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    Internet Auctions Promote Coffee Trade Development

     

     
     
    © International Trade Centre, International Trade Forum - Issue 3/2005

    Photo: photos.com

    Internet auctions for high-quality coffee help raise incomes for coffee producers and provide efficiency gains to buyers and sellers.

    Traditionally, many coffee producers didn't differentiate between high-quality and standard coffee, meaning they didn't benefit from higher prices for good coffee. In the late 1990s, ITC market analysis revealed that coffee producers could earn more money by selling their better coffee to niche, "gourmet" markets. It set up a Gourmet Coffee Project to develop exports of quality coffees that could potentially be sold for higher prices. Investing in quality was not a new concept.

    What made ITC's export development strategy stand out was taking the - then uncommon - step of integrating information and communications technologies (ICTs).

    Brazilians pilot Internet auction

    In October 1999, ITC held a "Best of Brazil" coffee contest under its Gourmet Coffee Project, which included 315 of the country's coffee growers.

    In the Best of Brazil contest, experienced coffee tasters, known as "cuppers", selected the ten best coffees, which were then offered for sale at the world's first Internet coffee auction. In December, 900 60-kg bags were available for the 23 bidders from four continents who joined a 48-hour online auction.

    The experiment was a success. Not only did the auction technology work, but the prices were high, sometimes double what had been expected.

    That experiment has grown into the Cup of Excellence® programme, which helps coffee growers in several countries. Brazil, which has hosted the Cup of Excellence® auction every year since 1999, has been joined by Bolivia, Colombia, El Salvador, Honduras and Nicaragua.

    Organizers have made a number of changes to make sure the Internet auction mirrors the pressures of a traditional auction. For example, they raised the number of coffees per auction to more than 30 and cut the online bidding period to a few hours. At the end of the bidding period, the auction is kept open only while there are less than three minutes between bids.

    Auctions help coffee trade

    Do these auctions help? The Cup of Excellence® programme believes the answer is yes, saying that it concentrates on recognizing and rewarding farmers who grow the best coffee, and that coffee-producing countries use the programme for quality education, sustainable development and promotion.

    "There is no other programme that offers more of its finances directly back to the farms. There is no better programme to identify high-quality farmers and help build long-term relationships, especially for smaller roasters," it says.

    The Cup of Excellence® contests and auctions are a strong marketing tool for small producers who can escape anonymity to gain fame and be rewarded for producing high-quality products.

    Winning farmers not only get awards, but 85% of the record prices at auction goes back to them. Winning farms, and often their regions, can expect future visits and buyer enquiries.

    This programme and its elements build "the bridge between the high quality farmer, the high quality trade and eventually the consumer", according to the Cup of Excellence® web site.

    It also helps the coffee trade in a number of ways: it makes it easier to source and identify high-quality coffees and farms; brings new regions into the business; helps producers to recognize different market niches and needs; helps develop an infrastructure and distribution system; encourages cooperation within the industry in producing countries; provides access to farmers; builds relationships with buyers of high-quality coffee around the world; and allows producing countries to make better land use decisions.

    Internet auctions spread

    Other countries and organizations have taken up Internet coffee auctions in recent years.

    The Coffee Quality Institute (http://www.coffeeinstitute.org), associated with the Specialty Coffee Association of America, last year created the "Q Auction" - Q stands for quality. This programme is designed for larger quantities (full container-loads) of specialty coffees. There have been 11 Q Auctions in five Central American countries since April 2004. These auctions allow buyers to review coffees that have received "cupping scores" above a minimum on a recognized scale. The Q Auction's logo is not used on retail packaging, unlike the Cup of Excellence® logo, which buyers use on packaging and elsewhere.

    Some countries have organized their own Internet auctions, with names such as the Costa Rica Crop of Gold, Guatemala Exceptional Cup and Best of Panama. In July, Ethiopia became the first African country to offer a full-scale auction called Ethiopian Gold 2005. A total of 26 coffees, selected among those of 126 cooperatives, were sold at very encouraging prices. This auction was arranged in cooperation with eCafé Foundation (http://www.ecafe foundation.org), which has partners in the Netherlands and the United States.

    Today, annual world coffee production is 115 million bags or 7 million tonnes. Only a fraction is sold through Internet auctions, but the quantity is growing and more countries are likely to use this avenue to promote high-quality coffee and get better prices for them.



    Online Coffee Guide reaches out to a wide audience

    Another innovative use of ICTs for trade development is the web version of ITC's 330-page Coffee: An exporter's guide (available at http://www.thecoffeeguide.org). The site is designed for coffee growers, processors, traders, exporters and associations, as well as those involved in coffee transport, finance, quality control, certification and related sectors in producing countries. The web site offers information on all aspects of the trade, including mainstream and niche coffee markets, contracts, logistics, supply chain management and risk, quality and legal matters. One of the 12 chapters covers e-trade in the coffee sector.

    The web site also includes a question-and-answer section. Users can submit questions and a panel of experts provides answers, typically within a week. Answers are stored in an archive for use by other visitors. The site also contains a page offering advice on how to buy and sell coffee. Use of the web site is free of charge.

    The site is also available in French (http://www.leguideducafe.org) and Spanish (http://www.laguiadelcafe.org).