How can Ethiopia’s coffee farmers get more from your $3 latte?

kaldi + goatsAccording to legend Kaldi (left), a 9th Century Ethiopian goatherd, discovered coffee when he saw his flock start leaping around after nibbling the bright red berries of a certain bush. He gave them a try, and the ensuing buzz prompted him to bring the berries to an Islamic holy man in a nearby monastery. The holy man disapproved of their use and threw them into the fire, from which an enticing aroma then billowed. The roasted beans were quickly raked from the embers, ground up, and dissolved in hot water, yielding the world’s first cup of coffee. No, I don’t believe it either, but it’s a nice story.

In the 12 centuries since Kaldi got his first fix, coffee certainly hasn’t made many Ethiopians rich, so how can its farmers earn a decent

Teferi and Fikrte (my Oxfam minders) celebrate Kaldi's discovery
Teferi and Fikrte (my Oxfam minders) celebrate Kaldi's discovery

living from growing it, especially when world prices (as now) are good? To find out, I headed for Kaldi’s region, Jimma (see pic – they believe the Kaldi story, anyway), where Oxfam is trying to help thousands of small coffee farmers (typically 2-3 hectares a family) export directly into the international market for organic coffee, and so pocket a much bigger chunk of the final price.

But the international coffee trade requires container loads of uniformly high-quality coffee beans, with minimal impurities. That’s a leap for small farmers used to selling their coffee by the sack, with a fair number of broken and damaged beans. Here are some of the ways the farmers are facing up to the challenge:

1. Organization and scale: They set up the Limmu Innara Union of cooperatives in 2006, which now comprises 41 coops, with 30,000 households. Strengthening the management capacity and market linkages of the union will be crucial to getting the coffee to market.

2. Quality control: success will depend on improving the quality of the beans. That means making sure that every family member or day labourer picks the red beans, and not the green ones, and that every stage of transport and processing minimises impurities. One of the key ways to achieve this is actually through a fascinating ‘functional adult literacy’ programme and a focus on women’s rights – more on that tomorrow.

3. Access to working capital: the union needs to pay the farmers up front for their coffee, otherwise their desperate need for cash will force them to sell to private traders even though they pay less. It takes time to build up that capital, and access to credit is hard until they have assets they can put down as collateral, so Oxfam has part-funded the building of a new warehouse that can both clean up the coffee chain, and simultaneously act as collateral for bank loans.

coffee market chain4. Learning to navigate the value chain: the coffee value chain is complex (see diagram), and requires different skills as you move from selling to local traders at the farmgate to doing international deals. Oxfam is working with a team from Accenture to find organizations that can work with the union to set up those links.

What struck me most in conversations with farmers both at the grassroots and in the union’s management board, is their awareness of the need to change. As Marina, a dynamic board member, spelt out, in words echoed by several others, ‘Our parents had a simple, peaceful life, but technology is always advancing. Unless our kids get an education, many of them will be unemployed or on the street. That could threaten the stability of the country. If we learn to use technology, we can live better.’

If the project is successful, how big a difference would it make? According to Fikadu Dugassa, the union manager, selling direct to export would bump up profits by some 25% – an extra US$ 0.50 per kilo. Then there are union plans for diversification, insurance and other ways to reduce the vulnerability of its members.

Developments in the wider coffee market could also help. If Ethiopia manages to follow the example of Jamaica Blue Mountain, and trademark its coffee (following the successful campaign to stop Starbucks and others blocking its efforts) then the price it receives could jump significantly, and with it, farmers’ incomes.

When I asked a group of coffee farmers how much they thought I would pay for a coffee in London, they reckoned 1 birr, (6 US cents) would be about right. When they heard it was more like 50 times that much, they wondered where the money went. It would be extraordinary (and only fair) if a lot of more of it could go to the people who invented and now grow it.

Postscript: Some readers were pretty unconvinced by my earlier post on roses, which argued that Ethiopia getting just 3 cents DSC00455to the dollar on its roses was a rip off. That’s just how relative prices work, no big deal. OK, how about this. The women (and girls) sorting through the coffee beans in this pic will have to work for 8 years to earn what I get from Oxfam in one day. Sorry, but that just can’t be right.

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8 Responses to “How can Ethiopia’s coffee farmers get more from your $3 latte?”
  1. If you’re working with ADP on the issue, then I’m sure you have the right people and the right expertise. I spent 4 years at Accenture in retail and consumer goods, and it’s a great company doing some extraordinary work. ADP is a great of example of CSR done well.

