Although Vietnam is currently under pressure from rising inflation in key markets and global uncertainties, the country still managed to post record-breaking coffee exports in 2021/2022.

Statistics from the General Department of Customs show that Vietnam exported 1.42 million tonnes of coffee in the first ten months of this year, up 10.8% from the same period last year. In the 2021-2022 season, Vietnam exported 1.68 million tonnes of coffee worth more than $3.9 billion, a record revenue.

According to the Ministry of Agriculture and Rural Development (MARD), coffee exports reached nearly $3.1 billion in the first nine months of 2022, up 37.6 per cent from the same period last year. Export coffee prices increased by almost 22 per cent to an average of about $2,280 per tonne.

The European Union remains the largest consumer of Vietnamese coffee, with a 39 per cent market share in the first eight months of 2022, amounting to 490,700 tonnes valued at $1.1 billion, “an increase of over 27 per cent in volume and over 54 per cent in value” compared to the same period a year ago.

In Europe, Germany is the leading consumer of Vietnamese coffee, followed by Italy, France, Spain and the UK in fifth place. Vietnamese coffee accounted for 29.9% of imported coffee, nearly one-third of all imported coffee in the first six months of 2022. Exports to Belgium, Spain, the Netherlands, France and Portugal also increased sharply compared to the same period last year.

Japan, Russia, Mexico, India and the US are also among the main buyers of Vietnamese coffee, with all countries increasing their imports from Vietnam. The country has also increased exports of processed coffee such as instant and ready-to-drink coffee, especially to China, a market that is growing at an average rate of 15% per year.

Vietnam begins its harvest season amid global uncertainties, lower coffee prices, rising inflation risks and unstable logistics, all of which are putting pressure on the global coffee industry. Dwindling coffee stocks are recovering and the largest coffee producers, Brazil and Vietnam, expect a healthy harvest next season.

Despite 20 years of high inflation, Vietnamese coffee exports have increased. Coffee is one of the indispensable commodities of the western world. Even though the market is very volatile at the moment, there will always be a demand for coffee.

Photo by Dang Cong on Unsplash

Luckin Coffee, Starbucks’ biggest competitor in the increasingly crowded Chinese market, announced its financial results for the third quarter of 2022 on 22 November. The company reported strong growth in the third quarter and has been working to restructure its business after an accounting fraud nearly two years ago.

  • Total net revenues were RMB3,894.6 million (US$547.5 million) in the third quarter of 2022.
  • Revenues from product sales were RMB2,995.5 million (US$421.1 million) in the third quarter of 2022.
  • Revenues from partnership stores were RMB899.1 million (US$126.4 million) in the third quarter of 2022.
  • Total operating expenses were RMB3,309.4 million (US$465.2 million) in the third quarter of 2022. The increase in total operating expenses was predominantly the result of the Company’s business expansion.
  • Cost of materials were RMB1,440.5 million (US$202.5 million) in the third quarter of 2022.
  • Store rental and other operating costs were RMB770.4 million (US$108.3 million) in the third quarter of 2022, representing an increase of 49.4% from RMB515.5 million in the same quarter of 2021.

We are pleased to deliver another quarter of improved results, with continued improvements across our key operating and financial metrics.

Dr Jinyi Guo, Chairman and CEO, Luckin Coffee

Dr Jinyi Guo also said that everything is going according to his expectations. Luckin Coffee has increased its scale to further improve its overall profitability and achieved an operating profit margin of 15% in the third quarter, which is comparable to Starbucks, which delivers a range from 17 – 14%.

With our research and development capabilities and our operational efficiency, we are confident in our ability to continue capturing growth opportunities in the fast-growing China coffee market while driving long-term value and sustainable growth for our shareholders.

Dr Jinyi Guo, Chairman and CEO, Luckin Coffee

Some of the highlights of the report include total net sales in the third quarter, which amounted to US$547.5 million, up 65.7% from US$330.4 million in the same quarter of 2021.

Luckin Coffee opened 651 new shops in the third quarter, which means that the number of new shops opened increased by 9% each quarter. The company now has 7,846 shops, including 5,373 self-operated shops and 2,473 partner shops. 25.1 million people visited Luckin Coffee shops, up 70.5% from the same quarter in 2021.

