Gizat Worku, Ethiopian Coffee Exporters Association General Manager
BY GIRMACHEW GASHAW
Today’s guest Gizat Worku is the General Manager of Ethiopia Coffee Exporters Association. He was born and raised in Gojjam, a special place called Gimjabet Mariam.
Gizat graduated with first degree in economics at Addis Ababa University in 1987/8. In pursuit of his dream subject he studied master’s degree in Development Economics.
After graduation he was hired in the National Bank of Ethiopia as Market Analyst and served there for nine years. Gizat has served his country in different governmental and nongovernmental organizations such as Ethiopian Postal Service Enterprise, Ambassador Garment, Yaheno PLC, Friendship Agro Industry and Mosobo cement.
In today’s Ethiopia the coffee export is gaining momentum and Ethiopian Coffee Exporters Association is one among many players that contribute to the success it has reached. The Ethiopian Herald made a short stay with Gizat Worku, to know more about coffee and the process it passes from farmer to consumer, challenges and how the recent success is registered. Have a nice read.
Would you please tell us the stride of the Association to augment Ethiopia’s coffee supply in the international market?
Established in 1969, Ethiopia Coffee Exporters Association has been working indifferent regimes and promotes Ethiopian coffee in the international market. Apart from building the nation’s image, it advocates in order to bridge gaps reproaching the government and its members. The association discharges multifaceted tasks that ensure coffee sector development jointly with other development partners interested in the area.
What is more, the association provides cupping service for its members that have not had their own laboratory. By its nature, coffee is not sold tagging label one or two like any commodity, it has to be ranked first checking its taste. It also offers various training including cupping, marketing and so on to make members capable while joining the international market.
The association is a combination of not only exporters but farmers, coffee roasters and others who are directly or indirectly involved in the sector. We deliberate with the government to improve bottlenecks and acknowledge the wonderful jobs it has done for promoting the sector. Without limiting itself in arranging local and international platforms to members in order to promote Ethiopian coffee, the association is striving to build healthy relations among exporters.
Cup of excellence was carried out in Ethiopia. Would you please tell us about that?
Cup of excellence is the premier specialty coffee competition that discovers amazing coffees and rewards the farmers. Alliance for coffee excellence, a USA based company, made the competition. It is a mechanism for the coffee in the hands of farmers sold online. The competition is now carried out in Ethiopia for the third time. In the first two competitions, Ethiopian coffee was sold, breaking a record high. First, it was sold for 185 USD per pound or 407 dollar per kg. In the second competition, which was held last year, the coffee ranked first sold 155 USD per pound. This year, the competition is going on and the winner is not yet known. Every year, some 40 farmers receive an award.
Could you tell us about the country that imports the largest portion of Ethiopian coffee? If you do not mind tell me the secret behind that?
Germany is ranked first in buying huge amounts of Ethiopia’s coffee. The country bought in some 20 percent of annual coffee consumption from Ethiopia. If you take last year’s performance, it declined due to COVID related barriers and it bought 16 percent of coffee intake from Ethiopia. However, the country is not considered as the highest payer as the least qualified coffee.
By the way, coffee is monopolized by five to six world trading houses and they buy and supply coffee products for customers. They are the ones who buy and provide coffee for the market. If you take Germany, it resold half of the coffee that it brought from others. The country sold both the green coffee and/or adding some value to it. Germany bought Ethiopian coffee to gain advantage. The companies who work differently with green bean suppliers need uninterrupted coffee supply and financial support. Our exporter may not offer such a wonderful opportunity for buyers. However, the lonely option they have is supplying green as per the time the roasters needed.
Germany bought the 5th ranked Ethiopian coffee in terms of quality with the lowest price. In contrast, America is a country that pays extensive dollars to buy Ethiopian coffee. Good buyers are buying grade one and two of coffee products. England, Italy, Japan, Spain, South Korea, China are countries that buy Ethiopian quality coffee products next to America.
Reports indicated that the coffee export is gaining momentum, what is the reason behind that? Could you put the reality in the ground supported by figures?
The very reason behind the increased coffee export is, the recurrent drought and frost occurred in three consecutive days in São Paulo and Minas Geraes as Arabica coffee producing areas are seriously affected. This contributed to declining coffee exports by 14 million bags.
In May 2019, the coffee sold at a minimum price of 0.87 USD per pound while in February 2022, the price increased three fold and escalated to 2.60 USD per pound according to New York composite price. The reason for the price increase is the decline of coffee product supply in the international market.
Ethiopia has exported 148,000 tons of coffee within six months. Some 162,000 tons of coffee is also exported within eight months. Hither to, the country has not scored such a wonderful performance in the sector.
Surely, Ethiopia will earn over one billion USD in the next six months. Had it not been for the lack of peace and stability, the nation would have earned 1.67 billion USD exporting coffee. In this hard time, registering such a wonderful performance is marvelous.
What type of Ethiopian coffee is preferable by the international customers? Why?
Yirga Cheffe is the most sought-after coffee in the international market followed by Guji, Sidama and the newcomer Nensebo. What makes the coffee preferable is its aroma. The aroma comes as per the level exporters promoted it for customers.
Though there are some efforts to have a brand and trial to promote it in the international market, a lot remains to be done in branding Ethiopian coffee. We created new logo working together with JICA. Apart from registering the brand in every country, more is expected from exporters in terms of keeping the standard.
