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New strategies for an evolving market at Turnberry: with the coffee business at an uncertain stage, audiences at the NCA's well-attended 2008 Convention heard about a range of strategies and niches that were ripe for development.

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As the coffee fraternity gathered in early March for the 97th incarnation of the National Coffee Association's Annual Convention, the market had just hit record highs and was coming down, amidst gloomy predictions from origin and from some of the major markets. As a result, the Convention venue--Aventura, Florida's Turnberry Isle Resort and Club--played host to a number of sessions that reflected the current market uncertainty, and offered a number of ways for that market to develop.

Incoming NCA chairman Jonathan Feuer of L M Zuckerman & Co set the tone in his welcoming presentation, highlighting the "evolution and revolution" of the coffee business in recent decades, and identifying the ways that the Association has partnered and represented the industry. Among other initiatives, he reported, the NCA was currently lobbying to modify the proposed Country of Origin Labelling requirements, some of whose provisions could be negative to the industry and damaging to the trade in coffee.

Indeed it was coffee's role in world trade that gave locally-based U.S. congresswoman, Ileana Ros-Lehtinen, her jumping-off point, as she advocated a free trade agreement with Colombia. praising coffee producing nation's strong leadership in dealing with drugs and what she called "narco-terrorists." The coffee trade, she said, was an important example of the way the U.S. could support the region's democracies and serve its own national security interests at the same time.

Bringing the session right back to the product itself, Colman Cuff and John McMartin of Starbucks, the official convention sponsor this year, introduced what they called the first-ever NCA coffee cup tasting, serving all the attendees at their seats with a sample cup of the specialty giant's new Black Apron exclusive blend from Rwanda. The coffee--which was shortly to be launched in European and Mideast Starbucks branches--marked the exciting re-mergence of Rwanda as a high-quality coffee producer, McMartin said.

The emergence of the Geographical Indication (or GIs) as a sort of "brand" for origin was explained by Daniele Giovannucci of the United Nations International Trade Centre, although, he warned, "trademarking your name does not guarantee that you have a business." While this new tool was helping some coffee origins to emphasise the cultural and agro-ecological aspects of their products, integrated with standards and traceability, the need to establish structures first--very difficult in some origins--was a major stumbling block. The result, he said, was that successful GIs, like that for Kona, could take decades to result in measurable benefits for producers.

The Move from Pits to Screens

Examining the coffee trader's point of view were Michael Nugent of UBS Financial Services and Adam Ford of the Intercontinental Exchange (ICE), which in the past year has transformed New York coffee futures into a completely screen-based business. As a user of the new system, Nugent was positive about the revamped system, especially about the service the new exchange gives its users, but he suggested that new realities in the futures market--including the huge growth in open interest caused by hedge funds participation--could well "force change in how we look at the market."

Ford, for his part, pointed out that replacing the former NYBOT's open outcry system with screen trading avoided the pricing anomalies and arbitrage difficulties with the old system. He stressed the importance of making strong contacts within the physical coffee community, although he also admitted that ICE's much-vaunted Robusta contract had yet to garner a groundswell of support from the trade. ICE would attempt to launch a side-by-side options product, he announced, as part of an overall trading evolution that he compared to the move, "from the horse and buggy to the Model T."

As one of a number of breakout session choices, roaster Dallis Coffee's David Dallis brought the practicalities of cupping to a room full of non-cuppers, explaining the essential importance of the practice. "A roaster cannot make the product better," he said, "so we are very dependent on origin." Taking the novices through the basics of cupping for aroma, acidity, body, flavor and finish, he canvassed opinions on the three samples that were prepared: a strong, pleasantly acid Guatemalan Huehue, an earthy, spicy Gayo Mountain Sumatran and a smooth, fruity Ethiopian Beloya. He strongly emphasized the significance of water, pointing out that the low mineral content of tap water available in markets like New York City and Seattle highlighted coffee's acidity, while harder water elsewhere tended to wash out the specific characteristics of individual coffees.