The Xiamen-based coffee company has undergone an intense restructuring, upgrading its team and recruiting the best talent in the industry following a massive accounting fraud in 2020, not long since it was founded in 2017.

The 2020-2022 Corporate Governance Report highlights Luckin Coffee’s goal to create value for both customers and society while laying the foundation for its sustainable development. The company is technology-driven, offering high-quality coffee and other products, and aims to become a global brand that is present in everyone’s daily lives.

The Uganda Coffee Development Authority (UCDA) reported that the volume of coffee exported in October was lower than in September. On the other hand, revenue was higher due to the sustained high prices for coffee during much of the year.

Screenshot 2022 11 27 At 14.09.45

Coffee prices, however, have been falling since mid-October, which has weighed on the global coffee market. In addition, Uganda is facing drought in most of its coffee-growing areas, which also affected coffee revenue in October. According to the UCDA report, due to unfavourable weather conditions, the main harvest season was shortened in the Central and Eastern regions, and harvests were lower in the Greater Masaka and South-Western regions.

As of October 2022, Uganda’s coffee exports amounted to 457,244 60-kilo bags valued at $67.10 million. This included 398,592 bags of Robusta valued at $53.25 million and 58,652 bags of Arabica valued at $13.85 million. In September 2022, Uganda earned $71.22 million from the export of 503,695 60-kg bags of coffee. Of this, 464,118 bags were Robusta worth $62.19 million, and 39,577 bags were Arabica worth $9.03 million.

Arabica exports were generally lower in October than in September due to the overall low Arabica demand in October, which also led to lower prices.

According to UCDA, the value of Uganda’s coffee exports increased by 35% in the last 12 months between November 2021 and October 2022 despite a lower volume of coffee exports. The higher value is due to the training of farmers in best handling and post-harvest practices.

The coffee processors and traders were trained on the best coffee post-harvest handling practices such as hulling of dry coffee of 13 per cent moisture content, rejecting wet coffee from farmers, good store hygiene and avoiding coffee adulteration. Routine factory inspection and monitoring were carried out in all the regions.

UCDA Report

In the period from November 2021 to October 2022, coffee exports amounted to 5.83 million 60-kg bags worth $883.24 million, compared to 6.55 million 60-kg bags worth $652.50 million in the previous year (November 2020 to October 2021).

Ugandan Arabica coffee beans averaged $3.94/kg, down 25 cents from $3.80/kg in September 2022. Sustainable Arabica fetched the highest price of $6.67/kg, $2 more than conventional Bugisu AA, followed by Bugisu A+, $1.04 more than conventional Bugisu AA.

A federal judge in Manhattan has 60 days to move forward with the nearly 9-year-old antitrust case against Keurig Green Mountain Inc. before a federal appeals court reconsiders whether to intervene in the litigation, according to a court order on Tuesday.

The New York-based 2nd U.S. Circuit Court of Appeals in an order declined “a bid from a plaintiffs’ lawyer suing Keurig over alleged anticompetitive conduct in the single-cup coffee brewing market to compel U.S. District Judge Vernon Broderick to set a trial date.”

Broderick has two months to act on the pending motions; otherwise, the three-judge panel will consider a renewed motion. Those motions include arguments by Keurig and the plaintiffs’ lawyers that the court could only rule on the basis of the facts contained in the pleadings.

Among the plaintiffs are California-based family coffee products company JBR Inc. and Illinois-based food and beverage company TreeHouse Foods Inc. Keurig has denied the claims, and the plaintiffs warn of further delays in the case.

The cases have been before Judge Broderick for nearly nine years, but in late September, JBR filed a petition for a writ of mandamus. The company felt compelled to do so after becoming frustrated with the speed with which Judge Broderick acted in court when, after 8.5 years, there was still no trial date.

Trial could easily be another four, five, or more years away. Key witnesses are getting older, retiring, and indeed dying, or have died, waiting to have [JBR’s] day in court.”  He also said he’s happy with the court’s decision and is hopeful they will finally have a trial.

