Ahmed Bin Sulayem
Ahmed Bin Sulayem, executive chairman of the Dubai Multi Commodities Center.
By Dan Bolton
The United Arab Emirates is home to the world’s largest concentration of business ventures adding value to tea. The country dominates the re-export market in tea and, as you will read in this exclusive report, the Dubai Multi Commodities Center (DMCC) is ready to explore a similar role for coffee.
Ahmed Bin Sulayen is executive chairman of DMCC which opened its Tea Center in 2005. Last year the Tea Center processed 41 million kilos of tea, which is more than triple the 13 million kilos processed in 2013.
In late May Sultan Bin Saeed Al Mansouri, minister of economy, pledged his country’s support for China’s Silk Belt and Road initiative (One Belt, One Road). “We are, and consider ourselves to be, one of the best positioned countries when it comes to the implementation of the Silk Road and Belt concept, simply because we have invested a lot in infrastructure; whether it’s in ports, airports, and road networks,” said Al Mansouri.
“In the modern world, there is a demand for faster, safer, and more cost-effective transport of goods across the supply chain. Free zones need to plug into integrated logistics and coordinate with the supply chain community to ensure hinterland access which can be a major inhibitor of economic growth, especially in developing markets,” said Bin Sulayem.
STiR: Dubai is not well known as a coffee hub but there are 90 commercial coffee roasters serving 2,200 retail coffee outlets in the country. The largest is a 14,000 sq. ft facility that roasts 100 metric tons a month. Coffee arrives at the port of Jebel Ali from 22 producing countries. Please describe your interest in establishing the Dubai Multi Commodities Centre (DMCC) as a global coffee hub with the possibility someday of operating Intercontinental Exchange (ICE) licensed warehousing.
Picasa
Bin Sulayem: I’m not saying that is an easy task for DMCC but I don't see any excuse not to explore it. Visiting the International Coffee Organization’s (ICO) recent conference in Ethiopia opened my eyes to a number of things that we can look at. One suggestion, as a first step, is to establish a re-distribution center for green coffee, specifically Harar region coffee, which is very popular on the Saudi market.
“We should approach it the way DMCC approached similarly ambitious expansion initiatives in 2002 and 2004. You can't get it all done at once, so we start with a re-distribution center. There is also a justified business case for involvement in the instant coffee business, since 70% of the world consumes instant coffee. We will explore that as well with baby steps for now.
“Whatever product we bring to market, I want it to be really from Dubai, not a ‘copy and paste’ from some Eastern or Western market. We also need to take into account requirements locally and regionally. [Coffee] is in the culture; people here are curious and like to try new things.
STiR: In the 1980s, Africa supplied 27% of the world’s green coffee. That percentage fell to 13.1% in recent years, in large part due to domestic turmoil in the most productive coffee regions. Kenya has 700,000 small holder farmers supporting five million dependdents. Ethiopia now exports 6.6 million 60-kilo bags (4.5% of global exports). The government is resolved to increase global market share. In addition, projections for population growth to one billion, with a more affluent middle class, bode well for increases in coffee consumption within Africa. Could Dubai become the coffee gateway to Africa?
Bin Sulayem: I agree. There seems to me to be a future for coffee in Africa. Dubai is a global crossroads with a sphere of influence covering a wide range, with about two billion people connecting Asia, Africa, and Europe. The nearest ICE licensed port is Barcelona, then Antwerp, and Bremen. There are no ICE licensed ports in Africa. DMCC has many connections with a number of cities and regions. Dubai is a strong trading center, and it is a big magnet for commodity businesses. If we could do it for tea, we can definitely do it for coffee.
We’re literally talking to almost the same governments, you know; you saw Vietnam today on the panel; you know that Vietnam is a big player in coffee. It’s there and I can't ignore it anymore. In business, a lot comes down to convenience – when it becomes convenient – business cannot ignore it. I believe the success that we have had with tea will be replicated with coffee.
We have the expertise; we have the resources to follow through on these initiatives – specifically coffee. It is not a commodity where I have to convince the community that it is part of culture; there is a big business to it.
They know.
STiR: There is a largely untapped domestic coffee market in Africa where per capita consumption is less than 1kg in most of countries. This is expected to double given Africa’s young and growing middle class. There appears to be a lot of potential in big markets like Nigeria, South Africa, and Ethiopia where coffee consumption is 2.2 kg per person. This raises the possibility of a virtuous cycle where Dubai cleans and processes Africa’s green coffee for export; then roasts some of this coffee for domestic markets where the UAE enjoys many treaty benefits lowering trade barriers.
Bin Sulayem: The challenge in coffee, ultimately, is that it’s a relatively inexpensive commodity. There’s a lot of difference in margins between that and diamonds. And even between coffee and tea — but margins are just one part of the equation here.
When I look at coffee, I believe we were going to learn, as we progress with this, that it might end up where we just focus on speciality coffee. It will for instance be beneficial to host a forum or conference where people discuss what they want to see from Dubai. We’ll be talking to people like yourself to see what their forecasts are, and what they’ve experienced the past few years.
There are clearly advantages to Dubai and if tea can succeed I wouldn’t say it’s any harder than coffee — there are complications I’m sure but we won’t know until we start exploring it. And I feel the time has come where we have to give it it’s justified focus and attention.
Market participants in Ethiopia were certainly receptive when we discussed it. They offered a lot of recommendations and suggestions. I feel that DMCC has gained enough confidence and trust from the market that people are confident this will progress into something more than where we are today in the coffee business.
I do see similarities with tea from certifying to redistribution, re-packaging, and all that. The Middle East region; and the GCC regions have enormous potential according to industry experts as in their view Europe and the US have reached the maximum maturity that they can. It’s a great opportunity to have the coffee industry set its foot firmly down in Dubai. So, I’m excited about the prospect of that.