Coffee: it's the marketing that counts

Drinking coffee gives innocent pleasure to millions of people, but growing the coffee doesn't bring any pleasure at all to most coffee producers. Worldwide, prices are generally very low, and many smallholder growers have been uprooting their coffee bushes in despair. But, not in Malawi. Although not a major producer, compared to giants like Brazil, Colombia, Kenya and Vietnam, Malawi has learned, and can teach, a useful lesson. The lesson is that financial success depends not on growing more but on reducing costs of production and bold marketing.

For many years the smallholder coffee growers in northern Malawi had been overseen and their beans sold by the parastatal Smallholder Coffee Authority. Despite only paying growers 20-30% of sale price, and retaining 70-80% for overheads, by 1999 the SCA had accumulated a debt of Malawi Kwacha 40million. The Government, anxious to divest itself of a significant debt and its stake in what appeared to be a poorly performing industry, offered the Authority for sale under its privatisation programme. To their credit (in every sense) the 4000 smallholder coffee producers purchased the SCA for the value of its debt in May '99, converted themselves into the Smallholder Coffee Farmers' Trust and appointed new management and member Directors to run and oversee the business.

Aiming high when prices are low
By year's end 2003 not only was the MK 40 million debt cleared, the Trust was passing back to growers 70-80% of revenue earned, and retaining only 20-30% for overheads. Even more remarkable was that this turn-around has been achieved during a period of low international coffee prices. Visit Mzuzu, the Trust's headquarters, speak to General Manager Harrison Kalua, and it's clear that this transformation in the fortunes of smallholder coffee producers has been a team effort-Malawian commitment supported by the European Union, Germany's GTZ and the UK's Natural Resources Institute (NRI).

The priority for Mr Kalua and his management and extension teams has been to reorganize the grower members into local associations, give them a feeling of ownership through representation on the management board, and to increase the financial returns to members. Nobody suggests that it was easy, changing ingrained attitudes never is, but by providing totally transparent accounting and management, the confidence of members has been gained, making them open to change to more demanding but rewarding commercial production approaches.

One of the routes to increasing members' incomes was to produce quality berries at minimum cost. This meant replanting with new higher yielding clones and adopting new pest and disease management that reduced dependence on costly chemicals. The second income builder was to start processing a proportion of the berries, and marketing a value-added, quality controlled, attractively packaged and branded product, in place of selling the low value, anonymous bulk commodity that had been the fate of beans in the past.

Cost reduction was achieved by building a leaner and more effective management team, and developing a marketing group. The EU was particularly helpful in funding capacity development through training and extension. Savings in cost of production were made by reducing the cost of disease and pest control; here the Natural Resources Institute was able to develop an effective integrated pest management programme that was less polluting and less costly than the previous chemical control regime. Coffee Berry Disease (Colletotrichum kahawae) and White Stem Borer (Mononchamus leuconotus) were found to be the main problems. White Stem Borer (WSB) in particular had become a serious pest since the withdrawal of dieldrin, which had been used as a stem-paint. Farmers had then switched to Fipronil, which was effective but contributed to pest and disease control costs of some 30 per cent of total production costs. One of NRI's suggestions was that farmers smooth the bark on the lower stems of coffee bushes instead of painting with insecticide, denying the borer an ideal site at which to lay its eggs.

Not stopping yet
Despite such encouraging progress, Malawi's Smallholder Coffee Farmers' Trust is looking further ahead. In pest control, NRI is working with pheromones for WSB, which have proved successful in India and look promising for Africa. Indeed, the knowledge gained on the biology and distribution of WSB in Malawi will provide the starting point for a five-year project with Malawi and Zimbabwe as its African partners. Meanwhile the cost of pest and disease management has been reduced and margins increased.

Marketing has been assisted by GTZ, in particular the development of markets overseas. Already Mzuzu Coffee, packed in eye-catching gold foil, re-sealable packs are on sale regionally in Zambia, Zimbabwe, Namibia and Mozambique, and further afield in Germany, Australia and UK. Mr Kalua also believes in converting more Malawians, who are great tea drinkers, to switch to coffee, and these distinctive packs are now to be seen in leading supermarkets in Malawi and are also available from outlets such petrol filling stations.

Sales are increasing, turnover is rising and the income for the smallholder producers is growing. This is resulting in growing farmer confidence, demonstrated by plantings of new high-yielding, quality bushes-a definite sign of a longer term commercial approach by farmers than the resigned, no-risk, subsistence outlook of the past.