Daniel Johnson Jr, the plaintiffs’ lawyer

This is good news for the plaintiffs, who have been frustrated over the pace of the litigation for a while, and have been urging Broderick to set a trial date. Keurig’s lawyers, on the other hand, said in a court filing that Broderick’s “decisions on the pending motions could obviate a trial or define the extent of any remaining claims.”

The lawsuit has been pending since 2014 on a claim that Keurig “monopolized or attempted to monopolize and restricted, restrained, foreclosed, and excluded competition in order to raise, fix, maintain, or stabilize the prices of Keurig K-Cup Portion Packs at artificially high levels.”

The original suits also accused Keurig of breaking antitrust laws by putting on the market technology that would allow its machines to work only with Keurig’s coffee pods.

Photo by Tingey Injury Law Firm on Unsplash

The Saudi Coffee Company recently signed an investment agreement with the Royal Commission for Jubail and Yanbu to build a 30,000-square-metre coffee warehouse in Jazan City.

Saudi Arabia’s current coffee production is 300 tonnes per year, a figure the country aims to increase to 2,500 tonnes by 2032, an increase of more than 700%. The modernisation will also focus on a more sustainable and localised value chain.

The Saudi Coffee Company also plans to open 25 coffee shops around the world as one of its five pillars of strategies to upgrade the Kingdom’s coffee industry.

The second pillar will focus on roasting and packaging coffee, according to the Kingdom. The company will create an open platform that will allow domestic and global brands to increase their production without necessarily having to invest in their own facilities.

The third pillar would be having a Saudi coffee brand that tells the story of Jazan beans to the globe. The fourth pillar is opening a chain of coffee shops. The last pillar is to lift up the standards of the coffee industry through training and certification by having academies in Riyadh, Jeddah, Dammam and Jazan.

Raja AlHarbi, CEO, Saudi Public Investment Fund (PIF)

The new $319 million coffee warehouse in Jazan City appears to be the base on which these five pillars will be built. It will give Saudi Arabia greater connectivity to the global coffee world and provide access to some 2,500 Saudi farms. The Kingdom also wants to provide Saudi youth with training in coffee production and processing.

Several investors in Jazan City, including Saudi Coffee Co. and United Feed Co., have signed the investment and construction agreement, which provides for various facilities “including the establishment of a coffee factory and an animal feed factory, as well as housing and infrastructure projects.”

Alharbi argued that Saudi Arabia is not competing with any other country, but he was playing with some ideas:

PIF is targeting to help in the diversification of the Saudi economy. Agriculture and coffee play a major role in this diversification. Coffee is the second biggest product globally after oil. So, imagine one day Saudi Arabia is the major oil producer, and one of the major coffee producers.

Raja AlHarbi, CEO, Saudi Public Investment Fund (PIF)

Westrock Coffee Company, based in Little Rock, Arkansas, announced that it held a ceremony in Conway, Arkansas, for its new state-of-the-art ready-to-drink (RTD) coffee roasting facility. When fully operational, the 524,000-square-foot production facility will be the largest ready-to-drink (RTD) coffee roasting facility of its kind, according to Westrock.

Several key company figures attended the event in Conway on 9 November, including the CEO and co-founder of Westrock Coffee, Scott Ford, and Charles Nabholz, chairman emeritus of Nabholz Construction, a multi-service contractor managing the renovations.

It is particularly meaningful to me to have the nation’s largest roasting to ready-to-drink packaging facility in Conway, my hometown. Starting these upgrades marks a significant milestone in our company’s history to further accomplish our mission.

Joe Ford, Co-founder and Chairman, Westrock Coffee Company

As an industry leader, Westrock Coffee provides beverage solutions to the most distinguished brands around the world, and this new facility enables us to further our ability to deliver the most innovative solutions to our customers in a variety of formats.

Scott Ford, CEO and Co-founder, Westrock Coffee Company

The facility will offer ample space “for the development, production, and distribution of our coffee, tea, and RTD products, including ready-to-drink cans, glass bottles, multi-serve plastic bottles, and bag-in-box (BiB) solutions.” It will also have a product development lab to allow the company to develop, test and produce new products.