    For me the key is much less about organisation and more about the value chain. Automating the activities at the low end of the chain, and getting farmers to move up is surely the key to increasing wages?

    Previous attempts at ‘organisation’ haven’t worked so well: The key is productivity.

  2. joe

    I’m interested that there is no mention of fairtrade in this piece. It seems that particularly in the coffee market, people are waking up to the fact that quality of production is more important (in terms of value) than the fairtrade branding.

    On a more fundamental level, one should surely question the logic, and perhaps ethics, of encouraging farmers to participate in such a volatile world market when the returns are so low – not to mention the environmental and social impacts of growing a cash crop. It seems to me that the era of believing the way to alleviate poverty was via a ‘consume them out of poverty’ model is now over.

    Unless you’re growing something totally unique, you’re unlikely to see the benefits from exporting a bulk product as there are powerful forces which have already sewn up the market and the farmers will inevitably lose out.

    Duncan: don’t agree Joe. There’s only one thing worse than trying to engage with the world market and that’s … not engaging with the world market at all – coffee returns may be volatile, but they are often much higher than returns on other crops, and those are volatile too. Cash crops and exports have underpinned a number of development success stories. What matters is farmers’ ability to reap the benefits and minimise the risks.

  3. Pete H

    Hi Duncan,

    I’m glad you are covering these basic trade issues as I certainly don’t understand them. Where the market has driven down prices of raw materials like coffee, that come from many different countries, the only solution that I understand is the Fair Trade model where we have to choose to pay more. I am not concerned that the coffee houses in the UK turn maybe 10 pence of roasted coffee bean (plus milk and the cup) into a £2 drink – that extra £1.90 is up to competition here to regulate and it pays rents and salaries here. But it does seem very wrong that the raw coffee costs so little.

    I tend to make my own instant coffee, so my price per cup is pretty low. I am very happy for the growers to get maybe 1 pence more per cup – but I have no idea of how this should be brought about except voluntarily through fair trade. Any ideas?

    I don’t agree that improving quality is the way to approach this as an overall solution (although it is a good thing of itself). If one set of producers improve their output beyond their competitors and capture the niche market won’t they just swap incomes, leaving the other producers poorer?

    Thanks for the blog,

  4. Ken Smith

    I’ve always been a bit nervous about the ideas of small farmers navigating the value chain especially if you need to bring in global consultants like Accenture to do it. Aren’t you taking away the skills, role and therefore livlihood of local traders and middlemen who do this already for a living ? and so Ethiopia ends up exporting what few relatively well-paid jobs exist in the coffee trade to us ?

    Duncan: don’t worry Ken, Accenture aren’t actually doing the brokering, they’re linking the union with Ethiopian social entrepreneurs who will help with the international links, helping with business plans etc

  5. P Baker

    The price comparison to a London coffee shop is a dubious one. Coffee is (to my memory) only about 2% of the full costs of running a coffee store.

    The reality is that when you sit down in a central London cafe you are renting a piece of very valuable real estate and being provided with heat, light, etc. It’s actually a very good deal to use a space for maybe an hour for just £2! The people who buy-to-go are subsidizing those who sit. Even if there was only water in the cups, you would have to pay almost the same (I think they make a higher margin on cakes etc.)

    I think when Oxfam had coffee shops (called Progreso)they charged the same and I think they closed down? Maybe they were charging too little?

  6. Greetings to all,

    Thanks for posting this important information close to many peoples heart, Ethiopians and friends of Ethiopian coffee farmers and the people of Ethiopia and all the coffee farmers of the world some 25 millions and their families in general.

    On behalf of all, who would have joined me to THANK YOU ALL, at home and the larger Ethiopian and other African Diaspora, I would like to THANK OXFAM America and OXFAM UK,Global Exchange, Fair Trade Fedearion, Tadese Meskela, Liam, Jacoby,many other great people like Shlomo, Proff. Lemma Senbet, Elizabeth from DC FAIR TRADE MET UP group my friend and my leader,the Embassy of Ethiopia, all Ethiopians from all sides, and non Ethipians and fair trade advocates and supporters,coffee lovers who pay attention to where their hard earned money go to,those who still continue to pay the price to let this important information is still up, and may others, I THANK YOU ALL.

