Tamiru Tadesse is Founder and Manager of Halloo Coffee PLC and Tamiru Tadesse PLC. The latter is an enterprise that collects coffee from over 300 small-scale farmers to supply to the former. Born in Bensa, Sidama Region, he studied electrical engineering at Hawassa University and taught at Debre Berhan University for two years before being employed at a coffee exporting company for six years. But after his friend, also from Bensa, won the 2020 Cup of Excellence global coffee competition, Tamiru decided to set up his own company that exports coffee. A year later in 2021, He won the competition with the top price of USD370 per kilogram after stiff competition from his home town’s coffees. His company currently has surplus orders from global buyers and plans of setting up a coffee processing plant instead of exporting raw beans.
You began exporting just nine months ago but success has greeted you already. How do you secure foreign buyers?
I started both the supply and export businesses last year and have since exported 200 tons of fresh coffee or red berries. With the nine containers exported thus far, around USD1.2 million was earned. In the next two months, I will be exporting beans worth USD1.3 million. But we are currently facing delays because of logistical problems in Ethiopia. All in all, we have generated around USD2.5 million in nine months from exporting coffee.
Under the recently introduced law of vertical marketing, the suppler can provide coffee directly to exporters, without Ethiopian Commodity Exchange (ECX) intervention. Previously, coffee could not be exported without passing through ECX. Exporters bought from ECX and exported only after suppliers stocked their coffees at ECX warehouses. But under vertical marketing, the exporter can directly access coffee from farmers and suppliers. It can then export once the Ethiopian Coffee and Tea Authority (ECTA) approves. If the exporter wants to grade its coffee, it can send it to ECX. The vertical market has become highly helpful for exporters, as well as for the general improvement of Ethiopian coffee export performance.
Finding international markets is difficult for all Ethiopian exporters. But it was simple for me because I previously worked at a coffee exporting company and had contacts. I sent samples of my coffee which they tasted and liked. We negotiated on the price and I proceeded to ship. But if I had no prior experience and did not win the Cup of Excellence (CoE) competition, finding international buyers would have been difficult. For beginner exporters, finding buyers is the most difficult job.
My top customers are in China, Hong Kong, and Taiwan. These Asian countries were unable to buy Ethiopian coffee before and used to buy from secondary sources. Europe and the USA buy from Ethiopia to reexport to these countries. Now the Asian countries are happy to access Ethiopian coffee directly. They also pay good prices. I have never exported to Europe except for some samples for competition purposes. Many Ethiopian coffee exporters are now shifting to Asia, where our coffee is becoming famous.
You won the 2021 Cup of Excellence (CoE) coffee contest. How did you enter?
It was my friend who won the 2020 CoE by setting a new world record—USD407 per kilogram was the winning bid. His coffee was also from my own birth place of Bensa in Sidama. The whole world was amazed by his result. There, I learned that there are international buyers willing to reward quality. So, I submitted my samples for the competition.
The auction at CoE is different from the normal international coffee market. The similarity is that both buy after tasting samples. However, CoE is more of a promotional, branding, and marketing endeavor, than basic selling and exporting. Once you win the contest, you have all the exposure you want to international coffee buyers.
How much have you exported thus far?
In total, we exported over 300 tons this year. Our plan for next year is 500 tons. The ECTA is now doing a great job to improve coffee exports, unlike previous times. I have never seen the Ethiopian coffee sector performing so greatly.
What is the variance in volume between what farmers collect and what is exported?
From 100 kilograms of freshly collected red coffee beans, we only get 20 kilograms of clean coffee. The majority of the red bean—80Pct—is water as well as skin, pulp, and parchment. If the cover is thick, like in Bensa coffee, you only get around 16 kilograms. However, from 100 kilograms of dried coffee, we find up to 33 kilograms of coffee beans. But it is better to buy the fresh red berries as dried coffee is largely substandard.
How do you compare the local and international markets, as well as CoE? What are prices like?
Prices are very different. My CoE winning coffee fetched USD330 per kilogram. Top Ethiopian coffee exporters make USD65. I myself exported at USD33. Yet, there are exporters who sell for as low as USD4. Some are even exporting grade four Ethiopian coffee, for instance grade four Jimma coffee, to the Middle East at USD2.80.
When it comes to the domestic market, you are not allowed to even sell grade five, which is the lowest grade. Only rejected and non-graded coffee is sold in the local market. Surprisingly, reject-grade coffee sold locally fetches a similar price to exportable grade four and five coffees. The price of local coffee is currently ETB112 per kilogram at the retail level.
Do you have plans to export processed coffee?