Westrock Coffee is one of the leading coffee, tea, flavour, extract and ingredient solutions providers in the United States. The company offers a range of services, including “coffee sourcing, supply chain management, product development, roasting, packaging and distribution for retail, food service, convenience stores and travel centres, consumer packaged goods, non-commercial and hospitality industries around the world.”

Westrock Coffee and Riverview Acquisition Corp formally completed a merger on 29 August. The merger has enabled Westrock Coffee to expand even further into Europe, Asia Pacific and the Middle East and accelerate the development of its RTD production facility.

The joint organising committee of the African Fine Coffees Conference and Exhibition (AFCC&E), comprising the National Agricultural Export Development Board (NAEB) and the African Coffee Association (AFCA), has announced that Rwanda will host the 19th edition of the event.

Rwanda will have the honour of hosting the African Fine Coffees Conference & Exhibition for the third time after 2009 and 2019. This will also be the first event after a two-year hiatus since 2020 caused by the global Covid-19 pandemic. The conference will be held in Kigali from 15 to 17 February 2023 under the theme “Shared Value for Sustainability in the African Coffee Industry”.

More than 1,000 stakeholders from across the coffee value chain will attend the event to discuss sustainable coffee practices, the impact of climate change on production and productivity, and better income for producers

Claude Bizimana, CEO of the NAEB, said coffee is an important aspect of the African economy. It positively impacts the lives of hundreds of thousands of smallholder farmers and their families in Rwanda and other African countries. It has also made “a significant contribution to foreign exchange revenues and the monetisation of the rural economy.”

Because of the efforts of these small-holder farmers, the quality of our coffee is now recognised globally. Bringing this event to Rwanda honours their work and reminds them that they are crucial to Rwanda’s coffee success story.

Claude Bizimana, CEO, Naeb

The event is an excellent opportunity for Rwanda and other African coffee-producing countries to once again showcase the quality of their coffee to participants. It serves as a platform to find new buyers and raise the profile of coffee origins.

Rwanda produces up to 420,000 bags per year, which does not place it among the top 20 producers. There are currently about 400,000 smallholder farmers who make their living from coffee. Production is dominated by bourbon varieties, which are prized for their quality.

The black frost experienced by Brazil in July 2021 has thrown the coffee industry into a period of uncertainty. Prices have risen significantly since then, leading some farmers to default on their future contracts and seek buyers willing to pay higher prices.

In 2021, several major trading houses had trouble getting the coffee they had contracted in advance. Securing coffee in advance guarantees traders that they can deliver it to roasters who also expect deliveries within a certain time frame.

Bartalks reported last year that some coffee traders saw a default of 5% on their Brazilian contracts. This year, some are seeing even higher defaults. A lawyer working for one of Brazil’s five largest coffee export companies told Reuters the defaults amounted to less than 10% of the country’s total forward contracts. As the largest coffee producer in the world, however, even small percentages make a big difference.

Cristiano Zauli Advogados is one of the Brazil-based law firms that assist traders in cases against Brazilian farmers. The firm said it had filed around 50 lawsuits, compared to 100 last year.

Despite the “bad blood” between producers and traders, the latter is still willing to negotiate first before filing lawsuits, but the parties cannot always reach an agreement.

As a result, law enforcement agencies are sometimes sent to the farms to search for the missing coffee bags. Traders also use satellite imagery to scan the farms and find out if the farmers are really affected by the reported frost and drought damage or if they are simply hiding their crops while looking for a better buyer.

The 2022 harvest was smaller than expected. Coffee trees took longer to recover from the frosts and droughts of 2021, prompting some analysts to lower their forecasts by up to 4 million bags. Coffee traded for over 70% more on the C-market than two years ago.

From a layman’s point of view, it seems right for farmers to default on contracts in order to earn more from their harvest. However, some traders are already warning that they no longer trust their suppliers, which could hurt growers in the long run as it will be difficult to find buyers.

One trader, who didn’t want to be named, said they believed it would take two years before they would start trusting Brazil again for new futures contracts.

