Corporate coffee

Coffee regions / Corporate coffee

Nasty old Brazilian coffee

My inability to completely connect the dots here is a testament to the lack of transparency of the big four mega coffee roasters and where they get their beans.

Dot 1:  Brazil, the world’s #2 coffee grower, has experienced drought conditions that means their 2007 production will be at a four-year low. This on the heels of a 16% decline in the 2005-2006 crop.  Therefore, the market is tight and stocks are quite low.

Dot 2:  Brazil will be selling off its federal coffee stocks, beans from the 1977-1978 harvest.  Not a typo.  Thirty year old beans, which they contend do not lose their flavor, only their color. Unroasted beans do stay fresh a long time, as it is the roasting process that creates oils and other compounds that oxidize when exposed to air.  But coffee beans are a once-living, organic crop, and changes do take place.  Most experts advise roasting beans within a year.

Dot 3: Who buys up all these tons of old beans?  Well, Kraft is the largest buyer of Brazilian green coffee.  Nespresso, a division of Nestlé, just announced it will be purchasing 45% of its coffee from Brazil. These are supposed to be “specialty” beans, but  I have no further information.

I cannot say for sure, but I would think it is likely that the large roasters are buying at least some of these old beans, given the low stocks, high demand, and their history of using — and needing — inexpensive Brazilian beans.  If used in blends, flaws would be less apparent.  Yuck.

Certifications / Corporate coffee / Jacobs Douwe Egberts/KraftHeinz / Rainforest Alliance

Yuban ad campaign

As I was perusing a magazine, I came across an ad for Yuban coffee with the headline “The coffee you make can make a difference.”  It showed their coffee cans, emblazoned with the Rainforest Alliance seal and a banner saying “Conserving the environment & supporting coffee farmers.  Minimum 30% Rainforest Alliance Certified Coffee.”

Let’s examine. Who are we dealing with? Yuban is a Maxwell House brand, which in turn is owned by Kraft Foods. (More on which corporations own which brands here.)

How big a deal is it that Kraft is buying RA beans? While Kraft will purchase 12,000 tons of RA coffee in 2006, this represents a tiny fraction (I’ve calculated about 1.5%) of Kraft’s coffee bean purchases.

What’s with the 30%? Rainforest Alliance (RA) allows use of their seal on products with a minimum of 30% certified beans (a fact for which they are sometimes criticized).  In order for Kraft to keep their prices so low (suggested retail for a 12-ounce can of RA-bean-containing Yuban is $3.89; a 13-ounce can of Maxwell House is $2.56), the other two-thirds of the beans in the can must be lower quality, likely technified/sun coffee.  I don’t see any other way they can do it.  The cost differential between certified beans and non-certified beans also means that I doubt Yuban will ever contain more RA certified beans than the 30% minimum required for use of the RA seal. (Update: As of January 2013, the Yuban can still indicates 30% certified beans. However, RA is requiring companies to scale up their percentages over time…read more here.)

Does this move really help farmers? While RA certification includes fair labor practices, and RA certified coffee usually commands some premium, the criteria does not set a minimum price paid to farmers. RA certification is cheaper for corporations that Fair Trade certification.  Oxfam is still pressuring Kraft to agree to buy Fair Trade coffee.

RA cannot be faulted for their efforts in promoting and making sustainable coffee available to mainstream consumers.  Nor can they really be criticized for partnering with Kraft, since RA certifies a product, not a company.

Still, it difficult for me to endorse supporting a corporation like Kraft which has a dubious ethical record (Responsible Shopper profile here). And while Kraft deserves some credit, as none of the other Big Coffee companies is making this type of effort, real environmental preservation and fair prices for farmers is far, far better served by purchasing sustainable coffees from small companies and roasters with relationships with their suppliers, especially those that provide information on the specific farms where their beans are sourced.  Plus I guarantee it will taste better!

UPDATE! The January 2007 issue of Coffee Review goes over supermarket coffees, including this coffee, which is “dominated by a cloyingly sweet nut character, the calling card of inexpensive coffees of the robusta species.”  Robusta tastes bad, and is sun coffee.  Very bad!  As for the Yuban Organic brand, that review notes it is recommended for “Those on a budget with a commitment to organic growing principles that transcends the desire to drink decent coffee.”  Please also read the accompanying article or my post about it.

