One piece of evidence is that Yunnan leaders were on the sidelines when Aiyang Group and Starbucks signed a memorandum of cooperation in Salt Lake City in November last year.

Compared with other coffee companies, there is no essential difference in Aichi's business model, and its products are also export-oriented. But it is more precise in management and higher in production requirements. This high-quality line is different from other coffee enterprises. The year 2003 was the turning point for Aijia, when it won an order from the German coffee maker Cheeber. Since then, it has been going well, and in 2008, Aixing and Starbucks began to work together.

The model of working with well-known companies has been commercially successful. "Starbucks is very demanding, but it pays a lot of money," says Liu Minghui. After several years of cooperation, the transaction between Aiyi and Starbucks has grown rapidly. "they were supplied with only a few cabinets, but now they are dozens of times what they were then." This cooperation laid the foundation for their later establishment of a joint venture company. But it inevitably brings some strange problems: Aiyi has a good reputation abroad, but almost no one knows it in the domestic consumer market. At a press conference with Starbucks on February 6 to announce the signing of the contract, a reporter directly asked Liu Minghui, "what does Ai Yi Group do?"

We can regard Ai'er as a special sample of Pu'er coffee industry-win orders from well-known foreign cooperative enterprises with good products, and then cooperate with them at home to get new opportunities. In the plans of Aixin and Starbucks, the project will "achieve an annual production capacity of 3000 tons of roasted coffee beans, 5000 tons of roasted coffee powder and 20, 000 tons of canned coffee beverages." the plan, which was realized in 2015, now looks a bit distant. But the advantages that Starbucks can offer have been shown. On Liu Minghui's computer, there is an English technical specification document provided by Starbucks, which covers everything from micro soil selection to seed selection to business ethics, to name a few.

In Liu Minghui's view, the combination of Starbucks' technological and brand advantages with the local resource advantages of Ai'er can make Pu'er coffee really deep-processed. On the other hand, it will make "Pu'er coffee more and more famous"-- which is what he calls "the biggest dream."

Coffee is business, tea is life.

There is a tea market on the streets of Simao, but there is no coffee market; there are good teahouses, but there are few good cafes. It is true that the coffee industry has developed, but for Pu'er people, coffee is business and tea is life. The "tea" temperament of the Pu'er people is very strong: idle and playful. As for work, it is less important. Jin Jihui, a northerner who runs a boutique cafe in Pu'er, has a deep feeling: when the store is decorated, local decoration workers have to take a nap. I work at two o'clock in the afternoon and go home for dinner at 05:00. He didn't understand before, but now he's living such a life himself.

Pu'er people drink tea of course, but doing business is another matter. A few years ago, the price of Pu'er tea rose and fell sharply, so that farmers began to prefer coffee. Liu Biao, deputy director of the Pu'er Coffee Industry Development Office, believes that "Pu'er tea hype is mainly in the end market and has nothing to do with producers," but growers' confidence is inevitably undermined. At the commercial level, the difference between Pu'er tea and coffee is as Dong Zhihua said, "Pu'er tea has a small output and is easy to be hyped." Coffee is a global crop that can't be made by a few people.

The profit advantage of coffee is also obvious compared with tea. According to Liu Biao's survey of the average output value of coffee and tea in the city, "coffee is almost twice as high as tea." Under profits, farmers have their own choices-although Liu Biao believes that "tea is still a profitable thing, and ordinary people will not cut it down," there are still newspaper reports that "ordinary people cut down tea trees to grow coffee."

The attitude at the government level is also very clear. Before going to Pu'er, there was a saying that "the secretary is in charge of tea and the mayor is in charge of coffee." but what we see in Pu'er is that coffee is the protagonist in the development of the industry. Liu Biao explained the status of tea and coffee to me like this: "the government's consideration is to allow the tea industry to develop steadily, fix the current area, discourage the construction of new tea gardens, and do more work to improve the quality and efficiency of tea gardens." Coffee is now developing rapidly and improving rapidly. " Liu Biao lamented to the reporter more than once that "coffee is really the best crop."

For Pu'er people, coffee is an opportunity to make money; for Pu'er government, coffee is the best choice for industrial upgrading, and for this city, coffee is the key to their globalization-when Pu'er tea is only popular among the Chinese community, coffee has made the city influential all over the world. One piece of news that locals like to talk about is that Starbucks president Howard Schultz came to the city in his own private jet to discuss coffee cooperation.

Is Pu'er ready for globalization? As far as house prices are concerned, there seems to be such a trend. When Jin Jihui came here five years ago, the average price of the house was about 1000 yuan. "now the average price is more than 3000 yuan, and for places with good locations, it is more than 5000 yuan." In terms of hardware, the construction of roads and new areas is refreshing, but in terms of software, the city is obviously not ready to take a taxi here, as long as it is a little farther away, taxi drivers do not turn on the meter.

Nor does the city intend to become a cultural "coffee city"-when Pu'er wants to become the industrial "coffee capital" of China, growers and government officials identify with tea more culturally than coffee. In Simao City, there are not many public facilities related to coffee, but "Tea City Avenue" and "Tea City bus" can be seen everywhere. Do we need to infiltrate the coffee culture into this city? Dong Zhihua's view is that if the coffee industry is to develop, then farmers should learn to drink coffee. He cited an example: "Colombian coffee producers have done a better thing-- to make all growers know how to drink coffee. Also teach them what is good coffee, because only know what is good, they can consciously grow good coffee." Jin Jihui agrees with this view, saying, "when foreign guests come to talk to you about coffee cooperation, do you give instant coffee to others?"

(responsible Editor: Leo)