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Coffee and Tea Reports from the Front Lines

U.S. Responds to World Coffee Crisis

United States - The Senate has recently joined the House of Representatives in passing a resolution that directs the U.S. government to “adopt a global strategy to respond to the current coffee crisis.” Since 1997, the global price of coffee has crashed by nearly 70%, forcing many coffee-farming families into a humanitarian crisis.

Oxfam launched a global campaign last September to rally international support for its Coffee Rescue Plan with the release of the report, “Mugged: Poverty in Your Coffee Cup.” The report urges governments, corporations, international institutions, civil society organizations, and consumers to support an emergency strategy to immediately create the conditions needed for a sustainable coffee market.

“Oxfam applauds both the House and the Senate for taking this critical step on the road to comprehensive legislation that could effectively combat this world-wide calamity,” stated Raymond C. Offenheiser, president of Oxfam America. “Oxfam looks forward to more concrete and meaningful legislation in the next session of Congress that will improve the livelihoods of over 25 million coffee farmers and their families now facing economic ruin.” Senate Resolution 368 was championed by Senator Patrick Leahy (D-VT) with backing from original co-sponsors Senators Christopher Dodd (D-CT) and Arlen Specter (R-PA).

New Hawaii Coffee Labeling Law Passed
United States - Hawaii Governor Benjamin J. Cayetano has signed into law a bill that will require specific disclosure of the percentage of Hawaii coffee used in coffee blends. It is House Bill 2169, and it amends existing statutes regulating coffee labeling for locally produced coffee. “This is a very important development for our industry,” said Hawaii Coffee Association (HCA) President Frank Kiger. “The labeling requirements in the revised law will allow consumers to clearly distinguish a 100% Hawaiian coffee and foreign coffee,” he explained. “Most of the coffee roasted and sold in Hawaii that carries Hawaii identifiers are blends. [The new laws] will distinguish a Premium Blend coffee - one that may contain 30% or 50% Hawaiian Coffee - from one containing only 10%.

The new measure is the result of two years of work spearheaded by the Hawaii Coffee Association. “The Hawaii coffee industry represents an extremely wide array of perspectives: five-acre family farms, large corporate farming operations, local and regional coffee roasters, and retail coffee vendors of all sizes,” said Steve Hicks, HCA vice president. “We met and worked with the Kona Coffee Council, Kona Farmers Alliance, Hawaii Farm Bureau, members of the Hawaii Coffee Association, and the Department of Agriculture in order to reach a common ground on the issue of labeling. The consensus reached focused on consumer awareness,” Hicks added.

The new law allows coffee producers with existing label supplies that do not comply with the new requirements one year in which to use them before re-printing labels. “The Hawaii Coffee Association will post the new requirements on their web site and work with any interested party that may be affected by this change over the next year,” Hicks said.

The Hawaii Coffee Association web site is located at www.hawaiicoffeeassoc.org.

Venezuela Hosts Barista Competition
Venezuela - The First Venezuela Barista Competition is set to be held in Caracas in February of 2003.

Venezuela’s Café Flor de Patria is busily preparing for the first ever Venezuela Barista competition. The competition will determine what it takes to be the best Barista through tournaments one can enter, hone skill and win.

Tea Auction Strike Hits N. Bengal Economy
India - A strike by the warehouse workers of the Siliguri Tea Auction Centre is threatening the entire economy of North Bengal, reports the Times of India.

Several auctions have been cancelled, as huge amounts of tea pile up in the warehouses.

While loading stock on trucks, warehouse porters charge “khamali” and “rassikasa,” which are known as “mandatory tips,” at the rate of 90 paise per bag of tea and Rs 1.65 per truck respectively in addition to their regular charges. The porters are demanding that these be hiked to Rs 1.20 per bag and Rs 2 per truck. Besides causing huge revenue losses for the state government, the ceasework is a major cause for concern for different sections of the industry, including producers and multinational buyers of tea like Hindus than Lever and Duncans. The state government earns 3% from each auction.

The average turnover in an auction is around Rs 12 crore, the annual turnover being about Rs 500 crore. “This is bound to adversely affect our labor payment. At least 5,00,000 families dependent on tea production in north Bengal, are going to face financial problems if the trouble is not resolved soon,” said tea producer S. Seal.

“The buyers could not lift 1.9 million kg of tea worth Rs 11 crore sold in the previous week’s auction, which is lying in the warehouses. Besides this, we had to postpone last week’s auction too after detailed discussion with buyers and sellers,” Siliguri Tea Auction Committee secretary Col. (Retd.) T. B. Subba said. According to him, the state government has already lost around Rs 75 lakh in revenue which “is going to be multiplied every week if the trouble continues.”

Under the system, producers deposit their stocks in the 32 warehouses recognised by the STAC, which organises the auction. After this, the buyers lift the stock from the warehouses. The buyers are supposed to pay the price to STAC by 13th day from the date of lifting stock.

Starbucks vs. Tully’s in Japan
Japan - Starbucks Coffee Japan Ltd. and Tully’s Coffee Japan Co. are in stiff competition in Japan’s coffeeshop market reported the Nikkei Weekly recently.

In the fiscal year through March 2003, the two firms each plan to open 100 or more coffee shops nationwide. At the end of March, Starbucks had had 345 shops, nearly seven times the number of Tully’s coffee shops.

With the cost of setting up one store totaling about ¥70 million, Starbucks will use ¥8 billion for store openings, out of proceeds of ¥13 billion from selling new shares in October 2001 when the company went public. Although Tully’s procures coffee beans from Seattle-based Tully’s Coffee Corp. under a licensing agreement, it is an independent company, meaning that it does not have the financial strength of Starbucks. When Tully’s went public in July 2001, it raised ¥500 million through the initial public offering. Cash and deposits at the company at the end of last December stood at about ¥1.9 billion, about a quarter of the amount of Starbucks.

Starbucks, which posted a 4% fall in same-store sales in fiscal 2001, is trying to bolster the number of visitors by upgrading the menu, including adding six tea drinks. The company is moving to reshuffle the existing line of about 70 items to broaden its customer base, which now consists mainly of 18-40 year-olds. Tully’s, which marked a 7% increase in same-store sales in fiscal 2001, appears reluctant to extend the menu to include non-coffee items, states the paper.

A common challenge for both firms is to curb material costs and administrative expenses that have been pushed up by rapid expansion. In April, Starbucks introduced a computer system to calculate the appropriate number of employees at a shop based on year-on-year data, such as the number of visitors and sales according to operating hours. Such information is accessible via intranet at each shop. It also brought down the growth rate of number of full-time workers to below the growth rate for sales. That lowered sales and administrative expenses to less than 67% of sales last fiscal year, up 1 percentage point from the earlier year.

Starting in the current fiscal year, Tully’s is roasting coffee beans in Japan to take advantage of the lower import tariffs for raw beans than those for roasted beans, reckoning that this approach will reduce purchase costs by about 10%.

Tea & Coffee - January/February, 2003


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