Home The Washington Diplomat May 2008 Ethiopian Coffee Wakes Up To Global Battle for Profits

Ethiopian Coffee Wakes Up To Global Battle for Profits


For most ambassadors in Washington, coffee is no more than a nice hot beverage enjoyed on the job or at diplomatic functions. But for Samuel Assefa and the country he represents, it’s a matter of economic survival.

Assefa, Ethiopia’s envoy to the United States, has spent a good part of his two-year tenure in Washington working with the Ethiopian Coffee Trademarking and Licensing Initiative — a worldwide, grassroots effort aimed at forcing huge multinationals like Starbucks to share their profits with struggling coffee farmers living on less than class=”import-text”>2008May.Ethiopian Coffee.txt a day.

“Usually, African ambassadors in the U.S. tend to be preoccupied with political matters,” Assefa told The Washington Diplomat. “But Washington is also the capital of the largest economy in the world. And as ambassador of a poor country, you have pangs of conscience if you don’t deliver on the economic front.”

With 85 million inhabitants, Ethiopia is now Africa’s second-most populous nation after Nigeria, having recently overtaken Egypt. Yet it’s also steeped in poverty. A devastating war with neighboring Eritrea combined with a drop in world coffee prices in 2002 ravaged Ethiopia’s once-proud coffee industry, forcing millions of farmers into other cash crops, including the narcotic qat leaf.

“Harar coffee was once very famous,” said Assefa, calling this distinctive Ethiopian varietal the “mother of all coffees” coveted by exporters, buyers and distributors the world over. “In the Middle East, they bought only Harar. But after 2002, everything was uprooted. This incredible coffee with its powerful berry flavor is virtually gone.”

In the last five years, world commodity prices have recovered and exports are climbing back up. In the 2006-07 season, Ethiopia — widely acknowledged as the birthplace of coffee — exported 187,000 tons of coffee beans worth 0 million, up 2 percent from the previous season. Coffee now accounts for around 35 percent of Ethiopia’s class=”import-text”>2008May.Ethiopian Coffee.txt.4 billion in total annual exports.

Yet those numbers mean little to the average Ethiopian coffee farmer. Despite projected gross domestic product growth of 8 percent in 2008, Ethiopia’s annual per-capita income is a miserable 9 — the eighth-lowest on Earth, and not even enough to buy 60 lattes a year at Starbucks.

“About 15 million people depend one way or another on coffee,” said Assefa, an academic from Addis Ababa whose father and grandfather were also ambassadors. “Many of them are the poorest of the poor, who actually carry sacks of coffee on their backs. Some are more fortunate; they have a mule.”

That’s why the trademarking and licensing initiative is so important to Ethiopia. Its goal is to achieve more equitable leverage for Ethiopian coffee producers, provide brand security to importers and retailers, and boost consumer awareness and demand.

In March 2005, Ethiopia filed with the U.S. Patent and Trademark Office (USPTO) to trademark Yirgacheffe, Harar and Sidamo — the names of Ethiopia’s three finest coffee-growing regions. Without legal protection, Addis Ababa argued, Ethiopia had no way to capitalize on a system that allowed Starbucks to charge a pound for gourmet coffee produced by farmers earning only class=”import-text”>2008May.Ethiopian Coffee.txt.45 from that same pound of coffee.

“Retail prices were going up for our specialty coffee, but export prices remained the same. There was nothing we could do about this,” Assefa said. “Before, we just threw up our hands. But then we decided to establish an intellectual property [IP] office. Usually the developing world is thought not to be favorably inclined toward IP. One has this superficial image of IP being in the interests of the well-to-do, and the fight against it to be in the interests of the developing world.

“We decided that IP can work for us as well, by branding our coffees. But in order to do that, we’d have to exercise some ownership in order to be able to control distribution,” the ambassador explained.

At first, Starbucks, the world’s largest coffee retailer — with more than 15,000 stores in the United States and abroad — refused to go along with the idea, arguing that Ethiopia would be better served by seeking geographical certification for its coffees rather than trademark protection. The Seattle-based coffee giant even tried to get the USPTO to reject Ethiopia’s application and launched a media counter-offensive to defend its actions.

