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Entrepreneur eyes cafes in West to profit from African coffee

Andrew Rugasira has worked for
more than a decade to sell coffee in a way that will be more
profitable to Africans, starting with a firm packaging roasted
beans in Uganda and now working on plans to open cafes abroad.

The Ugandan entrepreneur’s goal resonates across a continent
that has long sold commodities that are processed and consumed
in industrialised nations, such as cocoa for chocolate or beans
for espressos, while Africans get a fraction of the profits.

From his outlets in Kampala, Rugasira wants to expand his
Good African Coffee cafes to Washington DC, London, and other
African capitals.

The idea is to sell cappuccinos and lattes with a ‘Made in
Africa’ story to draw customers who might otherwise go to
America’s Starbucks or Britain’s Costa.

“When you add value you retain not just the financial value
in country but you create jobs, businesses pay more taxes and
that’s how you develop the economy,” he told Reuters.

But Rugasira’s efforts to break into international markets,
which began when he set up his firm in 2003, highlight the
challenges facing African businesses as they seek to add more
value and turn a local product into a global brand.

British supermarkets Tesco and Sainsbury’s
, which initially bought his packaged coffee, have taken
it off their shelves. And there is no guarantee his cafes will
find it easy in markets with established international chains.

“Whether you can scale that up and be up against a behemoth
like Starbucks, which really knows the coffee business and the
retail business, that’s an incredibly tall order,” said Victoria
Crandall, an analyst for Africa’s Ecobank.

RETURNING VALUE

While Brazil, Vietnam and Indonesia are the world’s top
coffee exporters, coffee is big business in east Africa, which
produces some of the world’s finest arabica and robusta beans.

In Uganda, Africa’s biggest exporter and the eighth biggest
exporter globally, about 500,000 small farmers grow coffee. It
is Uganda’s biggest commodity export, accounting for up to 30
percent of the country’s foreign exchange earnings.

But Rugasira says less than 0.5 percent of the value of a
cup of coffee sold in the West is earned by the bean growers.

Rugasira is undaunted. His coffee beans may have struggled
to draw supermarket browsers, but he said cafes offer a bigger
shop front to entice customers keen to try something new and
ready to support sustainable development.

“As a small company we do better when we interface with
customers directly than putting a product on a shelf,” he said
in a telephone interview from Kampala.

“Part of our brand is to have a conversation around some of
the development issues in Africa. We’re an ethical brand that
speaks to a specific and a conscious consumer,” he added.

Good African Coffee says it shares 50 percent of all the
company’s profits with farmers in the fields. The firm pays
about 25 percent above the average market price to its network
of 14,000 coffee farmers, according to Rugasira.

The next step includes opening a cafe in the smart
Washington DC district of Georgetown by the end of 2015 and
another in London by 2016.

He also aims to tap a growing taste among Africa’s middle
classes for coffee. Outside a few places like Ethiopia, which
consumes more than half the coffee it produces, few Sub-Saharan
African markets have a taste for the drink. That is changing.

AFRICAN CHAINS

In Kenya’s capital Nairobi and other centres, local chains
are growing, such as Java cafe and Dormans, a coffee producer
since 1950, that has been expanding its branded cafes.

The Nigerian chain Cafe Neo tells customers on its website
that it is “celebrating the return of coffee to its African
roots.” It has outlets in Lagos and one cafe in Kigali, the
capital of Rwanda.

Rwanda’s own Bourbon coffee, which says it is “bringing
profits back to the hands of the coffee farmers,” has eight
locations globally, including in the United States.

Yet even if such African chains are starting to branch out,
cracking the market beyond the continent may be tougher.

Rugasira, educated at a British university, has faced his
other challenges in convincing investors his brand is marketable
and can overcome challenges of working from a land-locked
country with poor transport connections.

“Agriculture is perceived to be high-risk,” he said. “There
isn’t enough patience and institutional accommodation. Yet it
has the highest potential.”

But he says African entrepreneurs need to keep pushing to
succeed in building international brands that add value if they
want to secure higher returns on their commodities.

“Empowerment and community transformation require more than
just better prices for third-world growers,” he said. “They
necessitate linking African farmers to African processors.”

(Additional reporting by Elias Biryabarema in Kampala; Editing
by Edmund Blair and Giles Elgood)

By Edith Honan

 

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