More information:

 

Coffee regions / Corporate coffee

Poor quality Vietnamese beans (that end up in grocery store coffee)

A short article entitled “Quality of Vietnamese coffee poor”appeared recently on a Vietnam news site. It notes that Vietnam is the world’s second largest producer of coffee, but that 89% of its crop is low-quality robusta. And it adds, “The reason is the massive use of inorganic fertilizer, water, insecticide and poor processing technology.”

Where do these beans end up? In your cup, if you buy cheap coffee from one of these large corporations.

Nestlè (Nescafe, Taster’s Choice) buys 20 to 25% of Vietnam’s coffee. Kraft (brands include Chase and Sanborn, General Foods International Coffee, Gevalia, Maxwell House, and Sanka) is another major buyer; at a 2003 shareholder meeting, Kraft Chairperson Louis Camilleri said that the firm buys coffee in Vietnam that does not meet even minimum ICO [International Coffee Organization] standards, the first admission from a major company regarding purchase of sub-quality beans.  At the Folgers web site, Proctor & Gamble admitted to buying Vietnamese coffee: “We purchase our coffee beans from all over the world, including Vietnam. The percentage of beans from any one country varies all the time, depending on availability.” (Note that Folgers is now owned by JM Smucker, but probably uses P&G’s sourcing avenues). Sara Lee/Douwe Egberts (Chock Full o’Nuts, Hills Brothers) also buys coffee from Vietnam and is in a partnership with Kraft in that country.*

Kenneth Davids at Coffee Review sums up the problem with most robustas in today’s market:

Apparently with the support of the World Bank, robustas recently have been planted in very large quantities in Vietnam. These are mass-produced coffees at their most dramatic: stripped from the trees, leaves, unripe, ripe and overripe fruit and all, and dried in deep piles. All of which means the essentially bland, grainy robusta character is topped off with an assortment of off-tastes, mainly musty/mildewed and fermented. These coffees sell for considerably less than all other coffees, including better quality robustas. I am told that production costs for Vietnamese robustas are about 20 cents per pound or less, compared to, for example, production costs of 80 to 90 cents per pound for the excellent “100% Colombia” coffees competing in the supermarket. And now the current episode: Commercial dealers and roasters have learned to steam the often foul-tasting Vietnamese robustas, removing the waxy covering of the bean and muting (but not entirely eliminating) the offensive flavor notes.

To read about the human and environmental toll of coffee in Vietnam, read this article from Tea & Coffee by Mark Pendergrast, author of the outstanding book, Uncommon Grounds. The article includes a history of coffee in Vietnam, and describes how more than a million acres of the Vietnamese highlands were planted in mostly robusta coffee in the late 1990s, land which was abandoned after the drop in coffee prices, “leaving the exposed soils to the torrential rain. Erosion, siltation, land slips, flash floods, and water shortage are the obvious results.”

It’s enough to convince you to seek out sustainable coffee.

Background information / Corporate coffee

Who owns what?

[The coffee consolidation landscape has continued to evolve rapidly! This post is a starting point but not entirely up-to-date.]

You can find many different coffee brands on supermarket shelves, and frequently multiple brands are actually owned by one of only a few corporate conglomerates.  Some of these companies have poor records when it comes to environmental and social responsibility.

Below is a primer on common U.S. coffee brand ownership. Read about how much certified coffee these companies purchase here, and their role in the coffee crisis here.

Note that some brands may have split ownership representing different parts of the world, or a division of distribution lines between retail/grocery and coffee shop/restaurant. For example, Nestlè owns the distribution rights to Starbucks coffee in grocery stores and retail chains, but Starbucks does the coffee sourcing. I have tried to simplify here.

JM Smucker Co. — Through purchases of other companies, coffee is now the main business of JM Smucker, and their Folgers brand is the largest brand in North America, accounting for nearly 20% of the retail volume. Other brands include Millstone, Cafe Pilon, Cafe Bustelo, and Kava. They distribute Dunkin Donuts retail coffee (both companies have poor coffee sustainability records). Read more about JM Smuckers here and Dunkin here.

Kraft Heinz Company –Maxwell House (North America), Yuban, Gevalia, Nabob, Ethical Bean — about 10% of the U.S. market by volume. As of 2019, Kraft Heinz was exploring selling the Maxwell House brand. Ethical Bean is the company’s attempt at sustainable coffee as it is all organic; volume figures are not available.

