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Tuesday, 30 April, 2002, 14:06 GMT 15:06 UK
Grounds for a coffee revolution?
Titus Gitau and Stephen Njukia, co-founders of Africanlion.com
The partners are aiming for an internet auction a week
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By Mary Gahan
BBC News Online business reporter
line
A revolution in Africa's coffee trade is being attempted by two Kenyans who want to auction beans over the internet.

They say they want to get higher prices for the best coffees and pass on bigger profits to farmers.

Titus Gitau and Stephen Njukia came up with the idea for their internet auction after studying and travelling in the United States and Europe.

"We became aware of how popular good quality Kenyan coffee was," Mr Gitau told BBC News Online.

But the pair were astonished at the prices.

"In America, you walk into Starbucks and pay $5 for a cup of coffee, at the same time the farmers in Africa are getting very little."

Cartel prices

At the moment coffee is bought and sold at a weekly auction in Nairobi.

"There are a few very active players on the bidding floor," said Mr Gitau.
A Starbucks coffee shop
There is strong demand for speciality coffee

"The prices tend to be cartel-type prices because the exporters, who sit in the middle, have to buy low and sell high."

The two say they will sell only the very best coffee through their company, www.africanlion.com.

Mr Gitau speaks about their plans with enormous enthusiasm.

He reckons they will be able to attract new buyers from the US, Europe and Japan, and he is certain that the system of anonymous bidding will push up prices.

However, some market experts believe that these expectations may be overdone. Professional buyers tend to buy coffee in lots worth $50,000.

Buying so much coffee over the internet requries a massive amount of faith in the seller and his sources. It takes a long time to build that kind of trust.

Paying a premium

The debut auction in April had mixed results.

Prices did indeed go up.A Japanese buyer paid $453 (311) per 50 kilo bag of the best Kenyan Arabica coffee - $106 more per bag than the same lot fetched at a local auction a few weeks earlier.


"A container of coffee is worth $50,000, it's not like buying a book from Amazon

Coffee exporter
But there was also disappointment because only two of the 17 lots of coffee were sold.

Mr Gitau said it proved buyers were prepared to pay a premium.

But he did not know why the other speciality coffees had failed to sell.

Coffee taster

Traders in Nairobi are sceptical about the chances of the internet sales winning business from the traditional auctions.

"A container of coffee is worth $50,000, it's not like buying a book from Amazon," said one exporter.

Simon Wakefield, a London based coffee importer, was one of a panel of experts who tasted and selected the coffees which were offered for sale in the internet auction.

He welcomed attempts to pay farmers more for their crops, but doubted that the internet auctions would have any real impact.

"I buy my coffee from an exporter who will buy from a farmer through an auction.

Marketing tool

"If you buy over the internet it's still got to be exported and it's still got to be imported."
A coffee plantation
It is hoped the auctions will lead to higher prices for farmers

Mr Wakefield said there would be a limited market for internet sales but thought the most likely buyers would be some of the coffee shop chains.

He said they would be willing to pay a premium for the very best coffee so they could use it as a marketing tool.

Titus Gitau and his partner are now planning their next auction in August where they will be trading the best speciality beans.

Brazilian coffee

These are arabicas from Kenya, yergachaffe and sidamo from Ethiopia and bugisu from Uganda.

Top grades from Rwanda and Burundi will also be offered for sale.

Once the coffees are selected, samples will be posted to overseas buyers so they can taste the quality before the auction.

And Mr Gitau can look to Brazil for inspiration.

Japanese and other coffee roasters have paid an average of 10 times world market prices to buy beans offered at an internet auction for Brazilian gourmet coffees.

See also:

05 Mar 02 | Business
Kenyan tea prices fall again
14 Feb 02 | Business
Kenya's flower farms flourish
22 Apr 02 | Business
Quality focus boosts coffee growers
27 Feb 02 | Business
Starbucks takes on its critics
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