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U.K.: missing out on green bean warehousing.

U.K.: Missing out on green bean warehousing

In Britain, if you are in the business of warehousing coffee, one of the chief factors you need to add into your calculations is that soluble coffee doesn't take up much space. In a market where some 90% of all coffee is instant, the raw bean trade is necessarily a highly specialized affair, and compared to the great Continental coffee ports, the opportunities for British warehousing companies are obviously limited.

Moreover, as John Murcott of Murcott Wilden & Jacobs points out, apart from that consideration, Britain was never likely to feature very prominently in the overall European coffee storage league anyway. It is undeniably true that neither London or Liverpool, or any of the ports in between, seem natural candidates for the kind of transit business that competitors on the other side of the Channel are geographically so well placed to handle.

On the other hand, he is also quick to point out that changes now on the way could tend to influence this situation in certain respects. There are a lot of new terminal operations taking place in Europe, and both Trieste and Barcelona have been added to the Robusta list; and even more significantly the United States is building new relationships with U.K. warehousing companies in anticipation of arrangements that would allow U.S. participation in C contract Robusta trading.

"American companies are currently looking for London agents to operate through the London Fox, and that should at least give the trading houses a little more to do." And traders could certainly do with encouragement: high stocks are grimly matched by high borrowings, and terminal markets are going down. "So they have problems whichever way they turn."

However, although the U.K.'s intake of physical coffee may not compare with such giant operations as Hamburg and Rotterdam, the figures are still big enough to merit sime respectful attention by warehousemen. As John Murcott says: "Don't forget that there are still companies like Kraft General Foods, Nestle and Allied Lyons to take into consideration." It is true, too, that in anticipation of the single European market after 1992, several Continental roasters are energetically trying to end the dominance of the big three in the British roast and ground market, and shipments of ready-roasted brands are beginning to show up in U.K. imports statistics.

Another sign of the changing times is provided by burgeoning companies like H.D. Cotterell, which has formed solid relationships with similar companies - many of them family-owned enterprises - over the last five or so years; the original H.D. Cotterell was, as it happens, established in Hamburg over a century ago.

In the London office, Chris Rogers agrees that by comparison with the main Continental coffee ports, coffee warehousing on its own is a pretty negligible element. "We are an island, after all." In the year ended in March, British coffee imports amounted to around 24,500 tons, with some 1,300 tons being exported - "and most of that was on its way to be decaffeinated." The major portion of the imports were from East African origins and the Ivory Coast, with the smaller traders bringing in the more expensive, and more profitable, Arabicas.

Over in Antwerp the import figures are, naturally, far less modest. As J. Lagrilliere of Ocean Group Belgium reports, the port's January figure for coffee in store was in the neighborhood of 92,000 tons; by contrast, the figure for Le Hevre was less than a third of that total. Not that the business of holding coffee stocks is always as profitable as it might be; with coffee prices so low, competition between warehousing companies is correspondingly sharp, which means operating on the narrowest of margins.

"There's a lot of quick turnover involved, but of course the country of origin has a bearing on this. With the Ivory Coast and Uganda, for example, everything's gone in a mouth. On the other hand, Madagascars tend to remain in store, there are difficulties Zaire, and there are Cameroons around which have been in store for around three years."

Like many warehousemen, he does not expect that 1993 will bring much change to the industry, apart from a slight speeding up in cross-border transit. For the rest "the normal paperwork you get at ports of entry will still be there, there'll be the usual commercial documentation to attend to, as well as the ordinary customs formalities."

Luk Jacobs put Antwerp's current high status as a coffee port in sharper focus by recalling that in 1983, the amount of coffee in store in the port's warehouses was an extremely modest 7,000 tons. "Not a bad increase, I think you will agree," he remarked happily. There were several factors behind the rise not least of which was Antwerp's acquisition of Terminal Market recognition in 1985. "We started as a company to specialize in coffee in about 1987, and although we tended to rent warehouse space at first, last year we began building new warehouses of our own." The company now has 15,000 sq.m of warehouse space and handles about a quarter of the port's coffee business.

There were other factors behind the rise, of course. "Well, the port offered a very good level of service, and although approval as a Terminus port gave us the initial bosst, Antwerp was also sensible enough to set our rates at a very reasonable level. This became the cheapest port in Europe, in fact, so that the trade could operate through Antwerp as efficiently as anywhere else, and at a lower cost."

Another boost was supplied by the breakdown of the International Coffee Organization's system of control, which heralded the wholesale transfer of stocks from countries of origin to ports of import.

"And that's likely to remain the case," said Jacobs, echoing the view of a good many European coffee people. Nor does he see many of the Continental enterprises rushing to answer the U.S. requirement for alliances with companies on this side of the Atlantic...whatever London might do. "The trouble is that the conditions which the U.S. seeks to impose in terms of bonds and guarantees are much stricter than those laid down by London Fox, and at the moment I don't think you'll find much interest in (Continental) Europe. Why go to all that trouble when you can't be sure anyway whether you're ever going to benefit from the arrangement?"

Some things do not change, happily. While agreeing that Jacobs customers in Switzerland, Germany, the Netherlands, Austria, Italy, Spain, France and Belgium would in the main receive their suppllies by truck or train, Luk Jacobs also recalled that one great tradition is still firmly in place: the Rhine Service. "We still regularly forward consignments by river barge to Germany, as well as to Basle in Switzerland. It may be slower but it's also cheaper!"

In spite of Antwerp's advances, it has not yet quite managed to dislodge Rotterdam from its position as the Continent's second coffee point of destination (Hamburg remains the undisputed leader). The giant Dutch port's total for 1989 was 253,000 tons - and the figures was more or less constant over the whole of the last decade, flactuating only in step with the alternating fortunes of the coffee industry itself.

As Peter Borsboom of Rotterdam's BLM readily agrees, the unalterable fact is that, in many respects, Hamburg is simply better placed geographically. This is especially true of the nascent East European coffee trade.

"They have traditional relationships with countries like Poland, Romania, Czechoslovakia, Hungary and the other near neighbors - as well, of course, as the former German Democratic Republic." In one respect, however, there has been a small change in Rotterdam's share of this traffic, brought about by the fact that the Dutch port charges less for more extended periods of storage. "In Hamburg they want a quick turnover, and if that is not possible, their logic is perhaps change to some other commodity."

But he agrees that the potential new markets could have a certain, limited effect on the business - although not as much as some might have hoped. "A few were thinking in terms of 100% more business, but I don't accept that, because in too many cases the old Eastern bloc might well want the coffee, but they haven't got the money to pay for it."
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Title Annotation:Coffee storage
Author:Clark, Richard
Publication:Tea & Coffee Trade Journal
Date:Jul 1, 1991
Words:1399
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