Photo by Knase, CC BY 3.0 DE, via Wikimedia Commons

The Colombian Coffee Growers Federation recently reported a decline in coffee production and exports due to environmental problems. Colombia is the second-largest Arabica producer in the world and the largest producer of washed mild Arabica.

Registered coffee production in Colombia fell 12% to 888,000 60kg bags of green coffee, compared to more than 1 million bags produced in the same month in 2021. In the 10-month period from January to October, production was over 9 million bags, still down 10% from nearly 10.1 million bags in the same period last year.

In the 12-month period, November 2021-October 2022, production declined by 13% from 13.2 million bags to 11.6 million 60kg bags. The lower figures are due to excessive rainfall over the last 28 months, resulting in excess water, less sunlight and fewer blooms on the coffee trees.

Prod Oct Eng

In addition, coffee exports declined by 5% at the beginning of the current coffee year, from 987,000 60-kg bags in October 2021 to 942,000 bags in October 2022. Annual exports fell by 7% to 11.8 million bags from 12.7 million bags in the previous year.

Exp Oct Eng

Uganda is now the third country with a Coffee Living Income Reference Price (LIRP) calculated by Fairtrade, following Colombia in 2021 and Indonesia earlier this year. Fairtrade launched a new LIRP for coffee from Uganda on 31 October and proposed a farmgate price of USh 11,640 ($3.13) per kilo of parchment Arabica coffee and USh 7,150 ($1.93) per kilo of Fair Average Quality Robusta coffee for sustainable livelihoods.

As a global organisation with the stated aim to improve the lives of farmers while ensuring transparency and fairness, Fairtrade seeks to raise standards in the supply chain through its various programmes, one of which is LIRP. The organisation argues that a minimum price for coffee will protect farmers from a decline in what is otherwise a very volatile market.

Fairtrade called for an assembly of stakeholders in Uganda, including producers and their technical staff, support organisations, coffee researchers and industry representatives, to “jointly analyse farm economic baseline data and define realistic targets for each of the key income drivers.”

We will have to see how realistic this is against the backdrop of the controversial contract awarding an effective monopoly to the Uganda Vinci Coffee Company (UVCC), a company with no history in the industry.

Ugandan Arabica currently sells for between USh 10,000 ($2.69) and USh 11,000 ($2.96) and has even reached USh 12,000 ($3.23) in recent months, meaning that the proposed framework is within reach. The Dutch company Fairtrade Original has already agreed to pay such prices even if the market price falls.

Setting a reference price for a living wage is a lengthy process, as many factors influence the analysis. Each country has a unique coffee growing tradition that needs to be taken into account, including farm size, household size, production volume and local working conditions.

The organisation learns a lot by assessing each origin. For example, coffee farms in Uganda are traditionally smaller than in Colombia, with larger households. Production in Colombia also seems to be better because they use more organic fertiliser, which might also be possible in Uganda. Labour is also treated differently in each country.

Living income is a journey, and therefore it is important to establish long term collaboration with our partners, like ACPCU. We want to achieve living incomes for coffee farmers by paying them the thoroughly-researched Living Income Reference Price and developing projects to further improve their incomes. This way, we take the lead in bringing about the highly needed change in the coffee industry.

Lotje Kaak, Business Development Manager, Fairtrade Original

Fairtrade defines the LIRP as sufficient income to provide all household members with a decent standard of living – including a nutritious diet, clean water, adequate housing, education, healthcare and other basic needs, plus a little extra for emergencies and savings – once agricultural costs are covered.

The incentive for LIRP came after the coffee price crisis of 2018/2019, when low prices threatened the livelihoods of farmers, many of whom sold their coffee for less than the cost of production.

Blue Bottle Coffee, which is majority owned by Nestlé, has announced the launch of a speciality espresso, initially intended as a replacement for the company’s iced latte. This product is designed for use at home without the need for special equipment or preparation skills.

Nestlé bought Blue Bottle Coffee five years ago for $425 million. The acquisition, a result of Nestlé’s expansion in the coffee industry, allowed the food and beverage giant to move into the premium coffee market, as Blue Bottle is considered a premium brand compared to some other big coffee chains.