    Tamiru, an Ethiopian like ALL OF YOU, Ethiopians, Eritreans, other Africans, Blacks, Whites, Reds or Yellows, siply put GOD’s chicldren in differet skin and eye color, wear, faith and origin as you ARE ALL ONE BUT LOOK DIFFRENT, all of you came from Ethiopia,Africa, God,Sprit..Adam…Ardi…Lucy……………………………>>>>>*, from the farm to the cup and back to the farm…

    *This is a self promotion, yes and no but any way, I will not be able to sell you any coffee NOW!

    ….New Beginning Initiative (NBI), An African Diaspora Initiative based envisoned under A new Earth Thinking, based on Self and Global Peace, Spiritual Reconciliation and Development for our children and children’s children for a just, peace and green world….

    Would you like to learn more about our NEW INITIATIVE OF NATION BUIDING BASED ON Self & Global Peace and Spritual Reconcilaition and Development Initaitive?

    Pls feel free to write Melvin Hardy or me Tamiru Degefa at;

    More on Ethiopian Coffee;

    FRIDAY, MARCH 9, 2007

    The Trademark Controversy, The Ethiopian Diaspora, and Abol’s Model

    By: Tebabu Assefa and Tamiru Degefa

    Global Coffee Market and Coffee Crisis

    Coffee is one of the most highly traded commodities in the world, second only to oil. The trade of coffee generates $80 billion every year in the global market, and that amount is growing.

    In 2001, coffee prices on the global market hit a 30-year low, and a humanitarian crisis ensued for the 25 million coffee farmers and families around the world, including many in Ethiopia. The fall in revenue has affected the income small farmers earned for the ‘fruit of their labor” As a result, the farmers are unable to send their children to school and could not afford to pay for their basic needs. However, from the retail sides demand for coffee has risen and the coffee industry has shown remarkable profit. For example, Starbucks, an 8 billion dollar a year company, was able to sell Ethiopian Harar coffee for $26.00 per pound, whereas the farmer only received between $0.60 and $1.10 per pound and only 3 cents goes to coffee farmers for every cup cappuccino Starbucks coffee sales for $3.00. Coffee prices have risen a little recently, but hard working coffee farmers continue to work relentlessly, receiving minimal profits for their crop, while coffee companies and corporations are bathing in earnings.

    Current Starbucks-Ethiopia “Patent & Trademark” Controversy

    In 2001, in response to the coffee crisis, Oxfam International, Global Exchange, and other advocacy NGOs, initiated a multi-national campaign to bring global awareness to the problem of the coffee crisis. The campaign has created a massive global public awareness and international support to the “Fair Trade” market and put forward a set of recommendations to government officials, the coffee market and coffee consumers to expand the Fair Trade market. In response to this campaign, the US Senate and the House of Representatives have recognized the severity of this crisis, naming it “Silent Mitch” after the Hurricane that wrecked havoc in Latin America and have subsequently passed resolutions to tackle this predicament.

    Black Gold, an internationally acclaimed documentary film about coffee, featured in the Sundance and Human Rights film festivals in 2005, examines the workings of the World Trade Organization (WTO) and connects the dots of global coffee market and makes a profound statements that if Africa’s share in world trade could increase by just one percentage point, it would generate $70 billion a year, five times the amount the whole continent receives in aid.
    In 2005, Light Years IP (LYIP), a Washington based NGO, assisted Ethiopia in registering trademarks for the coffee names Harar, Yirgacheffe and Sidamo in 40 countries. The trademark has been secured in 30 of those countries.

    Unfortunately, the U.S. is not one of these 30 countries. The U.S. Patent and Trademark Office (USPTO) have informed Ethiopia that Starbucks has already registered a product title that conflicts with the names Ethiopia sought to trademark. In February 2006, Ethiopia offered Starbucks a royalty-free license to use the names in exchange for giving Ethiopia ownership over the names. Starbucks rejected the offer. In June 2006, the National Coffee Association of USA (NCA), on behalf of Starbucks, filed a letter of protest to the USPTO to stop Ethiopia’s trademark application from being further processed. What needs to be understood is that Sidamo, Yirgacheffe, and Harar beyond being a place of origin for the finest coffee in the world, are also regions with populations that have vast social, cultural, and economic resources, engaged in multiple ways of life in Ethiopia.

    In order to be successful in today’s global market, developing countries have to add value to the raw, unfinished, agricultural products that they export, and can further maximize earning by securing IP rights for their products. The coffee that comes from Ethiopia is so highly recognized around the world that having ownership over the names Sidamo, Yirgacheffe and Harar would greatly increase the revenue generated by Ethiopia. According to LYIP, currently, the Ethiopian coffee sector captures only 6% to 10% of the fine coffees’ retail price, barely covering the cost of production. Compare that to Jamaica, whose Jamaican Blue Mountain Coffee is able to win 45% of the retail price for the country. Oxfam has made the claim that if Starbucks would sign the agreement to give Ethiopia its rightful ownership over the names, an additional $88 million would flow into the Ethiopian economy.

