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Expands its reach: Louis Dreyfus commodities: from asset light green coffee trader to integrated supply chain manager, Louis Dreyfus Commodities has evolved and completely transformed its coffee business.


Its origins may date back to 1851, but Louis Dreyfus Commodities is relatively new to the coffee business. Louis Dreyfus Commodities (LDC) founded its coffee operation in 1989 as an asset light green coffee trading business. The firm's coffee business has transformed itself from an asset light trader into a leading coffee supply chain manager, with sizable investment in producing countries representing more than 85 percent of worldwide coffee production.

The beginnings of the origination and processing business of LDC's coffee platform occurred in Mexico, Brazil and Peru where the company has run asset-light exporting operations for more than ten years. The major change in strategy occurred in 2007 when LDC Coffee greatly expanded its origination and processing capacity in Brazil.

"Over the years, we changed from a pure export trader of exportable grade coffee to a deeply integrated up-country procurement company, where we are now able to process export grades in our own factories and ship under our own regime to customers' worldwide final destinations," said Wolfgang Heinricy, global head of marketing and supply chain management for LDC's coffee division, based in Geneva, Switzerland. "Our supply chain is now fully integrated--upstream to downstream."

Pursuant to the new strategy, LDC Coffee (hereafter "LDC") grew its operations in Brazil to more than 140,000 metric tons of traded volume during the current season. This engagement was followed in 2008 by installations in Vietnam, with a similarly strong growth of processing around 100,000 tons annually and substantial volumes traded domestically, making LDC the one of the largest multi-national Robusta merchants in Vietnam.

Increasing Its Interest in Coffee

The strategy was upscaled and expanded in 2009 with increased investment in origination, processing and warehousing, said Heinricy, noting that the intent was to manage the supply base and market risk from the very beginning, when coffee changes from farmers' hands and enters the market. "We undertake all the functions and risk management."

After expansion in Vietnam, LDC entered Colombia with the purchase of two mills with associated storage capacity. LDC has been the largest private exporter in Colombia since 2010, with annual export volumes consistently in excess of 40,000 tons. In 2009 the company also built a modern processing plant in Perote, Mexico and expanded its origination and processing capacities in Peru. Between 2010 and 2012 LDC continuously expanded its milling and storage capacity in Indonesia where it now ranks among the three largest multi-national exporters. In 2012, the company acquired a processing plant in Honduras and has successfully begun export operations.

In recent years, LDC has also invested in origination, processing and storage assets in India, Uganda, Kenya, Tanzania, and lately in China, with substantial volumes exported to numerous destinations. The LDC global processing capacity is in excess of 350,000 metric tons. Furthermore, the company is continuously growing its share of exports in Ethiopia, where it is present with a quality control center through a local representative.

Today, LDC is an integrated member of all the aforementioned coffee-producing communities. The company is a market maker for farmers and cooperatives alike on a daily basis. "[LDC] has learned to love this business and is here to stay," said Heinricy.

LDC maintains its coffee headquarters in Geneva and has regional trading centers in Wilton, Conn., Sao Paulo, Brazil; Bogota, Colombia; Nairobi, Kenya; and Singapore.


"Louis Dreyfus Commodities' new strategy was part of a major change in how physical coffee-trading was being handled by them. Now they were getting involved in processing and supply chain management," said a North American-based industry analyst who has covered coffee for 20 years. "They've continued to expand and upscale this strategy since then."

Supporting the Coffee Community

In order to match an increased origination capacity, LDC has extended its marketing reach accordingly. Globally, the group has been merchandising in excess of 500,00 metric tons annually over the last three years: more than 6 percent of annual production, and more than 8 percent of globally exported volumes. More than 30 marketers are servicing roasters that range in size from the largest global buying groups to small family-operated roasteries both in traditional consumer destinations as well as in emerging markets. A team of approximately 50 logistics professionals help the company meet the increasingly complex delivery demands of the industry.

