Thursday, July 26, 2007

Coffee houses cash in on Starbucks' arrival in neighbourhood

26 Jul, 2007, 0256 hrs IST, AGENCIES

NEW YORK: The possible addition of another Starbucks near one of Manthri Srinath’s three independent coffee shops in Santa Cruz, California, is cause for celebration. “When Starbucks opens up next to us, we get more business,” said Srinath, 41.

Starbucks has more than 7,800 company-operated stores worldwide. While some independent coffee shops have been driven out of business by Starbucks’ expansion, independents have hit on a recipe for thriving in the shadow of the world’s largest coffee chain.

The independents have found a niche by touting their coffee as superior and by establishing themselves as a third place between home and work, where sippers can groove on presentations by local artists, enjoy free wireless internet access or take classes on improving their own espresso-making skills.

“Independent coffee-houses have a lot more room to create a neighbourhood experience,” said David Morris, senior research analyst with Mintel, a London-based consumer research firm. “They can cater to the demographic within a three-block radius, and people respond well to that.”

Consumers in the US are spending more than ever on drinking coffee outside of their homes. For the first time since the 1980s, more people now drink coffee daily than carbonated beverages, the National Coffee Association says. As a result, while all small businesses have plodded along at a 3% growth rate since 2000, according to the US Small Business Administration, independent coffee-houses have almost doubled their numbers, keeping pace with Starbucks.

Nationally, the number of US coffee-houses, including chains, rose to 23,900 last year from 12,600 in 2000, according to the Specialty Coffee Association of America in Long Beach, California. Starbucks stores increased to 5,700 last year from 2,200 in 2000.

Starbucks, which serves 4 million customers a week and is raising US prices an average of 9 cents a cup on July 31, doesn’t expect a saturated market anytime soon. “There’s plenty of room to grow in the specialty coffee market,” said Starbucks spokesman Brandon Borrman.

The company’s long-term goal is to reach 40,000 locations worldwide, including smaller counters in airports and bookstores, Borrman said. Still, the moves by the independents aren’t going unnoticed at the Seattle-based company.

Starbucks chairman Howard Schultz sent an internal memo in February to senior executives, which was later leaked to the media, lamenting some changes the company has made over the years, such as pre-packaging beans instead of scooping them from bins at the store and switching to push-button espresso machines.

“One of the results has been stores that no longer have the soul of the past and reflect a chain of stores versus the warm feeling of a neighbourhood store,” Schultz wrote. “Some people even call our stores sterile.” Borrman said the company strives to balance corporate directives with regional changes. “We want there to be a consistency for Starbucks around the world, but we also want our cafes to be part of their communities,” he said. “Starbucks created legions of folks interested in coffee as an epicurean experience, and then abandoned them for the greener pastures of Pomegranate Banana Frappuccinos,” said Srinath, the cafe owner in Santa Clara. “The rest of us are now playing in their old playground.”

Srinath has purchased a Marzocco Mistral, an espresso machine handmade in Florence, for his Lulu Carpenter’s Cafe. The beans are roasted on site, he said. He plans to open two more locations in the next two years.

Though Caffe Luxxe in Santa Monica, California, is bookended by two Starbucks on its block, owner Mark Wain, 34, is celebrating its first anniversary and expects to add another location next year. He attributes his success to an artisan approach.

“It takes four to six months to get a barista fully trained,” Wain said. “I want someone to be able to feel the grind between their fingers and realise if it’s too coarse for espresso.” Rob Stephens, 38, president of the Hopedale, Massachusetts-based consulting company Coffee Solutions, calls the cafe-Starbucks relationship ‘symbiotic.’

“Starbucks gets people to think ‘a good cup of coffee is something I should expect,’ and then the independent cafe wows them,” he said. One way they do that is by hosting local events and providing free wireless internet access, something Starbucks charges for.

Another advantage is that independents can buy small amounts of coffee. That provides a quality edge, they say, by letting them shop farm by farm. Many successful independents use so-called super-gourmet beans, costlier coffee that Starbucks sells only in its Black Apron Exclusives brand.

Roasters such as Acton, Massachusetts-based Terroir Coffee Company and Chicago-based Intelligentsia Coffee work directly with specific farmers to produce specialty beans.

Intelligentsia, which has three retail locations in Chicago, offers classes for wannabe cafe owners, for $700 a person, that give overviews on the proper way to taste and brew coffee, how to train employees, marketing and customer service.

“Clearly people are looking for produce that is different and more pleasurable,” said George Howell, 62, owner of Terroir Coffee. “What’s happening with coffee parallels what you see in the rest of the food world right now, especially with wine and cheese.

Tuesday, July 24, 2007

Global Warming Threatens Coffee Collapse in Uganda

Alexis Okeowo in Nsangi, Uganda

for National Geographic News

July 24, 2007

Things are getting hot for coffee farmers in Uganda—a little too hot.

Growers say global warming is already cutting into coffee harvests, the country's biggest export.

And a new report warns that even a slight increase in temperature could wipe out Uganda's entire coffee crop, which brings in more than half of the East African country's revenue.

"Climate change has affected coffee production already," said Philip Gitao, executive director of the East African Fine Coffees Association.

The crop has had less time to mature because rain is falling at the wrong times, affecting coffee quality, Gitao said. And there have been more droughts in the past two to three years than ever before.

"If the coffee beans face a lot of sunshine and less rain, the beans will be smaller and in lower yields," Ronald Buule, a central Ugandan coffee farmer, said as he stood at a coffee plot bordered by lush plants, muddy hills, and an orange dirt road.