The coffee exported should not defame the country’s reputation in terms of quality. The coffee produced in Harar is also preferable by the Arab countries due to its Mocha flavor.
The quality of coffee is highly dependent on the altitude of the land. The higher the altitude of the land, the better would be the coffee quality. Secondly, the type of soil is also another decisive factor. Rainfall volume is one factor that contributes to aroma and setting coffee price.
You were talking about forest coffee. What makes it different from the ordinary coffee? Does it grab the attention of foreign customers?
Ethiopia is the only country in the world where forest coffee is found. You cannot find forest coffee easily. Forest coffee does not require intensive care, but the quality is naturally higher than others. It covers almost 10 percent of Ethiopian coffee export. Forest coffee is an important item to export differently but we are not tapping the potential. Forest coffee is true evidence to ensure that Ethiopia is a birthplace of coffee. Thus, Forest coffee is decisive to promote Ethiopian coffee in the international market.
Some investors are now joining the coffee export business without having adequate knowledge about it? Do you think it is worth daring for anyone?
New coffee exporters are joining the sector. As we all know, investors’ target is making money. They engaged in coffee export tasks in order to gain dollars and it is natural. Shortage of foreign currency is the very factor that increases the number of exporters in Ethiopia.
An investor or business man is not able to import products due to foreign currency shortage. According to the National Bank of Ethiopia, an investor should export some products and use the dollar to import another item. Exporters are engaged in export of goods to gain foreign currency due to the fact that they are involved in unnecessary market competition.
Many exports are not profitable. Coffee sector has its own safe haven. If you take first and second level coffee, the exporters do not fall into bankruptcy due to the coffee products having static prices. Exporters who buy first and second stage coffee can buy; sell it at an expensive price. However, there are others who buy low quality coffee at an expensive price and sell it with cheap price so as to meet its import demand. Investors engaged in housing, vehicle importing, and the construction sector are always engaged in coffee. Export task. This trend has to be changed.
When comparing the selling price of Ethiopian coffee with others, taking New York-C (an exchange the price of coffee decides) as a reference, 20 or 30 years ago, our coffee was sold for –20,-40,-60 cents etc. Countries that sold coffee at an equivalent price with Ethiopia are now selling what they produce at a better price. This means the price of Ethiopia’s coffee on the international level is declining. We are not selling our coffee in the name of Ethiopia. This indicated our weakness. We need to work to register our coffee at New York C.
What sort of care should Ethiopia take to further stay in the world market? What are the challenges that coffee exporters have been facing?
The marketing system needs to be qualified. Now there are two channels; vertical integration and Ethiopian Commodity Exchange (ECX). The ECX system is weak and has its own limitations. The vertical integration that connects suppliers and exporters provides more chances to brokers. Thus, the market is inefficient.
In order to make the market efficient, the quantity demanded should be equal to the quantity supplied. No one tells you how much coffee is presented to the international market. How many buyers come? You couldn’t get the answer. There is no data center that helps you get such information. So, the system is weak. If you have the information, you will have the power to decide for whom and at what price your coffee will be sold.
Integration is the other problem that the coffee export has been facing so far. Exporting Coffee is not an easy task, it passes through various processes. In short, it has to be improved.
Some exporters raise concern that the recent ECX has not had an active role and brokers are driving the coffee market. Would you please reflect on that?
Yes. ECX has not been discharging its role. Even if it is not the only source of a problem, various actors have been contributing. It has its own limitations in terms of ensuring quality of coffee or vice versa. People who work in the ECX should address grievances of buyers and sellers.
ECX is a good system that brings markets in thousands to one pool. It also provides information about the quantity, quality and production place of coffee. It is a good platform but it needs to be improved. The market process is always efficient when the value chain is minimized.
None of Ethiopia’s coffee products lose demand in the international market. The problem is, our production capacity has not escalated as per the demand. So, we cover only 2 percent of international coffee demand. We are not good players and yet we are a preferable and good place in Arabica and other coffee. You cannot increase the quality and quantity of coffee by doing an overnight job. In this regard, the task that has been done by the Tea and Coffee Authority is promising in terms of increasing productivity and income.
What is more, we need to work on the quality. The country would be beneficial when it supplies first level coffee for the international market.
How do you evaluate the effort of exporters to add values on the coffee product that is exported?
Selling coffee adding some value is imperative but this is not as easy as vending green coffee. Let’s see this from two perspectives. One, we can take the green coffee itself as a value addition. If we are able to upgrade grade-five coffees to grade-one, it is equal to increasing the price of coffee in three or four folds. If we take the price set by Ethiopian Coffee and Tea Authority, grade-five selling price is 1.70 USD per pound but grade-one is about 4.00USD per pound. It is more than double. Thus, I believe we need to improve the quality of green coffee.
With regard to roasting coffee, it is possible to sell in niche markets. However, selling roasted coffee both in the USA and Europe is hard. Though we need to start to add value on coffee, selling value added coffee products should not be considered as an easiest way to compete with others who control the market.
Ethiopian coffee was not promoted well. What is expected from the diaspora in this regard?
The Ethiopian diaspora had a chance to be a good seller. They can gather together and distribute the green coffee to small roasters. If the diaspora in USA can organize at the state level, they can easily run the business. However, it may be tough for one person, but they need to come up with one brand and make the business. There are some who go through this process; however, it takes a long time to do so. They can be effective if they come up together and operate collectively.
Thank you very much
It’s my pleasure.
The Ethiopian Herald April 2/2022