Coffee and Wine A Comparison of Two Value Chains, Ownership Structures and Sustainability Standards AAWE – Bordeaux – June 2016 Morten Scholer

Coffee – Flowering, cherries and green beans

Coffee – Two species Arabica Robusta Origin Ethiopia – via Mocca, Arabia Lake Victoria – Uganda, D.R.C. … Share of World production 60 % Latin America, East Africa, South East Asia 40% Vietnam + other S.E. Asia, Brazil, West/Central Africa Quality (Caffeine) Fine-flavoured aromatic (1.0 – 1.5%) Strong and harsher (filler) ( 2% ) Exchange ICE, New York LIFFE, London

Coffee and wine – Two value chains CoffeeWine Field work Harvest In-land trading Primary processing (dry or wet) Milling Sorting Stuffing (bags or bulk) Sale from exporter ………………………. Border ………………… Shipping Storage In-land transportation Roasting Blending Packing Sale to professional or retail Grinding Brewing (professional or at home) Serving – drinking Field work Harvest De-stemming, sorting, crunching Maceration Fermentation Storage (aging) Blending Bottling Sale from producer ……………..………... Border …………………... Shipping Storage In-land transportation Sale to professional or retail Serving – drinking

Coffee (few) - Steam-cleaning (Robusta) - Aroma preservation (soluble/instant) - Dark roasting (a ‘cover’ more than a genuine improvement) Wine (many) - Concentration (cryogenic/ice, evaporation, reverse osmosis, …) - Industrial yeasts – huge choice with many functions - Chaptalization (adding sugar) - Acidification and de-acidification - Fining with additives - Cone-spinning in vacuum + high temp. (alcohol/aroma adjustment) - Oak-flavouring (using barrels, staves and chips) Options for enhancement of quality

Coffee and wine – Large companies in the value chain Coffee – Portion of World production (magnitudes) Wine Investors J.M. Smucker, USA JAB Holding (Benckiser, Reimann), Germany Gallo Winery USA Constellation USA The Wine Group USA Treasury Wine Group Australia Penaflor (Trapiche) Argentina Concha y Toro Chile Castel France Accolade Australia Pernod Richard France Bronco Wine USA Eight hold 10% Trading houses Eight hold 50% 11% Neumann – NKG Germany 10% ECOM (incl. Armajaro) Switzerland 7% OLAM Singapore – UK 7% EDF Man – Volcafe UK – Switzerland 6% LouisDreyfus France – CH – NL 4% Noble Hong Kong – S’pore 3% Sucafina Switzerland 2% COEX USA Roasters / Brands Eight hold 40% 13% Jacobs Douwe Egberts ( Ex-SL/Kraft/Mondelez ) NL 11% Nestlé, incl. Nescafé and Nespresso Switzerland 5% Smucker’s (Folgers, Milstone, …) USA 3% Elite-Strauss Israel – USA 3% Tchibo Germany 2% Starbucks USA 2% Lavazza Italy 1.5% Keurig Green Mountain USA 1.5% Melitta Germany 1.5% Segafredo-Zanetti Italy 1.5% Aldi Germany 1.0% Kraft (Maxwell House, …) USA 1.0% UCC Japan Outlets / Retail 2% Starbucks, USA - Donkin’ Donuts, USA

Coffee – Leading sustainability standards Dimension Standards with a ‘main dimension’ Standards covering ‘all dimensions’ Environment - Organic (Biodynamic, Shade-grown, Bird-friendly) Rainforest Alliance Utz Certified …………………………… C ……………………………… Nespresso – AAA - Starbucks C.A.F.E. Practice - Keurig Green Mountain’s Responsible Sourcing Social - Fairtrade (FLO) - Fair Trade USA Economic

Coffee and wine – Four structural differences - Value chain (parties involved and physical transformations) Complex for coffee – simpler for wine - Quality enhancement (‘manipulation’) Only few options in coffee – many in wine - Size of companies (relative size) Big in coffee (some have +10% of world trade) – small in wine (all below 3%) - Sustainability standards Coffee is more complex than wine (coffee has worldwide standards, with more processes, locations and partners (sometimes illiterate))