    The role of the African Diaspora in the International Discourse

    While all the campaigns, efforts, and the financial resources currently being dedicated to tackle poverty and alleviate the crisis are important and can make a significant contribution, it is the very people from these developing nations, including those living in the Diaspora that should play a critical role in the international development discourse and campaigns. Ultimately, long lasting sustainable rehabilitation and development can only come about if the resources of the African Diaspora are galvanized and invested to help businesses from developing countries to compete in global fair trade. “Fair Trade not Aid” is a viable solution that has not yet been given the support it needs by the African Diaspora, who has the most vested interest, financial resources, and knowledge. It is high time for the African Diaspora not to join the international development discourse, but to assume the leadership role.

    For example, if 10% of the five-million Ethiopians living abroad were to spend $10,000 a year for two years consuming Ethiopian made products and investing in Ethiopian businesses, that amount of money directed towards Ethiopia would amount to $10 billion dollars. This is equivalent to the sum of the earnings that the 74 million people in Ethiopia make from the global market, for the next 20 years, assuming all things remain the same and the crisis does not worsen.

    In the case of the Starbucks vs. Ethiopia patent and trademark controversy, the billion dollar question is not only what Starbucks decides to do, but also when the Ethiopian Diaspora, the sleeping giant, will rise to overcome the challenges that we are currently facing by making business investments to increase the number of shares of Ethiopian coffee in the world market.

    Abol Coffee, from the farm to the cup & back to the farm

    Abol Coffee serves to give the Diaspora this opportunity by connecting Africans directly to the global market. Abol believes that the real solution to the current crisis lies in channeling the purchasing and investment power of the Diaspora in the right direction. If, for example, we presume that 3% of the Ethiopian Diaspora frequents Starbucks four times a month and spends $2.50 per visit, the total amount of sales equals $1.5 million a month, and $18 million a year. This is a huge amount of resource going to the Starbucks Corporation, and a step backwards in our fight. As Africans, we ought to recognize the massive opportunity to redirect our purchasing power and invest in those African businesses that compete with corporations like Starbucks in the global market. With companies such as Abol, Africans are able to directly contribute to the rehabilitation and development of their countries.

    Abol Coffee Inc. is a socially responsible business concept, summed-up by the phrase “from the farm to the cup… from the cup to the farm”, which resonates at multiple levels. By working in partnership with three Ethiopian coffee cooperative unions with approximately 300,000 small coffee farming members who will be stakeholders, Abol Coffee Inc. seeks to advance business as a solution for the Global Coffee crisis. To bring light to the rich Ethiopian coffee tradition and culture, Abol Coffee Inc. plans to open its first cottage coffee shop in the Washington DC area and bring the Ethiopian coffee culture directly to consumers.

    Abol Coffee Inc. recognizes that the global coffee crisis is only one of the many problems that our world currently faces. However, the partnership of the Ethiopian Diaspora with Abol Coffee Inc. to help this crisis in Ethiopia can serve as a model of the power of social responsibility to the rest of the world.

    Tebabu Assefa and Tamiru Degefa, Abol Coffee

  7. It is my first time to come to this site, what a wonderful post! I kind of became interested in your “postscript”. “The women (and girls) sorting through the coffee beans in this pic will have to work for 8 years to earn what I get from Oxfam in one day. Sorry, but that just can’t be right.”

    I just posted a video on my hub that shows these girls singing and sorting the coffee beans. I think they are kind of happy that they have a job…i know they deserve much, but This is how diverse life on planet earth is. Why do big companies take their manufacturing plants to other parts of the world other than the west? “Cheap labour?”.

    Till the socio-economics of Ethiopia changes they would be much better off singing and sorting those coffee beans.

    Well, after all we all would be unhappy if we always think and compare ourselves with others. While on planet earth we live in different worlds!

  8. Felix

    I think this shows that value-addition at the origin is the only solution for coffee producing countries like Ethiopia.

    Only if Ethiopians roast and pack their coffee themselves they will get better and higher paid jobs.

    Otherwise Ethiopia will stay a country where 90% of the people are farmers without real chance of development.

    We try to support this with our Solino project, selling 100% made Ethiopian Coffee in Germany. See more at:

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