A reality check for the local coffee industry

Coffee consumption in the Philippines may seem to be at an impressive growth with the sprouting of coffee shops all over the metropolis. However, the hard facts are beyond what the eyes can see.

While coffee drinking has become a fad particularly to the youth market, the total coffee category in the country is struggling to keep on a stable track.

A study by research group AC Nielsen showed an alarming decline of 13 percent for the months January to April this year compared to the same period in 2003 for the total coffee category. The figure validates a downtrend in annual coffee consumption of Filipinos over the years.

The AC Nielsen data also reported that in 2005, the total sales of coffee was at a dismal volume of just over 10,000 metric tons. With another study conducted in the first quarter of the year showing that the demand for soluble coffee is declining, the coffee industry could not expect the scenario to improve.

Perhaps the only consolation for the total coffee category is the increase in sales observed in the coffee mixes and out-of-home segments due to changing consumer behavior towards coffee. Coffee mixes are popular among call center agents who work on a graveyard shift while out-of-home coffee served in coffee shops and internet cafes are in-demand to young professionals and students.

However, looking at the bigger picture, the positive news on coffee mixes and out-of-home segments is not substantial enough to bring the whole industry to its much awaited growth.

One critical issue affecting the coffee industry in the country is the volume of green coffee produced annually. For the past few years, green coffee harvest of local farmers fell short of the industry’s demand–particularly the robusta variety.

With farmers eyeing short-term results of their crops, coffee harvest becomes highly dependent on its market value. The standard world trade price for green coffee is fairly unstable–straddling between P40 per kilogram to P80 per kilogram in a matter of one year for instance. Consequently, when the world trade price for green coffee is low, the local crop production of coffee goes down with it, and when prices are high, farmers are encouraged to plant more coffee.

Hence, in the past five years, the crop production of robusta coffee in the Philippines exhibited an erratic movement –sometimes increasing and sometimes decreasing by as much as 20 percent. This scenario leaves coffee makers no choice but to import their remaining green coffee requirements from other coffee-producing nations like Vietnam.

This is a sad reality for a nation that was once known as the third biggest producer of coffee in the world, next only to Brazil and Columbia.