Spreading the Healthy Coffee Message

The NCA's own "Coffee Delivers" generic program, designed to promote health attributes and combat consumer misconceptions about the beverage, is in its fourth successful year, having now created around one billion positive message impressions throughout the media. The tactic of "leveraging the science," to keep the material fresh with new spokespersons, was making good inroads, Starbucks' Stacey Krum said, and she introduced a reel of clips highlighting numerous TV shows and consumer magazines sending out the "benefits of coffee" message.

One of the fastest growing beverages in the U.S. is tea. Joe Simrany of the Tea Association of the USA told his coffee audience, exhorting them to look at the way this alternative beverage, and especially the specialty tea category, could supplement their businesses." A little tea goes a long way," he said, explaining that with 200 servings/lb., there was no upside limit at retail and that the resulting profit margin was very healthy.

George Vukasin Jr of Peerless Coffee & Tea testified to the enormous growth in specialty teas, which had led to a 25% volume increase in his tea business. There was "much more focus" on tea now at Peerless, he added. Taking part in the growth of sectors like organic, Fair Trade and specialty teas was available to all, Simrany concluded: "it is totally compatible with the coffee business."

Developing Sustainability into Profitability

Sustainable coffees, another strongly developing niche market, were certainly "no longer a fad," according to Karen Cebreros of Elan Certified Organic Coffees. Her organic business was taking part in the growth of this sector, she said, pointing out that 10% of U.S. coffee was currently organic. The sustainable sector offered a valid response to current concerns about relationships with growers and the importance of traceability, she added. Regarding certification, Cebreros said, the sustainable sector and "big coffee" could and should come together; she announced that her company was launching a code based on cup quality, organic certification and social responsibility.

Market analyst Judith Ganes-Chase of J Ganes Consulting gave an overview of the way sustainability was affecting the market. Although the public were only just beginning to catch on, the major organizations including the NCA had recognized the need for sustainability and had embraced it. Meanwhile, the producers were coping with it, even though in some cases they "were drowning under the paperwork" involved in proving coffee was sustainable. There was strong organic growth in the consumer market, she said, which was developing in tandem with the progress in the specialty sector. "Consumers are aware which companies are trying to do the right thing," she concluded, predicting that sustainable coffee was here to stay, and that demand for it was sure to grow.

Fewer consumers are drinking coffee, but the percentage of gourmet coffee continues to rise, according to the NCA's 2008 National Coffee Drinking Trends survey conducted earlier this year, and previewed by Mark DiDomenico of Sara Lee Foodservice.

Daily coffee consumption, among the 6,000 consumers contacted by phone or online, was down to 55% of adults, from last year's 57%, the 2008 survey found, although that consumption decline appears to be in traditional coffee. Gourmet types went from 14% to 17% penetration, with increases seen in all consumers aged 25 and above, DiDomenico reported.

He also blamed the current difficult economic conditions and resulting unemployment and reduced discretionary spending for a fall in daily coffee consumption by 18 to 24-year-olds from 37% in 2007 to 26% this year. On the positive side, the survey also found that more people agreed that coffee was good for health, DiDomenico said, a result that reflected well on the Association's ongoing "Coffee Delivers" campaign.

In wrapping up the event's business sessions, NCA president Robert Nelson highlighted the important role of the farmers in the coffee business and said that the Association was keen to cultivate cooperation with them. "The coffee business does not have to be about winners and losers," he said, urging the audience to take a role in bringing the industry together for the benefit of all. Giving back and building trust in the business, he concluded, would "impact both our world and our bottom line."

Michael Segal has been reporting on the coffee business worldwide for over two decades, and is currently web editor for the Speciality Coffee Association of Europe. He co-authored "The Coffee Companion." A Connoisseur's Guide" and can be contacted at: segalcoffee@yahoo.co.uk.
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Title Annotation:NCA Review
Comment:New strategies for an evolving market at Turnberry: with the coffee business at an uncertain stage, audiences at the NCA's well-attended 2008 Convention heard about a range of strategies and niches that were ripe for development.(NCA Review)(National Coffee Association)
Author:Segal, Michael
Publication:Tea & Coffee Trade Journal
Geographic Code:1USA
Date:Jun 1, 2008
Words:1481
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