LDC is an active member of the global coffee community and is highly committed, with a stake in more than 85 percent of coffee production worldwide. The company aims to continue to gain market share by improving the service it can offer to its end-user clients. To complement the origin expansion and value added services for producers, LDC is consolidating integrated supply chain solutions, quality assurance and traceability for the industry. The breadth of logistics solutions provided range from origin stocks to on-time deliveries to the factory gate and buffer stocks at destination.

Traceability and sustainability play an integral role in LDC's strategy. The company is a global signatory of the UN Global Compact [The United Nations Global Compact, also known as Compact or UNGC, is a United Nations initiative that encourages businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. The Global Compact is a principle-based framework for businesses, stating ten principles in the areas of human rights, labor, the environment and anti-corruption.], and has joined a number of global roundtable forums, positioning itself to be an important player in a segment that will continue to grow in size and importance worldwide. LDC's coffee platform is a member of the 4C Association, the UTZ--Certified, Rainforest Alliance, as well as Fair Trade, and supports individual industry specific sustainability solutions. The company is focusing on building sustainable and traceable supply chains while facilitating the flow of all types of coffees from producer to consumer.

"We started working with Louis Dreyfus Commodities about three years ago and the relationship has grown extensively," said Alex Morgan, senior manager, sustainable agriculture for the Rainforest Alliance, based in New York. "They participate in our bi-annual cupping for quality, buy and sell Rainforest Alliance certified coffees and now are actively working with farmers in producing countries to provide training and technical assistance to help them move toward certification."


In addition to involvement in sustainably certified and traceable trading networks, LDC Coffee is also proactively bolstering the supply base with several not-for-profit programs and studying project work to support the sustainability in coffee production in a number of producing countries together with industry partners and donor organizations and banks.

Strategic partnership with the industry is not a given, and all activities of Louis Dreyfus Commodities Coffee are focused on actively promoting this goal.

From FOB Trader to Agricultural Commodities Giant

Louis Dreyfus is a name with a proud history in the world of commodities. Geneva, Switzerland-based Louis Dreyfus Commodities is the world's largest rice and cotton trader, but its beginnings are quite humble. In 1851 Leopold Louis-Dreyfus, the 18-year-old son of a farmer from Alsace, started buying wheat from local farmers and selling it eight miles away in Basel, Switzerland, an important commercial center located on the Rhine River. The young entrepreneur soon established a network of regional offices in Germany and France in order to benefit from evolving transportation and communication systems.

This soon turned the enterprise into a wide-ranging trading operation--grain was purchased in the Danube basin and in Russia to meet the increasing demand of industrialized cities in Western Europe. From these beginnings the enterprise evolved into a major grain trading and shipping company, with offices covering all continents soon after the turn of the century.

Now, more than 160 years later, Louis Dreyfus Commodities is a leading merchandiser of agricultural products and the most diversified player of its size. Aside from its leading position in cotton and rice trading, LDC ranks in the top four in the grains, oilseeds, sugar, orange juice and coffee markets. In fact, LDC is one of the top 10 players in the world in green coffee exports.


Furthermore, the company is a major player in dry bulk ocean freight, non-ferrous metals, dairy and recently, the global fertiliser trade following the acquisition of Paris-based SCPA Sivex International in 2011. The group is also vertically integrated across the supply chain producing crops on more than 1,000,000 acres and with significant investments in processing and logistics globally. LDC employs more than 35,000 people (at peak season) in more than 58 countries and records net sales of USD $60 billion annually.
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Comment:Expands its reach: Louis Dreyfus commodities: from asset light green coffee trader to integrated supply chain manager, Louis Dreyfus Commodities has evolved and completely transformed its coffee business.(PROFILE: LOUIS DREYFUS COMMODITIES)
Author:Leigh, Aubrye McDonagh
Publication:Tea & Coffee Trade Journal
Date:Sep 1, 2012
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