"We are worried about the temperature, but we have limited resources," he added, as he examined his crops under a dense thicket of banana leaves.

Potential Disaster

Things might not get better anytime soon.

A rise in average temperatures of just 3.6°F (2°C) would make most of Uganda unsuitable for coffee, according to the Ugandan report on climate change released this spring.

That's a figure at the low end of global estimates.

The United Nations panel on climate change, for instance, predicted in January that world temperatures will rise by between 2.5 and 10°F (1.4 and 5.8°C) on average by the end of the century, primarily as a result of human activities such as burning fossil fuels.

(Read more UN predictions about how global warming will affect the globe.)

And "there is no real doubt that global temperatures will rise between 1.4 and 5.8 degrees [C]," said Philip Gwage, Uganda's deputy commissioner of meteorology.

Certain conditions are required for coffee growth, including cool temperatures and enough water, he pointed out. The average temperature in Uganda's coffee-growing area now is about 77°F (25°C).

If the temperature rises, only a few highland areas in Uganda could continue to grow coffee, Gwage added.

Although Uganda may also receive more rainfall from surface evaporation off east Africa's lakes, the increased precipitation could be erratic and not fall during the growing season.

Robusta, the main variety of coffee grown, would "essentially disappear," he said. Coffee-growing areas would be reduced to less than a tenth of their current size.

Neighboring coffee producers such as Kenya and Tanzania would also be affected, the Ugandan report predicts.

Fighting the Fire

To help prevent against the adverse effects of global warming, farmers are already adopting new growing strategies for coffee, a seasonal crop that thrives during Uganda's rainy, cool period between December and February.

The primary concern, farmers say, is ensuring the premium quality of Uganda's coffee—especially the reputation of the country's organic brands.

Farmers are growing trees densely to create cool shade for the coffee. They are also mulching—or covering soil with grass to hold onto water—and digging long terraces in the ground to retain rainfall.

But these efforts are not without obstacles.

George Kiryowa, a coffee farmer for 20 years, has been trying to implement the practices on his farm. But "the people have destroyed all the trees for timber," he said.

And because he can't afford extra labor, "these days we just use our hands, and the process is slow."

Kiroywa added that he now grows other crops such as cocoa—the plant source of chocolate—as a safety measure in case the changing environment does harm the coffee.

Saturday, July 14, 2007

Starbuck closes controversial outlet inside the Forbidden City

Pallavi Aiyar

Beijing: After a seven-year run dogged with controversy, an outlet of the American coffee-shop chain, Starbucks, located inside Beijing’s Forbidden City has closed its doors. The move comes after an intensive Internet campaign started by a State TV anchor last year accused the coffee-shop of “trampling” on Chinese culture and hurting the image of the historical monument.

The Forbidden City is a former imperial palace that was home to 24 emperors before the end of imperial rule in 1911. It is also China’s top tourist attraction, drawing some 7 million visitors a year. Located bang opposite Tiananmen Square, the palace has long formed the symbolic heart of the country.

The Starbucks outlet opened inside the Forbidden City, back in 2000 at the invitation of the palace managers who were looking for ways to raise the money needed to maintain the 178-acre complex of villas and gardens.

Commercial Ventures

Starbucks was not the only commercial outlet to operate within the palace grounds where a range of bookstores, souvenir shops, snack bars and Chinese-style teahouses are located.

From the very beginning, there were some critics in China who felt that the presence of the American franchise inside the palace was jarring and culturally inappropriate. Thus, shortly after opening, Starbucks had agreed to lower its profile by removing an exterior sign.

Since the beginning of this year, the Internet campaign calling for the outlet’s closure had gathered strength, hogging the headlines in domestic media and garnering the support of some half a million people. The coffee-shop closed on Friday although the announcement was made public only on Saturday. “[W]e have respectfully decided to end our lease agreement,” Wang Jinlong, president of Starbucks Greater China, said in a written statement: “We fully respect the decision of Forbidden City to transition to a new mode of concessions service to its museum visitors.”

Thursday, July 05, 2007

Brazil Subsidizes 4 Million Bags of Coffee at Auction

By Carlos Caminada

(Bloomberg) -- Brazil, the world's biggest coffee grower, agreed to subsidize all 4 million bags of beans offered at an auction after a currency rally eroded export profits.

Brazil will pay growers a subsidy of 39.99 reais ($20.40) a bag to supplement prices paid by roasters and exporters, the Agriculture Ministry said. Today's auction was the first time the government offered to support prices for coffee since 2002.

The Brazilian real has surged 59 percent in three years, the best performance against the dollar of the 16 most-traded currencies. The rally has narrowed exporters' profit margins.

``The price that producers are getting in the market is pretty close to production costs,'' said Daiana Braga, an analyst at the University of Sao Paulo's agricultural commodities research unit, known as Cepea. ``They get a much better deal at the auction.''

The government guaranteed arabica growers would receive 300 reais per 60-kilogram bag at the auction. To qualify for the subsidy, growers had to agree to sell the beans to roasters and exporters at a minimum price of 260 reais per bag.

The average price of arabica in the south of Minas Gerais state, Brazil's biggest coffee-producing region, was 232.83 reais yesterday, down 20 percent this year, according to Cepea.

Brazil said when it announced the auctions that it would subsidize as many as 5 million bags. The Agriculture ministry plans to hold an auction for the remaining 1 million bags next month.

Coffee futures for September fell 0.1 cent to $1.1180 a pound at 12:15 p.m. on the New York Board of Trade. The price has gained 17 percent in the past year through yesterday.

To contact the reporter on this story: Carlos Caminada in Sao Paulo at at

Last Updated: June 27, 2007 12:15 EDT