Building a sustainable coffee business one bean at a time

African Coffee Roasters CEO Jacob Olsberg at the firm's Athi River EPZ offices on December 2, 2022. PHOTO | DIANA NGILA | NMG

Located in a special trade zone in Athi River is African Coffee Roasters (ACR), which prides itself as unique and different when it comes to dealing with the world’s second most traded commodity, coffee.

“I’m Jacob Elsborg, the chief executive of African Coffee Roasters, a premium roaster that deals with wholesale coffee processing and a white-label coffee roaster. I have been working all my life in the retail sector but exited to have a new challenge in Africa and a manufacturing business.”

The Denmark-born CEO says ACR was started because coffee generates $200 billion in revenue yearly globally but less than 10 per cent of that income goes back to the countries where coffee is grown.

He says given that ACR has a strong opinion on the coffee trading environment, people and fairness, if they were to do anything different, then it is keeping that value in coffee-growing regions.

“When you export green beans, you export the value out and create no jobs but by processing, roasting and packing here, we have created 52 full-time jobs and other indirect jobs, something we would not be able to do if we roast the coffee in Denmark,” explains Mr Elsborg.

“Also, the value of 1kg of roasted coffee is much higher than 1kg of green coffee meaning that between 55 per cent and 60 per cent value of coffee stays in Kenya, which is the main goal of us being here.”

The CEO says he started the company in 2016 with the support of Coop Denmark and tapped his retail market knowledge and expertise to crack the competitive market, especially Europe.

Usually, coffee roasters are located near their markets in Europe, North America and Asia. This means coffee is exported raw in a long, complicated supply chain that includes unnecessary actors who end up earning more than the farmers.

The company differentiates itself from other players by ensuring that the roasting is done close to where the coffee is grown.

They are changing the narrative by adding value locally.

For raw materials sourcing, ACR sources green coffee from Uganda, Rwanda, Ethiopia, Tanzania, DRC and locally in Kenya.

“We are based in Nairobi but we see ourselves as an East African company and the reason is that facilities and government here are easier to work with compared to other countries. The port of Mombasa is crucial to us because of the short reach time to our main market.”

Jacob adds, “For us, it is about supporting the farmers through fair and timely payment, it is a lot easier than to depend on traders and when targeting the retail market, Kenyan and Ethiopian coffee are considered high-end brands but one cannot run a retail shop with two high-end brands only so you need different varieties of coffee and different price points.”

“We only trade with small group farmers because that’s where they feel they will make a bigger impact. The challenge is that smallholder farmers cannot control their quality and if you cannot control quality, you are exposed to fraud and cheated along the value chain,” he clarifies

Apart from low coffee volumes, the other reason for buying coffee from other East African countries like the Democratic Republic of Congo and Rwanda is the limited supply of organic coffee in Kenya while its demand in Europe is increasing.

“The potential for organic coffee is super high in the European Union (EU) because most countries are increasing the number of organic products, whether it is milk or coffee, among others. Customers look at organic as an added value.”

However, he adds that trading in organic coffee or products can be difficult due to strict EU import rules.

“By being here, we can buy directly from the farmers in Kenya but in other countries due to legislation, we source from traders who share our DNA.

“Roasted and packed coffee goes straight to Denmark or Finland and directly to the shelves. We are in control of the supply chain, making it as short as possible and can follow the money back to the farmers.”

He is quick to add that they pay the farmers the right amount of money as long as they produce high-quality coffee.

Mr Elsborg says the company works with different partners helping farmers improve their yields and earn more money from their produce.

However, green bean sourcing is not contract-based due to the fluctuating nature of global coffee prices and the company wants farmers to get the best possible prices.

ARC is currently running a project with Danish International Development Agency to help farmers grow sustainable organic coffee in Nandi, Kericho and Bungoma counties.

The average age of coffee farmers in those counties, he says, is 43 because they see the benefits of growing coffee – getting their money on time and fair pricing.

The company has so far trained more than 30,000 farmers on sustainable farming practices and quality coffee production to boost yields.

Being in an Export Processing Zone means that ACR is allowed to sell only 20 per cent of its coffee locally and export the other 80 per cent.

The CEO says one of the challenges is that the coffee takes up to six weeks at the sea and one week inland on both ends or eight weeks to reach Europe when roasting is done in Africa for sale in markets such as Denmark, Finland or Holland, yet the buyers are keen of freshly roasted beans.

“Secondly, all the brewing equipment in Europe is not available in Africa so the capability of brewing correctly is not here. The market is very limited for us because people don’t have the machines and brewing knowledge. The younger generation needs to develop a coffee culture in Kenya.”

Mr Elsborg adds that the coffee market in Europe is massive but highly competitive.

“European market coffee market is huge but you need someone who knows and understands it,” he says.

The former retail executive adds if Kenya wants to be once again profitable in the coffee trade, it needs to look at the infrastructure because it is difficult for farmers to pick cherries, and take them to a wet or dry mill for pulping.

“If we can bring more efficiency to the coffee value chain, we can bring Kenyan coffee back to the market in terms of high quality and volumes and innovation is key,” says Mr Elsborg.

ARC presently processes 2,400 metric tonnes of green coffee annually.

He says customers still find it hard to believe that it is possible to roast and package coffee in Africa and still be competitive in the EU or US markets.

“We still meet people who don’t believe it can be done here. Our capacity is increasing and we are growing at a rate of 40 per cent per year and we keep investing in capacity.”

The biggest challenge for ACR now is convincing its customers that it is right to refine raw materials in Africa.

For the organic coffee, Mr Elsborg laments that the product must undergo rigorous audits compared to their European counterparts for approval to export to the markets.

“I compare the number of audits, certifications we go through as a requirement compared to when you are based in Europe, it is five times as much because they don’t trust us in Africa,” Jacobs explains.

Jacob cautions those eyeing the coffee market that it doesn’t matter what they think about quality or pricing but rather what the customers want.

“One of the biggest mistakes manufacturers do is to think inside out i.e. try to get the market to adjust to their products rather than the demand and what the customers want then figure out how to fulfil that demand. The market will never adapt to you as a manufacturer, it is you to adapt to the market.”

He advises them to have an understanding of what the coffee market demands in terms of quality, pricing, packaging etc. and ask what that means to their business in terms of sourcing green coffee and packaging materials.

Growth and Diversification

For sustainable business growth, Jacob says that he sees a lot of growth for ACR because more and more of their customers or retailers in Europe have started thinking of how they can support Africa and developing countries through trade instead of giving aid.

“For us, It is a matter of growth because we have built a factory, strong logistical network, finance network, and coffee skills so it is scaling and over the next 5 to 10 years, we will invest in a new roasting capacity and capacity. We’ve just invested in a digital machine that will improve our quality. It is to double our revenue in terms of volumes to make sure that the business is also financially stable,” he concludes.

The other ambition is to diversify to other ventures like tomato ketchup for export and take advantage of their logistical and financial network.

“The market for tomato ketchup market in Europe is massive and we have a lot of tomatoes in Kenya, we intend to take advantage of that” he concludes.

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