Starbucks plans to consider opening a coffee store in Jamaica.
When Jamaicamocha spoke to Jamaica Blue Mountain farmers on the implications most had a mixed bag of views.
Some say it will benefit the local industry provided the local authorities force Starbucks to follow the lead of Colombia.
Others say it will hurt the local cafe sector, still burgeoning and still educating the public on how to drink brewed coffee. Remember that this luxury coffee producing nation generally drinks tea and imported instant coffees.
Those who want Starbucks to buy local also acknowledge another problem: How can Starbucks sell coffee at a similar price-point as in major markets while using expensive Jamaican coffee?
A solution involves using cheaper Jamaica low mountain beans but also allowing the giant to import commodity beans for blending as Jamaica Blue Mountian blends.
Even this solution would likely result in farmer protests and calls by other cafe players of favoritism.
Let’s see what brews.
Starbucks opened its first store in Colombia in 2014 and now has 11 stores. Medellin its latest, opened last September. But the chain wants to open 50 in that coffee producing country.
Starbucks now has over 1,000 stores in Latin America since entering Mexico in 2002. The new store, located in Medellín’s Milla de Oro on Poblado Avenue, is designed to honor Colombia’s rich coffee heritage while celebrating the city’s eclectic vibe.
“Since opening its first store in Colombia, Starbucks stores in the country have served 100 percent locally sourced and roasted coffee for in-store beverages to honor the country’s coffee heritage and the company’s 45-year history of sourcing premium arabica coffee from the region,” confirmed Starbucks on its press pages. “Customers can explore different varieties of Colombian coffees including Starbucks single-origin Colombia Nariño, Colombia Espresso, Colombia Espresso Decaf and the medium-roast Colombia coffee.”
The price of Jamaica Blue Mountain (JBM) coffee jumped so much in 2015 that it now rivals the price of Kopi coffee and outpriced itself from Hawaiian Kona, but what goes up comes down.
Coffee bars around the world historically offer Kona and JBM at roughly the same prices . The 2015 local coffee shortage and rise in Japanese demand changed that with JBM retailing at about $60 per pound from about US$35 a pound a few years earlier for quality beans.
It resulted in the wealthy huffing and puffing but still buying the luxury super-uber-yummy coffee from Jamaica. The regular rich however choose to drink tea instead ( Starbucks buys Teavanna ).
Jamaicamocha spoke to key dealers who predict the fall in price of JBM by 2017 due to reduced demand in Japan and ramp up in supply. “A large Japanese dealer stopped carrying JBM and other roasters in Japan are bailing and crying about the price,” said dealer A.
With the rise in prices for JBM every farmer’s son and grandson returned to till the soil. The rise in farmers on resuscitated lands will result in a jump in production and the magic number is 350,000 boxes for the crop year.
Hitting that target would put supply at a decade year high.
Another dealer said that JBM’s market is like a pyramid the higher the price the smaller the market. Simple economics dictates that price remains when demand and supply are in equilibrium: Yet demand is falling and the supply is rising.
Jamaicamocha believes on advise of dealers that the prices will fall back to about $45 a pound by 2017. Until then small poor farmers benefit. Dealers benefit and the discerning consumer gets his uber fix without counterfeits.
The price of Jamaica Blue Mountain (JBM) coffee jumped 40 per cent in real terms in a year based which worries Marley Coffee.
Coffee remains scarce based on a confluence of factors now led by summer drought which killed beans.
“We are committed to ensuring our supply chain and providing our customers JBM. We are diligently working to secure more JBM as the market we created for it continues to expand. There still is a high demand for JBM in North America, but limited supply and rising costs may hurt sales,” stated Marley Coffee to its investors this month in filings to the US Securities and Exchange Commission.
The sale of JBM beans largely gives the brand prestige, as the majority of Marley Coffee sales are from cheaper coffee growing regions outside of Jamaica.The company bought US$290,000 worth of JBM over nine-months ending October or two-thirds less than a year ago, financials state.
“We are currently working to address the supply issues and while we believe we will be in a far better position in Fiscal 2015 with respect to JBM availability,” noted the company.
Over nine-months the company recorded a US$7.8 million net loss from US$6.7 million in coffee sales or three times higher losses than a year earlier. Part of the losses are the result of payments to executives at Marley Coffee which surpassed US$1 million over three-months.
Marley Coffee based in Denver, USA, recently gained distribution in over 5,000 stores in North America, with plans to enter 10,000 stores.
Ten new cafes opened in Kingston over the last 12 months.
Its a record number of cafes in the struggling Jamaican economy. Moreover the city didn’t even drink quality coffee until recently. The farms instead chose to export the best grades to Japan and most Jamaicans drink cheap instant shit.
Reduced export earnings forced farms to find new markets and that new market is domestic. It has resulted in the Starbucks culture finally brewing its way into the island even without a phsyical store presence.
Kingston now probably has about 15-20 proper cafes. Many are within hotels but also on every decent mall. The owner of one of the pioneering cafes said: “Where are most of these cafes now. I expect them to continue disappearing in a year”.
Marley Coffee offers one of the coolest brands from the Jamaica Blue Mountains. This coffee rocks with reggae chocolateness and R&B low acidity. Its led by Rohan Marley, the son of reggae legend Bob Marley, with operations in the US and Jamaica.
Its listed on the OTC Market in the US as Jammin Java and considered a penny stock with thin capitalisation. The team at Marley Coffee however want to change that but are faced with financial hurdles.
For instance, April quarterly sales more than doubled year on year which has puts it on track to surpass the US$10 million annualised target for this financial year.
Despite the rapid sales jump, its net loss quadrupled to US$1.9 million during the three months to April. The company blamed the losses on its widening US distribution.
“The principal reason for the increase in net loss was the US$1.9 million increase in total operating expenses from the growth of the company and its staffing needs offset by the US$473,950 increase in total other income,” said company filings to the Securities and Exchange Commission (SEC).
Losses mean very little to coffee lovers who just want the perfect brew. Marley Coffee offers that, but even that has challenges based on the limited supplies of Jamaica Blue Mountain coffee.
The shortage is based on factors outside the company’s control led by the coffee rust disease. During the April quarter the company purchased just US$65,000 worth of Jamaica Blue Mountain coffee. which accounted for a small fraction off its US$2.1 million in quarterly sales. Comparatively, the company bought one-third more Jamaican coffee a year earlier.
In fiscal 2014, Marley Coffee established a national grocery distribution network, increased its brand awareness and strengthened its international presence, including its entry into two of the largest chains in the US, Safeway and Kroger.
The coffee nation of Jamaica will hike imports amidst slashing its local production by nearly half to 20-year lows.
Consequently, Government aims to formulate a coffee importation policy.
“Its a troubling situation,” said John Minott, president of the Jamaica Coffee Growers Association, (JCGA) at the Coffee Industry Stakeholders Retreat on the weekend at the Jamaica Conference Centre in Kingston.
Rust disease, hurricanes and the abandonment of farms has reduced available trees and therefore production since the onset of the Western financial crisis in 2008.
“It’s not something that the JCGA is trying to promote but the stark reality is that today…we have to import coffee for certain segments of the market.”
Minott argued for an importation window during which replanting should occur.
Coffee imports hit some US$1.78 million in 2012 up some 23 per cent since 2008, according to data from the International Trade Centre (ITC) a joint agency of the World Trade Organisation and the United Nations.
Contrastingly, exports dipped by double-digit levels to some US$17.3 million in 2012, according to the latest Bank of Jamaica data. But the crop traditionally earned about US$25 million annually up to the onset of the financial crisis.