I have submitted a proposal to the government and requested land near Hawassa Industrial Park to build warehouses and a coffee processing plant. We estimate the project to cost ETB150 million. Exporting processed coffee is the only option for Ethiopia. We are not benefiting by exporting raw coffee.
Developed countries have monopolized the processed coffee market because they have exceeded in processing technology as well as marketing strategy. Logistics is another hurdle for Ethiopia. If you roast coffee, you must export it instantly. Ethiopia also lacks packaging technology.
Most of our current customers of raw Ethiopian coffee face high energy prices and overhead costs to roast the coffee. So, we can roast it here and export it to them in their own packages.
How long does it take you to export?
Logistics has become extremely difficult post-Covid because of container scarcity. We pay ETB180 per quintal to transport processed coffee from Bensa, Sidama to our warehouses in Addis Ababa. There are also queues at washing plants during this peak season when every exporter is processing coffee. Final selection and containerizing are primarily performed in either Addis Ababa or Dire Dawa. This final work costs up to ETB40,000 per 20-foot container.
Once the coffee is processed and approved by ECTA, the exporter books and waits for the shipping containers which takes more than two weeks. Thereafter, insurance coverage is bought and containers are stuffed with the coffee, which is around 20 tons for a 20-foot container. Transportation from Addis to Djibouti costs ETB50,000 per a container. Once there, you wait for ships.
If we use the railway, it costs ETB26,000 per container from Endode near Addis Ababa to Djibouti. This price was ETB18,000 until very recently. However, to transport from Addis Ababa to Endode, which is near Sebeta, truckers charge ETB17,000 per container.
After the coffee reaches Djibouti, responsibility of the shipment is left to the buyer as our agreement terms are FOB Djibouti. My Chinese buyers pay USD200 to 300 per container to ship from Djibouti to China. The logistics cost between Addis and Djibouti is much higher than from Djibouti to China, even though the distance is incomparable.
All in all, it takes close to two months to source from farmers, process, and dispatch the coffee from Djibouti.
Container scarcity was only previously seen during Chinese holidays. But lately, the container scarcity has been continuous.
Shortages of containers this year is global problem. For one, Chinese exports have grown significantly. Secondly, the Suez Canal mishap happened. This container flow disruption caused shortages in China, which in turn reduced the number of containers that should have arrived in Ethiopia. The good thing is that China is currently reopening container factories closed under Covid. They are also currently buying more iron ore. However, some say that the lopsided global container flow will take up to three years to rebalance. Ethiopia has also ordered 3,000 containers from China, according to a source.
Why hasn’t Ethiopia been able to benefit as much as Brazil, Colombia, Vietnam or others from coffee?
Ethiopia is the sleeping giant in the global coffee industry. Ethiopians export coffee just to generate foreign currency and not because they know the value of coffee. Coffee productivity is also low because growers are not well enough incentivized. Farmers can shift to other crops like khat at any time. Ethiopia could have benefited highly had it capitalized on the fact that it is the origin of coffee. Kenya benefits from coffee more than Ethiopia because they market it very well.
Ethiopian coffee deserves much more than current prices, but nobody is working on that. Almost all Ethiopian exporters compete over the limited number of international buyers. If one exporter sells at USD5 per kilogram and another exporter hears of this, then the latter negotiates to sell for USD4 to snatch the buyer away. Other countries’ exporters negotiate for higher prices, Ethiopians negotiate for lower prices. The government is trying to set a minimum price, and this is good. Ethiopian coffee is fetching anywhere between USD2 to 65 per kilogram in the international market. This is a huge span and not right.
More than 90Pct of coffee produced in Ethiopia could be specialty coffee if farmers are trained with recommended harvesting and processing standards.
My company rewards farmers for quality coffee. We currently buy a kilogram of fresh red coffee berries for ETB31, up from ETB22 last year. But we give a 20Pct bonus for farmers who bring quality coffee. We pay this bonus during the summer when coffee farmers are usually short of finance. Farmers from winning areas of CoE are earning 45Pct more for the coffee than other areas. Now, every farmer in Bensa is cultivating coffee.
Brazil benefits because they produce coffee in bulk. Ethiopian coffee is of high quality and organic. But we are sleeping. Currently, global coffee prices have increased by 60Pct after Brazilian coffee farms were hit by frost. Ethiopia’s share in the global coffee market is just 3Pct. This must improve.
Coffee exporters are greatly benefiting but they are not supporting the farmers. They must begin negotiating for higher export prices and reward their growers. The sector is currently highly active and performing well following the government’s reforms. I hope this momentum continues. EBR
9th Year • September 2021 • No. 100