Early this year, Ndaroini Coffee Factory was thrust into limelight after entering into a direct coffee sale contract with Dutch- based Trabocca coffee company. This led to increased coffee prices as a kilo was bought at Sh121 with farmers getting Sh100 and the rest going to finance the factory expenses.
Notably, the buyer offered the payments upfront in February barely a month after the closure of the picking season.
Although I have not encountered any studies on the comparison between direct coffee sales and that of auctioning at the Nairobi Coffee Auction, it is a no brainer that direct selling is profitable and I’ll attempt to prove it here.
Before February this year, Ndaroini Coffee Factory was part of Gikanda Farmers’ Cooperative Society which was composed of two other wet mills, Gichathaini and Kangocho coffee factories. The co-operative’s coffee was being sold by an appointed marketer through the Nairobi Coffee Exchange(NCE). The average prices per kilo under this arrangement was Sh 85 per kilo.
Gikanda Farmers’Co-operative is famed nationwide for being the production powerhouse of the Mt.Kenya premium coffee beans with a vibrant syrupy blackcurrant profile.
This type of coffee is normally assigned grade AA and fetches the highest prices in the coffee markets. It is from this basis that Ndaroini coffee farmers had been agitating for better pay for their crop arguing anything below Sh100 was a humiliation to their hard work.
The turning point came in mid-2018 last year during a management meeting attended by all members from the co-operative. Ndaroini had expressed their interest to determine the buyer who would take their coffee, an issue that didn’t auger well with the cooperative officials.
This led to the registration of Ndaro-ini Coffee Growers Public Limited Company, which by April of this year had a membership of approximately 1,200 coffee farmers. It is under this outfit that they negotiated for direct coffee sales with Trabocca based in Netherlands in partnership with the Kenyan Rockbern Coffee Company. The other two factories; Gichathaini and Kangocho upheld the status quo.
The question of whether Ndaroini had taken a better route would be answered by comparing the coffee prices that each factory would fetch after the coffee sale. So, when the co-operative released the coffee rates of the two factories affiliated to it at Sh76 for the premium coffee beans a few weeks ago, Ndaroini’s strategy had won by far. Previously, the pricing margins were very negligible when Ndaroini was still under Gikanda Co-operative.
The question then remains, are direct coffee sales more profitable than the auctioning process that is normally supervised by the NCE? From my observation, direct selling strategy eliminates one chain of supply namely the marketer who was normally affiliated to the dry coffee mills. Let me simplify the process that coffee follows to reach the market. A coffee farmer normally takes the red cherries to a factory normally called the wet mill or a pulping station where the outer cover of the coffee is removed and stored as a dried parchment.
From here, it is taken to a dry mill which the management of the pulping station have appointed and the coffee is sorted, dehusked, graded and bagged according to the different grades. It is then picked by a marketing agent through the authorisation of a farmers co-operative and sells the coffee either through a direct sale to interested buyers, or more commonly via the Nairobi Coffee Exchange.
The marketing agent is the communicator between the seller and the buyer within this chain. However, for this process to be competitive different players at each stage of supply are normally required. Unfortunately, some few foreign companies have registered subsidiaries that act as the dry mill, marketing agent, buyer/ exporter and importer all belonging to one multinational including supply of coffee agro- chemicals with the result being a monopoly that makes it difficult for coffee farmers to negotiate a better pay at the NCE.
Coffee production has been on a steady decline since 1987 from 127,000 tonnes to 45,000 tonnes in the recent years representing an approximately 40 percent decrease. Most farmers can attribute this to poor or delayed payments which expose them to high interest rate loans and hence they are forced to abandon coffee farming altogether.
Brian Gicheru Kinyua, Mathira Constituency.