1. The Role of the Private Sector in Delivering STI to Rural Africa—the Case of Specialty Coffee World Bank, 14 February 2007 Thomas L Dixon Country Director TechnoServe Tanzania www.technoserve.org

2. 1 START WITH THE MARKET: COFFEE CONSUMPTION GROWING 1.6% p.a., BUT FARMERS FACING PRICE VOLATILITY DUE TO UNEVEN PRODUCTION Green coffee; millions of 60 kg bags Production Consumption Source: ICO; World Bank; 150 Years of Coffee, Marcellino Martins and E. Johnston

3. 2 PRODUCTION SURPLUSES PUSHED PRICES DOWN, JEOPARDIZING THE FUTURE OF FARMERS AND CAUSING THEM TO THINK ABOUT CHANGE. Real price of green coffee ICO indicator price, U.S. ¢ per lb., constant 2002 dollars* *Real price index created by combining 1900-91 average U.S. import prices from 150 Years of Coffee and 1992-2002 ICO indicator prices; all prices in 2002 dollars adjusted using World Bank Global Manufactured Unit Value index Source: ICO; World Bank; 150 Years of Coffee, Marcellino Martins and E. Johnston

4. 3 AN ATTRACTIVE NICHE MARKET SEGMENT IS HIGH-END SPECIALTY COFFEE *1 bag = 60 kgs Source:ICO; Daniele Giovannucci; Team estimate World coffee consumption Commercial Grade 100% = 108 million bags* Specialty coffee consumption 100% = 6 million bags Gourmet/ High Quality Fair Trade certified Other certified 93% 4% 3%

5. 4 ROASTERS SEEK CONSISTENT SUPPLIES OF QUALITY SPECIALTY COFFEE TO MEET THE GROWING DEMAND * Growth estimates for the specialty market range from 5 to 10% annually Source:SCAA; Team estimate Demand may grow by 2.6 million bags by 2007* Specialty consumption (million of 60 kg bags) 8.6 2007E 6 2002 3.7 1997 2.3 1992 2.6 million bags would bring $100 million in additional revenue annually to coffee producers assuming an average premium of 30 cents/lb However this demand growth will require consistent supplies of quality specialty coffee

6. 5 Nearly all smallholder coffee was processed at home, causing quality variations and limited ability to negotiate good prices…

7. 6 Access to central pulperies results in price premiums of over 70% Central Pulpery coffee fetches prices two times higher than home-processed coffee… 0.85 1.650.10 0.08 1.47 Home processed v. Central Pulpery (CPU) value US $/kg parchment (2004/05) Smallholder farmer groups selling via direct export received US$1.65/kg parchment for their central pulpery coffee Average farm-gate price in Tanzania The KILICAFE Strategy

8. 7 Introduction. STRUCTURE Farmer group Smallholder farmers VALUE CREATION Farmer Association Proper corporate governance Professional management Scale (national level) Infrastructure Market knowledge Farmer Business groups 93 smallholder farmer groups Scale (village level) Centralized collection and processing +8,000 smallholder farmers Farming Ownership of above structures KILICAFE was founded with assistance of Technoserve in 2001… A Farmer Association that provides services to Farmer Groups, assisting them to market their coffee to the national coffee auction and directly to overseas buyers

9. 8 AKSCG Parchment Sales 2004 U.S. ¢/kilo * Farmgate Source: TechnoServe analysis TECHNOSERVE’S INTERVENTION HAS CREATED APPROXIMATELY $1MN IN ANNUAL INCREMENTAL REVENUES 2004 sales Millions of kilos Average regional price* Incremental revenues due to TechnoServe intervention ~$1 million

10. 9 DIRECT EXPORT SALES GAINED IN SHARE AT KILICAFE SINCE LEGALIZATION IN 2003, HELPED BY CPU ROLLOUT  Fast growth trend in production quality and volumes  More members assisted to install new cpu’s annually  Fair Trade certified as producer.  Kilicafe has “Own company standards” to ensure Best Practices.

11. 10 New Approaches to Coffee Sustainability KILICAFE is working with key partners to launch more central pulperies and develop new approaches to coffee sustainability… New initiatives include: Central Pulpery Development Department KILICAFE Company Standards Farmer education using radio media Price risk management tools

12. 11 KILICAFE is a success story, bringing technology, innovation, and market links to enable remote smallholders to prosper

13. 12 Tanzania Kilimanjaro is the fruit of our ongoing partnership with TechnoServe and thousands of small-holder growers. This special offering represents the best in Tanzania coffee, as well as hope for a brighter future for these farmers and their families. QUOTES FROM LOCAL STAKEHOLDERS Source:TechnoServe interviews (2004-05) David Mwakapola, KILICAFE coffee farmer The Tanzanian coffee industry is on a slow but sure road to recovery, as it takes time to fully convert farmers from old habits and practices. We thank TechnoServe for the critical role they have played in this achievement. TechnoServe has the solution for Tanzania’s coffee crisis The Honorable Basil Mramba, Minister of Finance Tanzania My income has quadrupled since joining KILICAFE, which has allowed me to renovate my house and connect to electricity and fresh water Emmeline Swai, KILICAFE coffee farmer Doug Welsh, Peets Vice President of Coffee I used to think I was unlucky in coffee, but now I realize there is no such thing as to be lucky or unlucky in business. Rather it is a matter of producing what customers need, high quality products. Chris Jordan, Starbucks Director of Quality The pulperies have added huge value. The improved quality has given Starbucks the confidence to buy forward versus spot. We’ve increased our sales twofold in the past two years