China’s coffee industry is in a key stage of development after trying to crack the global industry chain for the past two decades
March 11, 2013 Leave a comment
Yunnan coffee industry in key stage of development
Staff Reporter
2013-03-11
China’s coffee industry is in a key stage of development after trying to crack the global industry chain for the past two decades, reports the Guangzhou-based 21st Century Business Herald. One of the landmark developments in China’s coffee industry took place in the southwestern province of Yunnan, which produces 98% of all coffee beans in the country, when coffee chain Starbucks opened its third international Farmer Support Center in the area, the magazine said. Starbucks has also set up a joint venture with a local company to establish bean processing facilities in Yunnan. However, local industry leader Dehong Hogood Coffee Co has been undergoing turmoil as a result of a dispute between the company’s founder and private equity investors. Though it was resolved at the end of 2012, the dispute caused serious damage to the company’s operations. Dehong Hogood’s rapid expansion by boosting the scale of the coffee farms it owns, and efforts to develop its own brand by building the country’s largest instant coffee production line, resulted in a tight funding situation that forced it to bring in outside investors.
Local growers shifting from tea to coffee after the Pu-erh tea price bubble burst in 2008, had also expanded the scale of coffee farms from around 64,000 acres to 165,000 acres, the magazine said. The expansion dragged down local coffee prices last year, which more than halved from peak prices. According to the magazine, because of the focus on instant coffee products, Yunnan has not grown high-quality coffee varieties on a large scale, even though the plateau environment in the subtropical region is ideal for such planting. In addition, tea is still the dominant drink in China, despite the country’s growing consumption of coffee, which has resulted in a large number of local coffee outlets being sold mainly to overseas buyers.Swiss food giant Nestle, the largest buyer of Yunnan coffee, has also been offering plants, training and incentives to Chinese coffee growers. But since Nestle purchases the beans at prices fixed according to those quoted at the futures market in New York, local coffee growers have also adopted speculative practices and track the futures market and foreign exchange rates closely. Apart from quality issues, the local coffee industry should also improve its growing and processing technology, as well as the business model of sourcing beans from growers, the magazine said.
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