But for all its lobbying, Starbucks — with 2007 revenues of .4 billion — didn’t earn much sympathy around the globe.

Fortune magazine called the standoff between the world’s largest, most profitable coffee retailer and one of the world’s poorest countries “a potential public relations disaster,” while the British nonprofit group Oxfam attacked Starbucks as being selfish in its attempts to deny Ethiopian farmers millions of dollars in potential income.

“We resisted the pressure to go the geographical certification route,” said Assefa, arguing that this would have disqualified Ethiopia from trademarking its coffee regions. “It became an embarrassment [for Starbucks], though there were many aspects of this controversy, and Starbucks was not alone in refusing to recognize our trademarks and intellectual property rights.”

Assefa added: “This was becoming a real issue, and the fair-trade movement focused on powerful stories. It made for wonderful sound bites, and then Oxfam came onboard. They were very critical. In Ethiopia, this mobilized everybody’s attention, but it came to a happy ending in a relatively short time.”

Following a meeting in Addis Ababa between then Starbucks Chief Executive Officer Jim Donald and Ethiopian Prime Minister Meles Zenawi, the coffee company announced it had reached an agreement with Ethiopia, though the details are still somewhat sketchy. (Donald was replaced in early 2008 by Starbucks founder Howard Schultz after a wave of sluggish sales and plummeting stocks for the company.)

It appears that Ethiopia’s Intellectual Property Office has dropped its initial demand for royalty fees. The licensing agreement as it was finally signed by Starbucks acknowledges Ethiopia’s ownership of the names Yirgacheffe, Harar and Sidamo, and sets the basis for joint marketing promotions and overall brand enhancement of these coffee brands. It also allows for convenient sublicensing of subsidiary distributors.

“The goal of the initiative is not to try to charge licensees to use the Ethiopian fine coffee names; rather, the intent is to create a basis on which to work together to enhance their value,” according to a press release from the Ethiopian Intellectual Property Office. “The aim is a stronger, mutually beneficial relationship between Ethiopia’s coffee farmers, exporters and promoters and those who distribute Ethiopia’s fine coffees in international markets.”

To date, Ethiopia has secured trademarks in 28 countries and signed licensing agreements with more than 70 companies. Ethiopia’s efforts have also earned the backing of the Specialty Coffee Association of America, which will honor the country at its 20th annual conference in Minneapolis this May.

“One of the things we had to overcome was the feeling that this was a battle against globalization and multinationals,” Assefa explained. “We didn’t want to be bashing the system — we wanted to be part of it. Oxfam also played a very responsible role. They called it a win for Ethiopia, and a win for Starbucks.”

The embassy had no hired guns lobbying on its behalf, Assefa said, noting that an attorney working with Arnold & Porter represented the government on a pro bono basis. But the ambassador declined to say how much his government is spending on coffee promotion.

“I don’t think we’ve been in the business of promoting Ethiopian coffee,” he conceded. “Usually, individual exporters might be doing some promotion here and there, but there hasn’t been any real promotion. It hasn’t been uppermost in people’s minds.”

He did say Starbucks has agreed to establish a “farmer support center” in Ethiopia — the first of its kind in Africa — and that in the past two years, Starbucks has increased its purchases of Ethiopian coffee by 400 percent, with the Ethiopian brands now accounting for just under 10 percent of the company’s total coffee purchases.

Ron Layton, a Washington attorney who works with the nonprofit organization Light Years IP, estimates that the trademarking agreement will generate an extra million a year in gourmet coffee revenues for Ethiopia. Assefa agreed.

“Starbucks began this trend, but now they’re being given a run for their money,” he said. “Discovering new sources of fine coffee is really a big job, so Starbucks itself had a deep interest in ensuring the survival of Ethiopian coffee. Ethics aside, interests dictate that they concern themselves with increasing the income of our farmers.”

At the very least, the agreement offers a glimmer of hope for the poor but proud African country that gave the world coffee in the first place.

“All arabica coffees we know in the world are derivatives of this one strand that came from Ethiopia. We possess a very rich diversity of varieties, and the survival of Ethiopian coffee depends on our genetic pool,” said Assefa. “Before, there was no incentive. But now, the possibilities are enormous. We’re just beginning.”


