East African coffee houses doing brisk businessBy THE EAST AFRICAN | Monday, June 11 2012 at 12:58
Coffee house entrepreneurs in East Africa seem to be the only ones smelling the aroma of success this year.
Farmers of the cash crop, though, are in for a tough year after record prices last year.
The price of coffee in the global market has fallen from a high of $4.8 per kilo in January to a low of $2.2 due to the high production of the crop from other leading producers like Brazil, creating a glut.
In addition, Uganda, East Africa’s largest producer and the third largest exporter on the continent, is facing a drop in production because of drought that affected the crop in the eastern part of the country.
But globally, there is a shift in coffee consumption patterns.
The morning coffee ritual, which is popular in Europe, the US and Japan, is sweeping through emerging and developing nations, with many coffee growing and exporting countries witnessing a sharp rise in domestic consumption of the beverage.
In East Africa, although the coffee ritual is still popular among mostly expatriates, the coffee shops seem to offer the place between work and home where people can socialise or hold business meetings.
This explains why coffee houses are sprouting up in East Africa’s capital cities, creating specialist investors who are making money selling a culture as opposed to yesteryears when trading houses and roasters made money from trading the commodity.
A fortnight ago, Emerging Capital Partners (ECP), the American private equity firm, acquired a majority stake in Nairobi-based Java Coffee House.
Java was set up 13 years ago by two American expatriates living in Kenya, Kevin Ashley and John Wagner, and it has expanded from one branch to 13 this year.
Its annual turnover hit Ksh1 billion ($11.5 million) in the year ended June 2011, according to an interview Mr Ashley did with the Kenyan media.
Java plans to open outlets in the region besides expanding to other major towns in Kenya. Mr Ashley declined to comment on the expansion plans and details of the ECP acquisition when contacted by The EastAfrican.
Eric Omondi, the general manager of Dorman’s, which runs a chain of cafes, based in Nairobi said the emergence of the coffee houses was driven by the growth of shopping malls and the prospects of rising consumption by the citizens in the region.
“The quantity of coffee consumed is just a drop in the ocean,” Mr Omondi said, adding that they have seen an annual 15 – 20 per cent increase in the volume of coffee sold. “The market can still accommodate so many more players. We need more foot soldiers talking about drinking coffee,” he said.
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