But can instant coffee really be called ‘Speciality’, or is Nestlé just milking the brand? I wonder how the team at Blue Bottle really feels about putting their name against soluble espresso? There’s nothing wrong with improving on the soluble products in the market, but why call it ‘craft speciality espresso’?

I can understand the marketing department is doing their job to use a language that will promote sales, but the more that words like ‘craft’ and ‘speciality’ are misused, then the less value they hold as consumers stop associating them with something that is genuinely special. Even if Blue Bottle is using speciality grade beans, a dried and soluble mass market product is not craft, and it is not espresso.

Nick Baskett, Editor in Chief

Blue Bottle says it had rethought its approach to soluble coffee to stay true to its premium reputation. The two-step process, extraction and drying, were prioritised to produce a higher quality and better tasting beverage.

We were never sure we’d crack the code on instant anything at Blue Bottle Coffee, but through curiosity, imagination and tireless effort, we’ve crafted a product that meets our high standards. Our Craft Instant Espresso is the result of three years of dedication to craftsmanship, quality and the unwavering commitment to help lead the future of specialty coffee.

Karl Strovink, CEO, Blue Bottle

Nestlé believes that the soluble coffee market will continue to grow and is therefore investing in this industry. The latest instant coffee offers convenience and quality to consumers on the go. Instead of going to a café or using a coffee machine, they just add milk and drink an instant espresso almost anywhere, including at home.

In the US the instant market is far behind some countries like the UK

Statistic Id696025 Types Of Coffee Usually Consumed At Home Worldwide 2017 By Country

With Craft Instant Espresso, Nestlé is expanding its range of instant coffee, with Nescafe being the best-selling product that has thrived during inflation. Nestlé reported last week that it contributed to the nearly double-digit growth in beverages in North America during the first nine months of the year.

Benjamin Brewer, senior director of global innovation and quality at Blue Bottle, said Nestle wanted to “provide a simple entry point into the world of speciality coffee,” and they look forward to continuing to grow their Craft Instant Coffee portfolio while always putting taste first.

Nestlé also recently purchased the Seattle’s Best Coffee brand from Starbucks, further expanding the company’s portfolio and list of coffee offerings. Nestlé has been working with Starbucks since 2018 and also distributes some of Starbucks’ products.

The union struggle at Starbucks continues. Unions have formed across the US, and the company has retaliated by closing some stores, citing various reasons, including health and safety, although these same stores coincidentally appear to be the ones supporting unionisation.

Recently, the company has filed charges with the National Labour Relations Board against union officials, who allegedly recorded negotiation sessions for workers who were unable to attend. The charges are specific to meetings in Chicago; Buffalo, New York; Ann Arbor, Michigan; Louisville, Kentucky; and Long Beach, California.

Starbucks said in a statement on 24 October that the broadcasting and recording of private sessions undermine the business interests of the company and its partners.

Meanwhile, the union also filed complaints with the NLRB on 25 October, arguing that Starbucks is not acting in good faith. Starbucks officials appeared to walk out of the five bargaining sessions within five minutes of the negotiations on day one after members of Workers United joined the video meeting online. The union replied that such an approach is simply a childish tactic to delay negotiations even further.

The fighting does indeed reflect a children’s playground spat, but if both parties are going to negotiate in good faith, then each needs to be transparent about their intentions. If recordings need to be made for those not attending, then it should be tabled at the meeting, and if all parties agree, then the meeting is recorded with consent, and if not, then the meeting can be rescheduled. A surreptitious recording is unethical and destroys trust.

However, the NLRB prohibits recordings or transcripts of contract negotiations and has previously argued against the recording of negotiation sessions, and in fact, the union claimed the negotiations were not recorded. According to Workers United, Starbucks declined to negotiate because some members of the bargaining committee attended the meeting remotely.

In correspondence leading up to these bargaining sessions, the union made clear that it was reserving the right to have bargaining members participate by Zoom when necessary and appropriate.

Starbucks Workers United

More than 230 Starbucks stores have unionised and the company is in the midst of 40 negotiations. The workers at stores that have voted to unionise accuse Starbucks of unfair labour practices and of withholding their pay increases and other benefits.

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