JAB Holding Company — Privately held company that went on a large buying spree starting in 2012 and now controls an enormous market share through its subsidiaries and acquisitions. Some of the familiar and important brands under the JAB umbrella include: Jacobs Douwe Egberts/JDE Peet’s, Green Mountain, Caribou Coffee, Peet’s, Intelligentsia, Stumptown, Panera Bread, Krispy Kreme, Douwe Egberts, Einstein Bros Bagels, and many more. See a fuller list of brands under their subdivisions Keurig Dr Pepper and JDE Peet’s. Additionally, JAB also launched the subscription coffee service Trade. I rarely say this, but you may want to check Wikipedia to keep up! All together, JAB’s brands probably make up 5-6% of the U.S. Market.

Nestlè — Nescafè and Nespresso are their popular brands. Purchases 870,000 tons of coffee annually, around 10% of world production, of which only a tiny fraction of a percent carries eco-certification. Their market share in the U.S. is quite small, less than 5% if their distribution of Starbucks coffee in stores isn’t counted (Starbucks sources this coffee).

Tata Consumer Products — Eight O’Clock. This one brand makes up perhaps 2.5% of the U.S. market.

Massimo Zanetti Beverage USA — Hills Brothers, Chock Full o’Nuts, Chase and Sanborn, Kauai Coffee, Segafredo. Owns many of the brands previously owned by Sara Lee, which divested itself of its coffee operations. MZB is a huge privately-owned company which sources a lot of its coffee from it’s own massive full sun plantation in Brazil, said to be the largest in the world. Their profile at the Sustainable Coffee Challenge website indicates very limited and lackluster sustainability goals. About 2% of the U.S. market.

These large companies rarely divulge coffee volumes purchased. These figures are estimated based on retail sales by volume and retail volume of coffee sold, calculated in tons. Numbers for 2019 and 2020 were averaged due to the market skew that occurred during the covid-19 pandemic. Data was primarily from Euromonitor, but included other sources.

Corporate coffee

The Coffee Crisis

The “coffee crisis” inevitably comes up in any talk of the coffee industry, especially Fair Trade issues. Here’s a summary of what it’s all about.

Prior to 1989, coffee prices were controlled by a cartel, much like OPEC for oil. The International Coffee Agreement (ICA) imposed quotas and controlled prices between major coffee producing and consuming countries. This resulted in fairly stable prices for coffee (known as the “C” price on the commodity market) of between US$1 and $1.50 a pound.

The ICA was renegotiated every five years by member countries. In 1989, the ICA collapsed when it was not renewed. In part this was due to a lack of support by the U.S., which had a great deal of power as the largest importing member nation. The U.S. had less political motivation to help major producing nations. Further, the Reagan administration was strongly free market and opposed the ICA on those grounds. These factors played a key role in the demise of the ICA.

Under the free market, prices plummeted, down to $0.49 per pound in 1992. Remember that this is the commodity price, and the farmers themselves receive only a fraction of the “C” price; in this case far below production costs.

Small farmers are extremely vulnerable to this market volatility. Experiencing up to a 70% drop in their incomes, many were devastated. Many abandoned their land, migrated north, or cleared their land for more profitable crops, including drugs. Child malnutrition climbed.

Although the initial price crash was an immediate response to the disintegration of the ICA, another cause contributed to subsequent crashes and sustained low coffee prices: oversupply. World development banks, promoting export-led development as a way to decrease poverty, funded increased production in many nations, most notably Vietnam. This country increased production over 1100% in the decade beginning in 1991. In addition to the development organizations, multinational corporations played a large role encouraging an increased coffee supply. They are typically known as the “big four” — Nestlé, Proctor & Gamble, Kraft, and Sara Lee (here are the brands these companies owned at the time of this post).

Much of this coffee glut was cheaper robusta beans (Coffea canephora). Because they are bitter and considered low-quality, robusta has historically only been used as filler in blends or in cheap coffee. Now methods have been developed by the large coffee corporations to process green robusta beans to make them more palatable. These companies now use a much higher percentage of robusta in their coffees rather than buying arabica from smaller growers in Latin America, where production costs are much higher than in Vietnam. In this way, the oversupply of robusta also depressed arabica prices.

