Coffee Industry

Abstract

Philippines, being situated within the coffee belt near the equator, was once major

producer of coffee beans during the Spanish period. During that time, Philippines was number

four, even greater than Brazil’s production. It has various coffee farms sprawling around the

archipelago.

However, due to the coffee rust that affected the country, Philippines had a hard time

recovering from the rust that it took the country more than 50 years for it to regain its strength. It

was the Americans during the 1950s who brought new variety of coffee which are more rust

resistant (Nuguid-Anden, 2003).

1950 until 1986, the country’s coffee production was rejuvenated as export production

went up. It could be said that these are the golden years of coffee production in the country. The

Philippines even became part of International Coffee Association (ICA), an international

organization which monitors the coffee bean quality being traded all over the world (Nuguid-

Anden, 2003).

After 1986, with limited demand, and with various countries increasing the production of

coffee, surplus of coffee beans occurred. And the Philippines, was hard hit again. Various coffee

farmers incurred losses which made them changed their crop into other else or made them

converted their farms into commercial or residential spaces. And to make the situation worse,

ICA was abolished as the global coffee problem worsened. The problem only gradually eased as

coffee specialty shops rose and as coffee drinking penetrated cultural norms in various countries

(Nuguid-Anden, 2003).

With higher coffee demand globally, various neighboring countries in Asia, such as

Indonesia and Vietnam, has prosperous coffee industry that truly jolted their agricultural industry

in a better shape.

And, for the Philippines, the once prosperous coffee industry could not even be traced

with its recent condition.

Hence, this research would like to explore the recent conditions of the ailing coffee

industry and delve on how to help the coffee industry with recommendations on how to make

sustainable coffee farms (Nuguid-Anden).

Industry Definition

The Philippine Standard Classification Board defined coffee industry as the planting,

growing and harvesting of coffee. Coffee is a perennial crop that grows only in countries with

only rainy and sunny season. These countries are situated within the coffee belt which is between

the Tropics of Cancer and Capricorn.

As entrepreneurs and companies explore all possible output from coffee, the industry is

becoming bigger encompassing other activities than planting, growing and harvesting. Aside

from planting, growing and harvesting, coffee industry is also composed of wholesaling,

retailing and manufacturing (Pangilinan, 2006).

Products

Parallel to the various activities within the coffee industry is the various products that the

industry offers.

The Coffee industry offers beans for companies which manufacture different varieties of

roasted and ground, soluble and ready to drink coffees. These beans are the second most traded

commodities all over the world, next to petroleum (Ang, 2010).

There are five varieties of coffee beans: exelsia, arabica, robusta, stenophylla and libirica.

Out of these five varieties, the Philippines has been growing four varieties except stenophylla.

However, with these four varieties, only arabica, robusta and exelsia are produced massively.

Arabica and robusta are the beans that are mostly demanded for export. With both beans

producing subtle to mild taste, these beans are used for instant, brewed and ready to go coffees.

Libirica, on the other hand, produces mild to strong taste which only few markets like Saudi

Arabia are demanding (Pangilinan, 2006).

Libirica, colloquially known as “kapeng barako” is a strong with spicy taste that grows

only in three Asian countries, Philippines among them. It is today considered as an expensive

coffee because of its rareness (Pangilinan, 2006).

Roasted coffee beans are now available in the market. Due to the proliferation of high-

end coffeemakers which use roasted beans, roasted beans are now available for individual

consumption. However, these beans are more often being sold in specialty coffee shops.

Grounded coffees popularly known as brewed coffee are now more popular among consumers

that even coffee brands are coming up with more varieties of this kind of product.

Coffee manufactured in soluble powder comprises the majority of the coffee market.

These are instant and ready-mixed coffees which comprises 90% of the market (Ang, 2010).

Ready-mixed coffees are more popularly known as the 3-in-1, or even 6-in-1 for some brands.

These products are already complete with milk and sugar that the only thing to do is to pour hot

water in it (Datamonitor, 2010).

A newer market that has been emerging is the ready to drink coffees. These are coffees

packaged in bottles, tetra-packs or tin-cans. These products are also available through vendo

machines scattered in most buildings and schools.

Coffee beans Beans

Soluble Instant and ready-mixed

Ready to drink, liquid

Roasted and ground

Product Process

Industry Macroeconomy

Contribution to GDP

12% of the total Gross Domestic Product (GDP) is Agriculture. In 2010, coffee industry

was negative 0.4% which continued to slip to 10.9% as various farms in Davao and Zamboanga

converted to banana and rubber (NSCB, 2010).

Contribution to Employment

Most coffee farmers are small scale coffee farmers still with no enhanced technological

machinery in cultivating their farms that they still use their hands in farming. The slipped in

GDP was due to the diminishing laborer of coffee farms in Zamboanga-Davao area (Ang, 2010).

Foreign Exchange

During the peak of coffee industry in 1986, it was bringing in export revenue of $132

million. In 2001, export revenue was only at $500,000. And on the past two years, there were

very little export activity of coffee. The country used to export coffee, however, with demand

increasing at 27% per year and with the diminishing coffee farms, the country could not even

cope with local demand (Nuguid-Anden, 2003).

The country is a net importer of coffee. Philippines mainly import coffee from Asian

neighboring countries like Vietnam and Indonesia. For the past years, Philippines was spending

$1.7million per year for coffee importation (Nuguid-Anden, 2003).

2009 2010Bean Imports 400 365 Roast & Ground Imports 0 0 Soluble Imports 1,150 1,300 Total Imports 1,550 1,665 Bean Exports 0 0

Rst-Grnd Exp. 0 0 Soluble Exports 0 0 Total Exports 0 0 Bean Imports 400 365 Roast & Ground Imports 0 0 USDA Foreign Agricultural Services

Linkages with the Rest of the Economy

Even if the coffee industry is not contributing enough for the economy, however, its potencies of

becoming vibrant again could not be discounted with all the opportunities that has been rising in

the country. (this part needs more research).

History of Players

References

Charmaine Nuguid-Anden. Figaro Company: A Case Study. 2003. UN Volunteers New Business Activity.

Nemielynn Pangilinan. Enhancing the Global Competitiveness of the Philippine Coffee Industry Under a Dynamic Open Trade Regime. 2008. University of Asia and the Pacific.

RTD Tea and Coffee in Asia- Pacific. 2004. Datamonitor.

Pia Ang. Philippines Coffee Situation and Outlook. 2010. USDA Foreign Agricultural Service: Global Cultural Information Network.