Ugandan Coffee Farmers Cash in on Religious Differences

Question: How many Jewish coffee farmers does it take to produce a pound of Ugandan coffee beans?

Answer: That depends on how many Christian and Muslim farmers are working alongside the Jews.

In a country surrounded by some of the world’s bloodiest examples of tribal violence, “JJ” Keki and his friends are setting an example for the rest of Africa.

The Peace Kawomera Cooperative in Uganda sprang to life one spring day in 2004, when Keki — an idealistic Ugandan Jew who sold coffee beans to middlemen for a pittance — asked his Muslim and Christian neighbors to turn their own religious diversity into a marketing tool that might score points with conscientious coffee drinkers overseas.

“We realized that wars are caused by differences,” said Keki, 48. “You may be different in religion, you may be different in political views, you may be different in color or ethnicity, and some people use those differences to cause chaos. We thought, ‘Why don’t we use our differences to bring peace into this world and maybe cause some economic development?’ That’s when we came up with this idea.”

The Ugandan farmers — who spoke to The Washington Diplomat in Silver Spring, Md., during a recent U.S. fundraising tour — established a coffee cooperative called Mirembe Kawomera (Delicious Peace in the local Luganda language) that eventually began selling high-quality arabica gourmet coffee at substantially higher prices. They raised enough money to send their children to school, afford health care, and reinvest in their own futures.

“We have a feeling of togetherness,” said Namudosi Sinina, 21, who officially represents the cooperative’s Muslim members. “We have decided to respect ourselves as well as respect others.”

“When they began in 2004, they started with 250 farmers producing one container, equivalent to 37,500 pounds,” said Ben Corey-Moran, project director for Thanksgiving Coffee and director for its coffee buying and producer relationships. Today, he said, the Ugandan cooperative produces three containers a year, or 112,000 pounds — a number projected to reach 225,000 pounds by 2010.

Buyers are primarily well-to-do members of churches, synagogues and mosques in the United States who are willing to pay extra for fair-trade gourmet coffee beans. During their March U.S. tour, the Ugandans visited four local Jewish houses of worship.

“Our interfaith outreach has to do with the fact that as a coffee company, we need to build a market for our products,” explained Corey-Moran. “Surrounded by violence and turmoil, this community in Uganda is building an alternative for peace — and the glue that holds it together is the economic foundation that fair trade provides.”

Corey-Moran told The Diplomat that thanks to his company’s exclusivity contract, these farmers receive 3,000 shillings ( class=”import-text”>2008May.Ethiopian Coffee.txt.78) per kilogram, up from 800 shillings (48 cents) per kilogram before the cooperative was established. “In addition, we have a profit-sharing arrangement that sends back class=”import-text”>2008May.Ethiopian Coffee.txt per pound of coffee as a rebate,” he said. “We buy everything they can produce. We’ve even trademarked the brand here in the States.”

Thanksgiving, with annual sales of .5 million, is known for taking on controversial causes. A few years ago, the company infuriated Cuban exiles in South Florida with its “End the Embargo” coffee labels featuring Pope John Paul II embracing Fidel Castro. The company, which strongly opposed the U.S. military presence in Central America during the 1980s, also sources coffee from Nicaragua and Guatemala, as well as Rwanda and Ethiopia.

“We feel that the story of this coffee belongs directly in the hands of people who will be moved by it,” Corey-Moran explained. “So our effort has been to build an alternative to the mainstream market that cuts out the middleman and goes directly to the consumers. Our market is Jewish, Christian and Muslim coffee drinkers.”

Yet no matter how altruistic their intentions, even wealthy consumers won’t spend extra dollars for gourmet coffee if it doesn’t meet their standards. That’s why the focus is always on quality beans. For their joint efforts, Thanksgiving and Peace Kawomera earlier this year received the Dr. Jean Mayer Award for Global Citizenship from Tufts University’s Institute for Global Leadership (South Africa’s Desmond Tutu was the 2003 winner).

“Make no mistake, we are here to sell coffee,” said Thanksgiving’s founder, Paul Katzeff. “I’m out to prove that capitalism is the best model for protecting the environment and delivering economic and social justice. You can’t sponsor and promote causes effectively if you don’t make money.”

About the Author

Larry Luxner is news editor of The Washington Diplomat.