The big four are making tremendous profits while lowering the quality of the world’s coffee. Over ten years, the profit retained by coffee-producing nations went from about 30 percent of the purchase price to 8 percent.

The investments made by these corporations in the growing of cheap coffee and the development of a process in which to make it drinkable are important factors in precipitating the coffee crisis.  An excellent, highly recommended article from Fortune magazine notes,

“Of course, without a market for cheap, low-grade robusta, there would never have been a coffee boom in Vietnam. And that’s exactly what the Big Four, along with other large European roasters, provided. They took advantage of new steam-cleaning technology to eliminate the coffee’s harsh flavor. They introduced flavored coffee — hazelnut, Irish cream–to disguise robusta’s inferior taste.”

A very good overview of the coffee crisis is over at CoffeeGeek, with recommendations for consumers.  It also touches on another aspect of the crisis, which is that higher quality coffee beans are becoming rarer, because the small farmers that grow it cannot compete and are going out of business.  As the Fortune article says,

“But the short-term economic advantages of robusta are overshadowed by long-term costs — for growers, drinkers, even the Big Four themselves. In the past ten years, as the global coffee market swelled from $30 billion to $70 billion, the revenues of growers have dwindled. Coffee drinkers, meanwhile, have had to contend with declining quality: The java at your local grocery store or deli now contains more robusta, and gourmet purveyors, which rely exclusively on the high-quality arabica growers in Latin America and Africa most damaged by the crisis, are having a tougher time sourcing beans. When quality drops, people tend to drink less coffee.”

The International Coffee Organization has proposed destroying the worst (lowest quality) 5% of the crop, helping to alleviate the surplus.  The big four are opposed to this plan.

More information:

Photo of Colombian coffee farmers by, ironically, Nestlé, under a Creative Commons license.

Background information / Coffee and the environment / Corporate coffee

The problems with sun coffee

Two species of coffee are grown commercially. Coffea canephora, or robusta coffee, is an often bitter species that is usually considered low quality and is used as a filler in cheap grocery store coffee. The higher quality arabica coffee, Coffea arabica, is an understory tree or shrub which naturally grows in shade. However, mostly with an eye toward profit, there has been a movement to find ways to grow arabica coffee in the sun.

Coffee is grown on nearly 10 million hectares in tropical regions around the world, areas that also harbor high levels of biodiversity. In the 1990s, farmers were encouraged to replace traditional shade grown coffee with sun cultivation in order to increase the yield of their coffee. In sun coffee systems, there is little or no canopy cover, and coffee trees are planted at high densities. In Latin America, 1.1 million of the 2.8 million hectares in coffee (41%) were converted to sun cultivation (Rice and Ward 1996). The impact of deforestation and conversion of shade coffee to sun coffee on biodiversity in these regions is much greater than the absolute levels of destruction would indicate.

While older arabica coffee varieties traditionally grown in the shade did not do well in the sun, they were replaced by hybrids that could withstand the sun and had more resistance to introduced diseases. But sun cultivation also has many other negative environmental impacts:

  • In shade plantations, dead leaves from the overstory trees provide nutrients to the coffee.  In sun plantations, these nutrients are not available, so fertilizers must be used, especially nitrogen (since many traditional overstory trees are nitrogen-fixing legumes). Sun coffee farms leach triple the nitrates into the local watersheds than shade farms.
  • There are fewer weeds in shade plantations, both because of the shade itself and due to the fallen leaves from shade trees acting as a natural mulch.  Herbicides are needed to control weeds in sun plantations.
  • Soils in sun plantations are more exposed to the elements, particularly drenching rains typical of tropical areas.  This leads to erosion of topsoil, and the leaching of chemical fertilizers, pesticides, and herbicides into local watersheds. Soil erosion and acidification and water pollution are serious consequences of growing coffee on sun plantations.
  • Coffee plants in sun plantations grow faster and age more quickly than those grown in shade, and therefore must be replaced more often. Sun-grown coffee trees are typically productive for less than 15 years, while shade-grown coffee trees may yield for 30 years or more.

You can read more about the benefits of growing coffee in the shade in this post.

Donald, P. F. 2004. Biodiversity impacts of some agricultural commodity production systems. Conservation Biology 18:17-37.

Rice, R. A., and J. F. Ward. 1996. Coffee, conservation, and commerce in the Western Hemisphere. Smithsonian Migratory Bird Center and National Resources Defense Council.