Value chain Analysis of Kenyan Coffee Fine African Coffee beans

In the processing stage of coffee beans in the upper reaches of the industry, auction and marketization are the two most important issues. There are only five mills in Kenya, and KPCU manages the largest one and controls about 70% of its production revenue. For the auction phase, until 2002, the Kenya Coffee Commission (Coffee Board of Kenya) was the only auction agent. After a round of reforms in 2002, it changed its role and became an institution with the right to issue agency licenses to applied auction agents. As a result, KPCU has been granted an agency license, and its rights have been further expanded. Recently, about 20 marketing agents have applied to participate in weekly auctions. Since coffee beans from small farms are processed separately, they are easily mixed with lower quality coffee beans from other farms and sold to exporters during grinding. this reduces the enthusiasm of small-scale farmers to produce high-quality coffee beans because they are paid according to the level of income generated by the number of coffee beans they produce. Not based on the quality of the coffee beans they produce.

4. Upgrading the value chain

According to the value added table below, the whole value chain has the greatest room for appreciation in the stages of processing, auction and baking, but this is mainly for the leading enterprises rather than individual farmers.

(* 1 kg of roasted coffee = 1.19 kg green coffee)

Therefore, to upgrade the value chain of the coffee industry, the following points are key:

1) small-scale farmers or workshops vigorously promote upgrading and renewal in production and processing.

Due to the lower production efficiency, small-scale farmers or workshops will produce much less than medium-and large-scale ones, which is due to the lack of production capital and the backwardness of production technology. The US Agency for International Development (USAID) estimates that a 50 per cent increase in productivity would increase farmers' profits from commodity exports by 58 to 70 per cent. Therefore, the upgrading of agricultural equipment and technology, especially the production equipment that some workshops themselves can afford, is a top priority for small-scale workshops in Kenya.

2) carry out system reform to expand the number of merchants participating in auction / marketization.

Kenya still has no leniency in the rules and regulations related to coffee processing, auction and marketization, and the Kenya Coffee Commission is still the only agency authorizing the issuance of licenses to mills and agents. Today, the rules and regulations laid down by the committee must be re-examined to allow more economically dynamic private businesses to enter the coffee value chain. The most important thing is to make more large companies with licenses more directly involved in this part of the consumer market. Self-employed farmers should also have the right to directly enter the consumer market to carry out legitimate business activities.

3) in the baking stage, increase stimulating preferential policies to expand domestic demand and vigorously promote local brands

In the value chain value-added table, we can find that in the auction phase, the price of roasted coffee beans is six times that of unprocessed coffee beans, and almost 50 times that of farmers. Farmers can grasp this stimulus and strategically find partners to reduce the price gap between the cost price and the retail price in the domestic market, which can be achieved through joint ventures to invest in promoting local bakery and local brands. In order to enable it to bring benefits to farmers, zhengfu needs to play an important role in the establishment and mediation of these rules and regulations. At the same time, zhengfu should also strive to enhance the competitiveness of the Kenyan coffee market, use financial incentives to encourage more foreign businessmen to participate in the local coffee market, and carry out benign cooperation with local farmers. In addition, it is also necessary to promote Kenyan coffee drinking habits in order to strengthen the domestic market.

5. Summary

Kenya's coffee industry plays an important role in today's world economic system. However, most of the production value is still generated in the auction / marketization stage, and large profits are controlled by some large leading companies, state power (CBK) and coffee roasting and retail mechanisms in developed countries. It is very difficult for local farmers, especially small-scale farmers, to profit from the coffee industry. Therefore, it is of international strategic significance for Kenya to update and upgrade the coffee value chain, especially in the processing, marketization and roasting stages to enhance the global competitiveness of the Kenyan coffee industry.

The original text is written in English | Wang Xiaozhi

Exclusive compilation of SMASH A CUP | Elvan

A brief introduction to the author

Wang Xiaozhi, graduated from the School of International Relations, Peking University, and majored in International Development practice, School of International Relations and Public Affairs, Columbia University. Long-term attention has been paid to such issues as Chinese investment in Africa, agricultural cooperation between China and Africa, and community agricultural development in Africa. He has been stationed in Kenya in the past year and traveled to Uganda, Tanzania, Mauritius and other countries to participate in and observe the survival and development of local international organizations, Chinese enterprises and civil society.